Corporate Social Responsibility

CSR: Society’s Return on Investment?

Posted on: October 24th, 2016 by Harmony Foundation No Comments

Lanlin Bu and Michael Bloomfield

with research and writing assistance from Adrian Southin

 

 

 

Corporate social responsibility (CSR) runs the gamut from self-aggrandizement to crisis management to with the occasional act of generosity. Society deserves better! Tax payers invest heavily in business, providing research and development grants, tax breaks, transportation facilities and many other subsidies including cleaning up the environmental messes too often left behind. According to a 2014 Fraser Institute report, over a period of nearly 30 years, federal, provincial and local authorities spent nearly $684-billion on business subsidies. The fossil-fuel industry alone receives over $3.3 billion (CAD) annually (See Chart1 below)[1].

 

Chart1: Major Subsidies to Fossil Fuel Industry in Canada (2013-2015, average)

 

chart1

(From http://www.iisd.org/faq/ffs/canada/ )

 

 

Simply put, business owes society a fair return on its investment. More than that, companies gain and retain social license through product safety, compliance with legal standards, honest reporting, “truth in advertising”, protection of the environment and public health, as well as fair treatment of employees, customers and local communities. Volkswagen, a company that once topped the Dow Jones Sustainability Index, plummeted after the shocking emission scandal of 2015[2]. A long and tough road to recovery will cost VW billions.

 

So what’s a better way forward? First, let’s restore balance, recognizing business is part of society not its master. Business needs to work more collaboratively with civil society to advance the social development, human rights and environmental stewardship. Furthermore, it’s in business’ best interest because responsible companies get rewarded. Studies show that healthy, happy employees are more productive and absenteeism decreases.[3] Customer loyalty tilts toward companies they trust and respect, those who demonstrate high social and environmental performance. In addition, business does best in well-educated, prosperous and healthy societies. Moreover, if the advocates for a global economy are to be believed the movement should be about creating more opportunities in disadvantaged places not exploiting lower standards for worker health and safety, accountability and environmental protection.

 

CSR is much more than just marketing tool or stay-out-of-jail card. For companies to truly be responsible, they need to commit throughout their operations. Take Loblaws as an example. It’s great they have programs such as the President’s Choice Children Charity. Yet, through the Joe Fresh brand, Loblaws was one of the companies involved in the 2013 Rana Plaza sweatshop collapse in Bangladesh that killed over 1100 people.[4] Justice still has not come to the victims. Similar examples include Streit Group’s sales of armoured vehicles to South Sudan[5] and Saudi Arabia, Tahoe Resources and Goldcorp’s mistreatment of local residents in Guatemala, and Canada’s tobacco and toxic waste shipped to Asia. This kind of behaviour overseas is damaging Canada’s reputation and relationships. No wonder Canada is increasingly seen as just another country willing to compromise public health, human rights and the environment to increase profit. Why do we allow these companies to hide behind lax local regulations to justify their actions while representing Canada abroad?

 

Sadly it’s not just overseas where Canadian companies are failing to meet public expectations. The Mount Polley BC tailing ponds breach by Imperial Metals, CN Rail’s denial of any responsibility in the Lac-Mégantic disaster and the Canadian clients of KMPG involved in an offshore tax scheme on the Isle of Man[6], each demonstrating how business puts profit over its legal and moral responsibilities, even here in Canada. Don’t we Canadians deserve better?

 

It’s time to a shift CSR away from brand promotion and crisis management. Transformational CSR must become corporate culture, practiced up and down the chain of command. Corporations must work in good faith with all stakeholders, including civil society to achieve economic development without harming the environment and public health.

 

The voluntary approach relies too much on the goodwill of individuals rather than a committed corporate culture. Furthermore, voluntary efforts do not provide a level playing field for business, favouring the laggards over the leaders who already are investing in positive action on conservation, climate, human rights, worker health and safety and so on.

 

Therefore Harmony Foundation proposes that senior levels of Canadian government work with business and civil society to develop and implement a protocol that guarantees the same standards of human rights, health and safety, and environmental protection, whether operating in Canada or aboard. Not only it is the right thing to do, but also this is our best chance to improve Canada’s reputation and long-term opportunities internationally. That would truly be the Canadian advantage! In fact, that’s the clearest path to prosperity with integrity.

 

 

Please see our  paper “CSR: Society’s Return on Investment for more on this topic. You can download the paper from http://harmonyfdn.ca/?page_id=2775. The paper lays out in more detail the elements of the protocol which was first presented in Canadian Mining Operations Around the World: Respecting People and the Environment (2013)

 

[1] http://www.iisd.org/faq/ffs/canada/

[2] https://www.theguardian.com/sustainable-business/2015/dec/30/vw-exxon-lobbying-brazil-mining-tragedy-toshiba-corporate-scandals-greenwashing-climate-change

[3] http://www2.warwick.ac.uk/newsandevents/pressreleases/new_study_shows/

[4] http://www.cbc.ca/news/world/bangladesh-garment-workers-lives-still-at-risk-the-fifth-estate-finds-1.1959518

[5] http://www.theglobeandmail.com/news/world/canadian-company-sold-armoured-vehicles-to-south-sudan-report/article31191713/

[6] http://www.cbc.ca/news/business/canada-revenue-kpmg-secret-amnesty-1.3479594

Loblaw’s and Supply Chain Management: Uncovering the details of the Rana Plaza Collapse

Posted on: June 18th, 2013 by Harmony Foundation No Comments

Photo Source: Inhabitat.com/tag/bangladesh

 

 

 

It’s early in the morning on April the 24th. Workers file in to start another day on the job. Sewing machines gear up and peck threads into garments like a community of woodpeckers searching for grubs. A mild tremor shakes the walls. Before anyone realizes what is happening, workers at the Bangladeshi Rana Plaza are running for their lives, but they are trapped inside. Over 1000 died, many more were injured.

 

Was this tragedy preventable? Who is responsible? Key questions have been raised by international labour organizations, NGOs, and the media, which have not been clearly answered.

 

Loblaw’s discount clothing chain, Joe Fresh, had contracted for garment workers inside Rana Plaza at the time of the collapse. Swiftly following the tragedy, Loblaw’s found itself under intense scrutiny from the world media.

 

When assessing a tragedy of this magnitude, it is important to start from the beginning. Why does Joe Fresh have suppliers in Bangladesh? Easy, lower wages and environment health and safety (EHS) standards allow for greater profit, and that motivates international outsourcing of jobs to developing nations.

 

Clearly then sourcing companies have a moral responsibility, if not a legal one, for the entire supply chain, even if a company does not own or directly manage it. How and why companies like Loblaw’s fail in meeting these responsibilities is insightful towards developing international standards that protect worker safety, public health and the environment, regardless of jurisdiction.

 

Therein lies the main problem: the lack of accountability. Many companies justify lower standards, arguing that they abide by local requirements. Others seem not to care and off-load their responsibilities to local producers, too often without providing help or support.

 

Wages are one thing; everyone should be paid a liveable wage, so they can provide themselves and their families with decent food, shelter, education and the other necessities of life. Unless of course, western companies, investors and customers, feel it is right to enrich themselves and enjoy higher standards of living at the expense of others.

 

Making wage decisions within the local economic situation is not unreasonable. However, unless we believe that the lives of Guatemalans, or Eritreans, or Bangladeshis are less important than ours, they deserve the same environment, health and safety (EHS) standards we enjoy.

 

Regrettably, current practices suggest we don’t value their lives as much as our own. After all, we are willing to risk their health and well-being for cheaper consumer goods and higher profits. This also applies to the elite in their own country who allow lower standards and benefit from attracting international companies.

 

As recent protests in Bangladesh and around the world have demonstrated, there is a growing demand to tighten labour laws and EHS regulations. They also made it clear that pro-active efforts, not damage control exercises, are long overdue, especially after a tragedy like Rana.

 

It is encouraging that only two weeks later, under heavy pressure from NGOs, media and labour organizations, the Accord on Fire and Building Safety in Bangladesh[1] was adopted. Signed by over 30 garment companies the accord called for independent building auditors, funding by retail brands to properly maintain buildings, and measures to improve safety standards[2].

 

Although this accord seems to be a step in the right direction, does it address the heart of the issue? No, and before the next tragedy occurs, we need to make sure this isn’t another image control exercise.

 

Meaningful change throughout the industry and the global supply chain requires effective international standards on worker health, public safety, and the environment. The Rana tragedy is not an isolated incident and such events are not limited to Bangladesh and neither should be our response. It is evident that the same lower standards risk lives in China, India, Pakistan and elsewhere in the developing world.

 

What’s needed is for corporations to embrace corporate social responsibility (CSR) as a serious commitment rather than a public relations tool. Otherwise we will continue to see a “race to the bottom” where corporations, in collaboration with government, continue to move to jurisdictions willing to settle for less.
Yes, corporations must do better. However, consumers, investors and government also are responsible for remedying the problem and eliminating future tragedies. The question is: how do we do it?

 

Governments must quit competing with each other by offering lower standards that put risk at the people and environments for which they are responsible. They also need to work together to achieve international standards for EHS. Not only do supplier country governments have a responsibility to ensure the health and safety of their workers, so do the home country governments, where corporations are headquartered. They should adopt policies with enforceable penalties and incentives that promote responsible behaviour.

 

Moreover, NGOs and concerned individuals need to continue advocating for safe and humane working conditions in developing countries. The Worker Rights Consortium (WRC), an independent labour rights organization, claims that $3 billion spread over 5 years, could be enough for Bangladeshi garment factories to be on par with Western health and safety standards[3]. The WRC also mentions that this would mean only 10 cents cost added per garment. We’re talking about nickels and dimes to ensure that tragedies, like the one witnessed at Rana Plaza, won’t happen again. Can we afford not to do it?

 

And what about us consumers? If we buy from companies like Loblaw’s, or Apple, or Wal-Mart, what kind of responsibility do we assume? It is not only up to the corporations to ensure the health and safety of its suppliers; it’s in our hands too! We need to inform ourselves about the practices of companies and brands we support with our purchases, and refuse to be unwitting partners in exploiting others or damaging public health and the environment.

 

Investors and investment managers can play an important role too.  Can we justify harm to workers, the environment and future generations to earn a bit more money? Such an approach is unconscionable and not good business practice either.

 

So you decide, are you willing to risk the health and well being of others, of your children and theirs : at what price? Retail companies routinely earn 60% on goods produced in these poor work environments[4].  A little less profit or adding a small cost to your shirt or slacks or shoes could achieve significant improvement. How can we say no when the average worker wage per month, $38, is less than the price of a pair of jeans[5].



[3] Worker Rights Consortium (WRC). www.workersrights.org

What Can Canadian Companies Do To Trade Responsibly With China?

Posted on: March 25th, 2013 by Harmony Foundation No Comments

 

By the end of 2011 there were over 2,500 Canadian companies in China. Like most western companies they have benefitted from permissive labour, health, and environmental standards and yet not one Canadian company is found among the top Corporate Social Responsibility (CSR) rankings in China. With China Canada’s number two export destination this is an increasingly dangerous approach.


Changing Reality in China

There are now over 30 national laws and regulations related to CSR in China; as well guidelines from stock exchanges, industry association and leading institutes. As social and environmental deficits and public expectations for improvement rapidly rise, the Chinese government has begun to use CSR to address environmental and social deficits. More than 400,000 registered NGO’s and close to 3 million grassroots groups place companies under even closer scrutiny.

 

What Can Canadian Companies Do to Trade Responsibly with China?

Healthy, prosperous, educated communities are the best places to do business and investors, customers, staff and other stakeholders increasingly favour responsible companies. They recognize that integrity and accountability are more likely to lead to economic success and want meaningful investment in society not wasteful image-building campaigns.

 

China is no exception and each Canadian company has a critical decision to make: continue operating as usual and risk market share and reputation or to align its business strategy and sustainability outcomes to meet the needs of society.

 

Canadians have benefitted from China’s remarkable economic development, and those who benefit carry a responsibility to invest in social development and environmental protection as they do at home.

 

What can your company do?

 

1)    Develop and contribute expertise and technology to help create clean and green solutions. China’s current 12th Five Year Plan emphasizes reducing energy use and carbon emissions and protecting water.

 

 

2)    Stop selling harmful products and technologies. Selling millions of pounds of tobacco or coal fired power-plants to China with little regard for public health or the environment is irresponsible.

 

3)    Abide by highest international human rights, health and environmental standards. In January 2013, CCTV, China’s largest TV network, reported that KFC’s supplier uses 18 types of antibiotics raising chickens (it doesn’t do so in the USA and Canada). KFC is now facing a severe public relations crisis in China.

 

 

4)    Contribute to meeting China’s national priorities articulated in the 12th Five Year Plan (2011-2015):

 

  • Poverty alleviation, especially in rural and agricultural areas.
  • Building a resource saving and environmentally friendly society.  Government is regulating environmental impacts more strictly, and the public is paying closer attention to performance of international companies.
  • Developing a skilled population. Providing training and investing in education for staff and civil society development.
  • Promoting community self-governance and improving the mechanisms for safeguarding people’s rights.Support participatory governance and encourage staff volunteer programs.

 

5)     Respond to local key stakeholders

While government relations are important, companies need to respond to the expectations and concerns of other stakeholders, e.g. business partners, media, NGOs, customers and employees, and differences in cultures, economic conditions, and stakeholder values while respecting international requirements.

 

6)    Strengthen community engagement through substantive society-oriented CSR initiatives. For example:

 

 

7)    Work with develop capable local NGOs. NGOs enjoy close relationships with local communities and understand local needs and concerns. They provide invaluable insights for CSR initiatives and can help implement them successfully. The key is to distinguish Government Organized NGO (GONGOs) from independently organized NGOs, and to find reliable partners based on their credibility, capacity, and local relations.

 

 

8)    Implement strategic philanthropic programs. Disaster relief is important; however successful companies also invest continuously in education, social development, culture, and environmental protection.

 

 

9)     Adopt transparency, accountability, and honesty in reporting.

In brief, Canadians want their companies to do well and to contribute to our prosperity but not as the result of irresponsible development which damages the environment and public health, exploits the poor and ignores the needs of future generations.

 

Are You Wearing Something Clean?

Posted on: May 7th, 2012 by Harmony Foundation No Comments

 

Water shortages and pollution trouble China, with two thirds of over 600 cities lacking sufficient clean water. Industrial use and wastewater discharge are major causes for water shortages and heavy pollution with the textile industry the biggest source of both.  In November 2011 Greenpeace published Dirty Laundry – Unraveling the corporate connections to toxic water pollution in China, and then in April, a group of respected environmental NGOs in China, Friends of Nature (FON), the Institute of Public and Environmental Affairs (IPE), the Darwin Institute of Environment, Green Stone, and EnviroFriends, published the report Clean up for Fashion – Green Choice Textile Brand Supply Chain Pollution.

 

According to these reports, many textile factories are responsible for serious environmental violations in China, causing severe water pollution.

 

More than a few violators are suppliers for famous international textile brands and clothing retailers. To make these international companies aware of the unethical performance of their suppliers and to encourage their action to improve their supply chain’s environmental practices, the 5 environmental groups sent letters to the CEOs of 48 international companies in March 2012.

 

Some companies, such as Nike, Esquel, Levi’s and Burberry started to investigate suppliers and look for solutions; some replied, refusing to give any information.  Remarkably Zara replied, “We regret that we cannot respond to individual requests for information from schools, universities and professionals regarding our business model.” More chose to ignore the request for information, and by the time the Clean up for Fashion report was published, 32 companies still had not replied. To date, 23 companies have replied, while the other 25 still keep silent.

 

So who are these companies who fashionably damage the environment to produce our clothes? The logos shown below identify the 48 companies who received letters, including many top brands.

 

Why should we care, if the Chinese care about their environment let them do a better job protecting it?  The stark reality is that much of the damage is done by companies cutting corners to provide us with low cost fashion. Let’s look forward to the day… soon… When Wal-Mart changes its slogan from “Save money, live better “ to Save the environment, live better” and we quit making our consumer choices simply based on price and take into account the environmental, health, and labour practices of  the companies we support or avoid.

 

The 48 companies are: