Profits. Principles. Or Both?

November 2, 2003

By Michael Jessen

The title of this column is taken from a recent half page advertisement placed by Shell Canada (http://www.shell.ca) in a national newspaper. In the ad, Shell claims to be helping the local Aboriginal community thrive while extracting two billion barrels of oil from the northern Alberta oil sands.

"Trust. Mutual respect. Teamwork. And sustainable development," the advertisement triumphs. "It's the only way to do business."

Fine words, but can Shell be trusted? Shell didn't appear to be thinking this way in 1995 when Nigerian poet and environmental activist Ken Saro-Wiwa and nine others were hanged for their opposition to the $30 billion worth of oil that Shell had extracted from Ogoniland without any benefits flowing to the Ogoni people.

Shell (http://www.shellnigeria.com) is Nigeria's biggest oil producer, accounting for nearly half of the more than two million barrels per day output of the world's eighth largest exporter. The Nigerian unit of Shell, with about 5,000 Nigerian employees, accounts for about 30 percent of Shell's total output worldwide according to company officials.

The oil giant now claims to be committed to the sustainable development of Nigeria's vast energy resources. "We aim to achieve this by balancing our business needs with social responsibility and sound environmental management," says Shell's web site.

Like most large corporations, Shell has committed itself to corporate social responsibility or CSR for short. Social responsibility and corporate citizenship are -- to many observers -- key to business success in the new economy. And since corporations are central to our lives and social development, business success is a prerequisite for society's success.

Whether you love them or hate them, corporations are here to stay -- at least until the next merger. The fact that corporations have become the most powerful institutions on the planet during the last half-century, means -- as Willis Harman said -- the dominant institution in any society needs to take responsibility for the whole.

According to The Corporate Responsibility Coalition (CORE) (http://www.corporate-responsibility.org), change has been slow and in many cases only superficial steps have been taken. "A mismatched patchwork of voluntary best-practice standards and codes of conduct has materialised, obscuring the main priorities and encouraging companies to undertake a 'pick-and-mix' approach to CSR," says the London-based organization.

The founding members of CORE were Amnesty International, Christian Aid, Friends of the Earth, New Economics Foundation (http://www.neweconomics.org), and Traidcraft (http://www.traidcraft.co.uk/). The coalition is now supported by over fifty organizations, including non-governmental organizations, church groups and trade unions.

For clear and consistent practices of CSR to emerge, CORE says companies need a common set of enforceable rules. This is where the government must play a role, according to CORE. "The current laws governing corporate conduct, set out nearly 150 years ago, no longer squares with the way businesses conduct their affairs in an age of increased globalisation. New company law legislation is now needed to level the playing field and ensure that corporations based in Britain are not only more responsible to their wider stakeholders, but are also legally accountable for their actions both here and overseas."

A New Economics Foundation Policy Brief by Deborah Doane entitled "Why the CORE Bill is Good for Business" is available for download from the CORE web site. The proposed regulation would see companies being held more directly responsible for social and environmental impacts, in particular, by making them accountable to a broader group of stakeholders beyond the shareholder.

Doane writes that the key elements of the CORE bill include:

 Companies should produce and publish reports on their social, environmental and economic impacts;

 Companies should consult with their stakeholders on company activities and impacts, in particular prior to embarking on new projects;

 Directors of companies should be required to consider the environmental, social and economic impacts of their operations and must take the interests of all stakeholders into account when making decisions on these aspects;

 Directors would take all reasonable steps to minimise any negative social, environmental or economic effects of their operations; and

 Stakeholders should be able to require companies and directors to meet these obligations.

Corporate critics can find an abundance of evidence to prove the need for new laws governing companies. Novelist and essayist David James Duncan doesn't have a lot of good to say about corporations. "With rare exceptions, the megacorporations are out to unify, dominate, monoculturize, dehumanize, and exploit the living world and its increasingly disenfranchised populace," he writes. Duncan cites the following statistics to make his case:

 The top 200 corporations possess twice the assets of 80 percent of the world's populace.

 The wealthiest 20 percent of the populace hoards 86 percent of the world's goods, while the poorest 20 percent scrape by or die on 1 percent.

 This disparity between top and bottom quintiles has doubled in the three corporation-serving "free trade" decades.

American satirist Michael Moore (http://www.michaelmoore.com) has some staggering facts in his latest book Dude, Where's My Country? Moore states that German Chief Executive Officers make 15 times the average salary of their employees; British CEOs make 24 times the employee's salary; but in the United States the average CEO makes an astonishing 411 times the average employee's salary.

Reasons enough why corporate social responsibility has to move beyond buzzword or public relations exercise. "Limited liability" has obviously transformed itself into institutional irresponsibility.

In Canada, The Corporate and Insolvency Law Policy Directorate (part of Industry Canada http://strategis.ic.gc.ca/epic/internet/incilp-pdci.nsf/vwGeneratedInterE/home) is responsible for the review and revision of a number of Canada's business framework laws in the insolvency and corporate areas. Nothing approaching the CORE recommendations appears to be on the horizon in this country.

Instead, Canada is promoting the Organization for Economic Co-operation and Development (OECD) voluntary Guidelines for Multinational Enterprises http://www.oecd.org/department/0,2688,en_2649_34889_1_1_1_1_1,00.html. The Guidelines are recommendations addressed by governments to multinational enterprises operating in or from adhering countries. They provide voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, anti-corruption, consumer protection, environment, information disclosure, competition, taxation, and science and technology.

The Guidelines express the shared values of the 37 countries that have adhered to them. These are the 30 OECD members and 7 non-member countries (Argentina, Brazil, Chile, Estonia, Israel, Lithuania, and Slovenia. Latvia's adherence is being completed and an application by Singapore is being considered.)

Hands up anyone who has heard of this and is familiar with the strangely named web site Canada's National Contact Point for the OECD Guidelines for Multinational Enterprises http://www.ncp-pcn.gc.ca/menu-en.asp. Canada's National Contact Point (NCP) is an interdepartmental committee of the federal Government, comprising representatives from the Department of Foreign Affairs and International Trade, Industry Canada, Human Resources Development Canada, Environment Canada, Natural Resources Canada, the Department of Finance and the Canadian International Development Agency. The role of the NCP is to promote awareness of the OECD Guidelines for Multinational Enterprises (the "Guidelines") and ensure their effective implementation.

Canadians Don Tapscott and David Ticoll believe that when companies are actively transparent, they build trust and perform better. That's the argument they make in their new book, The Naked Corporation: How the Age of Transparency Will Revolutionize Business published by Free Press - Simon and Schuster (http://www.simonsays.com).

Among the authors' many conclusions are:

 Transparency and corporate values enhance market share: there is a competitive business case for strategies that focus on stakeholders and sustainability.

 Companies, whether they know it or not, have a network of stakeholders called "stakeholder webs" which scrutinize their every move and can devastate or destroy a business. (Check out http://www.internalmemos.com and http://www.fuckedcompany.com to see what they mean.)

 Employees of an open enterprise have greater trust in one another and their employers -- resulting in lower costs, improved quality, better innovation, and loyalty.

 Transparency is critical to business partnerships -- lowering transaction costs between firms and enabling collaborative commerce.

 Corporations that align their values with those of the communities they touch, and behave accordingly, develop sustainably competitive business models.

One Canadian who would love to see companies become more socially responsible is singer Bruce Cockburn. His 27th album (You've Never Seen Everything) has just been released and it reflects Cockburn's deepening frustration with a world out of balance. The swirling jazz of "Trickle Down" (see lyrics at http://cockburnproject.net/songs&music/td.html) takes aim at corporate abuses and represents some of Cockburn's angriest and most political lyrics since his classic 1980s songs "Call it Democracy" and "If I had a Rocket Launcher."

"You look at war and environmental problems and you look at what's causing them and what's preventing us from solving them and the trail always leads to human greed," says Cockburn (http://www.rounder.com/feature/cockburn/bioframe.html). "Somebody's getting paid to keep it that way or make it worse. Everyone's wondering what it all means and what we can do about it."

A new poll conducted last May and released September 16 points out that doing something about "it" is a major stumbling block for many people.

An Ipsos-Reid poll reveals that two-thirds (65%) of British Columbians give BC companies and organizations solid marks for being socially responsible. The marks are not stellar, however, as fewer than one-in-ten (7%) British Columbians rate BC companies and organizations as doing a “very good job” when it comes to doing business in a socially responsible way. Nearly six-in-ten (58%) residents say companies are doing a “moderately good job” of conducting their business in a socially responsible way. In contrast, three-in-ten (30%) residents say companies and organizations are doing a “very poor job” (8%) or “moderately poor job” (23%).

While this may sound like good news, these numbers are really no different than what was seen in Ipsos-Reid research in 2001. At that time, Ipsos-Reid found 60% of BC residents giving companies and organizations solid marks for conducting their business in a socially responsible way (7% “very good job” and 53% “moderately good job”). “Given the interest in corporate social responsibility over the past two years, it is somewhat surprising that we aren’t seeing higher marks for BC companies and organizations,” says Kyle Braid, Vice President at Ipsos-Reid. “An increase of 5 points is nothing to get excited about.”

While British Columbians may be watching and evaluating, they are fairly pessimistic about their ability to influence companies to adopt socially responsible practices. Five-in-ten (51%) British Columbians do not believe they can have any real influence on BC companies’ corporate citizenship: three-in-ten (31%) say they have “not very much influence” and two-in-ten (20%) say they have “no influence at all”. Only about one-in-ten (11%) residents believes they can have a “great deal of influence” on whether a company is socially responsible. An additional four-in-ten (38%) say they can have “some influence”.

Yet according to Chris Laszlo, "1 in 5 consumers report either rewarding or punishing companies based on perceived social performance." Laszlo is the author of Sustainable Company: How to Create Lasting Value through Social and Environmental Performance (Island Press, 2003, http://www.islandpress.org). And in Britain, Business in the Community (http://www.bitc.org.uk) announced October 20 that new research shows that consumers are now purchasing a product associated with a good cause every second in the UK. The Business in the Community Giving Now 2003 survey discovered that 8 out of 10 (82%) consumers have been involved in a specific Cause Related Marketing programme during the last year, which directly benefits a good cause or charity. This rises to 96% when the consumer is a member of a household with children.

Two upcoming events in BC can help both companies wishing to learn more about CSR and CSR advocates.

The Accountability Project (TAP) (http://www.theaccountabilityproject.ca/index.html) is a new initiative to enhance sustainability and CSR reporting in Canada. It is holding a series of training workshops based on the internationally recognized AA1000 Series of standards and cover the CSR and sustainability reporting standards and requirements most relevant to Canadian organizations, including the Global Reporting Initiative (GRI). This series of one-day capacity building workshops will provide participants with a foundation for building accountability management in their own organizations. Participants will learn how to leverage reporting processes to drive genuine improvements in sustainability within their organizations. Participants will emerge better equipped to understand, measure, report and engage in the social and environmental issues that are important to their stakeholders and critical to their mission. A workshop for those working in the Natural Resources sector will be held November 19 in Vancouver. Find out more at http://www.theaccountabilityproject.ca/workshops.htm.

The Business Case for Sustainability Conference is being held one day earlier in Vancouver on November 18. This conference will examine best practices in the province’s forestry, mining/metals, energy, and tourism sectors. Sponsors have partnered with Canadian Business for Social Responsibility (http://www.cbsr.bc.ca) to develop content that is relevant, practical, and focused on how sustainable business practices contribute to your bottom line. It continues an initiative launched last year by the Honourable Stan Hagen, B.C.'s Minister of Sustainable Resource Management, in a one-day workshop entitled "Governance for Sustainability". Complete information can be found at: www.alcaninbc.com/businesscase-model-3/conferenceinfo.html.

Not long ago it was believed the mission of a company was to maximize profits. That's backward says Bill Shireman, CEO of the Global Futures Foundation (http://www.globalff.org) and co-author of What I Learned in the Rainforest: Business Principles for the New Economy. "We don't run our businesses to make a profit -- we make a profit to run our businesses. Great companies have an overriding sense of vision and purpose, a mission that is enabled by profit. For them, profits are a means, not an end. Companies without a seething sense of purpose are no better than machines. Companies with purpose are alive. They last for generations, because they have a reason to last."

A change in consciousness is taking place. People are trying to tame the wild power of corporations. The tremendous power of the world capitalistic structure is being challenged. Corporations that behave as if there is no tomorrow will help create just that -- no tomorrow. If corporations do not assume more social responsibility, the planet will not survive. The one thing corporations respond to are financial signals. We can all help the growing CSR cause by ensuring our purchasing and investment dollars only go to companies that have clearly enunciated values dictating appropriate employee, executive, and director actions. The power in your wallet is waiting to effect change.

RESOURCES - The OECD Corporate Responsibility page is at http://www.oecd.org/department/0,2688,en_2649_33765_1_1_1_1_1,00.html.

Industry Canada's Corporate Social Responsibility page can be found at http://strategis.ic.gc.ca/epic/internet/incsr-rse.nsf/vwGeneratedInterE/Home.

Natural Resources Canada's CSR web page is at http://www.nrcan.gc.ca/sd-dd/sd-dd/csr_e.html

Governance and Corporate Social Responsibility (a Conference Board of Canada site) is at http://www.conferenceboard.ca/GCSR/.

Principles for Global Corporate Responsibility: Bench Marks for Measuring Business Performance can be found at http://www.bench-marks.org/.

Hispanic Association on Corporate Responsibility is at http://www.hacr.org/.

Corporate Social Responsibility Forum is at http://www.csrforum.com/.

Corporate Social Responsibility Europe is at http://www.csreurope.org.

The Ecumenical Council for Corporate Responsibility is at http://www.eccr.org.uk/.

Eldis Corporate Social Responsibility Resource Guide is at http://www.eldis.org/csr/.

The Corporate Responsibility Group (check the excellent list of links on CSR page) is at http://www.corporateresponsibilitygroup.com/.

The online version of Corporate Responsibility - Responding to the Global Challenge is at http://www.responsiblepractice.com/.

SHARE - The Shareholder Association for Research and Education - is at http://www.share.ca.

Business and Sustainable Development: A Global Guide - http://www.bsdglobal.com/issues/sr_csrm.asp has the key findings of a recent survey of 20,000 people in 20 countries that offers some fascinating insights into the way consumers, and societies at large, perceive the social and environmental responsibilities of business. Corporate Social Responsibility Monitor 2001: Global Public Opinion on the Changing Role of Companies identifies those aspects of corporate practice that matter most to the general public. It also reveals some intriguing differences in priorities between different regions of the world. The survey was undertaken by Environics International, and involved interviews with around 1,000 people in each of 20 countries including the USA, Canada, Mexico, Britain, France, Germany, Japan, India, Russia and Nigeria.

Corporate Social Responsibility: Why Good People Behave Badly in Organizations from the March/April 2003 issue of the Ivey Business Journal is available at http://www.iveybusinessjournal.com/view_article.asp?intArticle_ID=404.

Watch for the film The Corporation made by Vancouverite Mark Achbar with collaborators Joel Bakan and Jennifer Abbott. It is a fascinating dissection of the history and consequences if the corporate age.

Michael Jessen is a Nelson consultant who assists companies and communities with sustainability issues. He can be reached at (250) 229-5632 or by e-mail at zerowaste@netidea.com. His business -- Zero Waste Services -- has an award-winning web site at http://www.zerowaste.ca.


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