Free copy of the September 2015 Ethical Corp magazine

Water fightResource conflicts

September 2015 www.ethicalcorp.com

Trans-Pacific PartnershipDeal or no deal?

Sustainable investmentFuture trends

NaturaB Corp falters

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Ethical Corporation | September 2014???Contents Ethical Corporation | September 2015

45 Asia column

China’s market woes

47 NGOWatch

Bitter sugar workers

49 Cheatsheet

All you need to know

Strategy and management

54 Investment trends

EIRIS forecast

61 GlobalEthicist

Latin American promise

Review

68 Report: Natura

70 Report: PVH

72 Academic news

74 New books

76 People on the move

79 Jobs

80 Subscriptions Save 20%

34Trans-Pacific tradeStalled progress

6 From the editor

EthicsWatch

7 Modern slavery UK policy

10 Renewable energy Costs fall

12 EU e-waste Illegal business

14 PolicyWatch Dutch climate appeal

Water briefing

17 War for water Resource politics

25 Water footprint Measure and reduce

34 Trans-Pacific Partnership Ethical trade offs

42 BrandWatch L’Oréal award

17 Water scarcityLimit misuse

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Ethical Corporation | September 2015

5

Ethical Corporation | September 2014Report reviewFrom the editor

Editor’s letter

Welcome to the September 2015 issue

This issue investigates one of the biggest resource risks facing

humanity – water. Some of the world’s most troubling societal

problems, including wars and inequality, can be attributed to

water scarcity and pollution. As this link becomes more apparent,

companies will find themselves under increasing public pressure

to address water usage in their direct and indirect operations, and

decrease as well as better manage their water footprint.

In the first part of our two-part trade series, we also look at the

ethical implications of the Trans-Pacific Partnership, as well as the

likelihood of the deal taking place at all. And SRI investment guru,

EIRIS CEO Peter Webster, offers us his predictions for sustainable

investment trends of the future.

To mark B Corp certification officially launching in the UK this

month, we review the world’s biggest B Corp, Brazilian cosmetics

giant Natura, as it attempts to meet new rigorous sustainability

standards.

Zara Maung

Editor

Editor: Zara Maung

Sub editor: Gareth Overton Contributors: Oliver Balch, Andrea Bonime-Blanc, Rajesh Chhabara, Ellen R. Delisio, Stephen Gardner, Nadine Hawa, Claire Manuel, Sam Phipps, Simon Propper, Andrea Spencer-Cooke, April Streeter, Fran van Dijk

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Ethical Corporation | August 2014??? Ethical Corporation | September 2015EthicsWatch: Modern Slavery Act

EthicsWatch

UK

A point that needs labouring

By Oliver BalchA law designed to cut slave labour from the supply chains of companies operating in the UK is about to come into force, but the detail of its requirements remains unclear

Almost two centuries after the UK formally abolished slavery, the scourge of forced, bonded and trafficked labour continues. Between 21 million and 29 million people worldwide are thought to be trapped in involuntary employment, according to estimates by anti-slavery groups. The international Labour Organisation says modern slavery generates illegal profits of $150 billion a year.

Although human trafficking and enslavement is evidently big business, it’s very rare to find large companies in regulated markets employing slave labour directly. Yet the risk that one of their suppliers or (more probably) sub-suppliers may be doing so is high.

For that reason, the UK government is requesting companies to take steps under the Modern Slavery Act to ensure that slave labour is not used in their supply chains. The legislation was passed in March and will come into force in October.

So are companies ready? Campaigners fear not. That’s partly because of a simple lack of awareness. Legislators decided to set the threshold for the Act’s applicability at the lower end of the proposed spectrum. Consequently, every company with annual revenues of £36m or more that is based in the UK or has UK operations has to comply – a pool of some 12,000 businesses.

A more significant problem is confusion. Marilyn Croser, director of the Core Coalition, a civil society network active in pushing for the Act, says: “Those companies who engaged in the process of legislation know it’s coming, but even for them there’s a lack of clarity as to what’s expected.”

Slavery in supply chains, renewable energy price fall and European e-waste crisis

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The main obligation is for companies to issue a “slavery and human trafficking statement” (see box). This needs to be produced on an annual basis and should demonstrate the steps taken to ensure a company’s operations are slave-free. If they are taking no measures, companies are required to say as much. Beyond that, however, the specifics of what the statement should include remain vague.

The Home Office is understood to be preparing official guidance to orientate companies more fully. The document is due to be published next month, around the time that the Act comes into force. It is essential that the guidance provides clarity on the “actions and reporting of those actions” that companies need to undertake to be compliant, says Croser.

Philippa Foster Back, director of the Institute of Business Ethics (IBE), anticipates “a lot of fumbling around” initially when it comes to meeting reporting requirements. A key issue of contention is how far down the supply chain companies’ anti-slavery measures are supposed to reach. Another is the rigour of assurance that companies are being asked to provide. Is it best endeavours to eliminate slavery or absolute proof that there is none, Foster Back asks.

“Companies are probably only going to be able to manage their primary suppliers at the moment and they will probably put in some form of cascade-type effect all the way down [their supply chain]”, she says.

What information should a slavery and human trafficking statement include? a) the organisation’s structure, its business

and its supply chains;b) its policies in relation to slavery and

human trafficking;c) its due diligence processes in relation

to slavery and human trafficking in its business and supply chains;

d) the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;

e) its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;

f) training about slavery and human trafficking available to its staff.

Source: UK government

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Regardless of the letter of the law, compelling business risk and moral arguments exist to push companies to act. As a minimum, businesses ought to have a human rights policy that requires suppliers not to support slavery or forced labour. A recent briefing issued by the IBE cites Vodafone’s Code of Ethical Purchasing and Canon’s Supplier Code of Conduct as illustrative examples (PDF). Additional steps companies may consider include rigorous site auditing, supplier training and wider support for union representation and worker rights in supply chains.

Human rights groups such as those represented by the Core Coalition would like to see companies go further and eliminate business practices that they say exacerbate the risk of forced or slave labour taking place. The list includes short order times by retailers and unfair payment terms that leave suppliers facing cash flow problems.

Campaign groups working closely on the promotion of the Modern Slavery Act include Unseen, Anti-Slavery International, Cafod, Amnesty International and Flex. The latter is pushing for companies having directors who are directly accountable for reporting. Anti-Slavery International, meanwhile, believes the UK government should be empowered to block the import of any goods produced with the use of forced labour.

The rigour of assurance required remains uncertain

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EthicsWatch: Modern Slavery Act

http://www.ibe.org.uk/userassets/briefings/b_43_modernslavery.pdf

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Ethical Corporation | August 2014??? Ethical Corporation | September 2015EthicsWatch: Renewable energy

IEA report

Renewable costs falling, but battles continueBy Sam PhippsCosts across the energy market are rapidly changing, but the picture remains patchy and contentious

The cost of renewable energy has fallen dramatically compared with power from fossil fuels and nuclear in the past five years, according to the International Energy Agency (IEA). The median cost of producing baseload power – i.e. power available at any time – from coal, natural gas and nuclear plants is about $100/MWh today, against about $200/MWh for solar, which has fallen by 60% from its 2010 level of $500.

Those costs include investment, maintenance, fuel and decommissioning over a plant’s lifetime and vary widely between countries and plants. For example, in Belgium power from commercial rooftop solar installations costs $312/MWh but in Spain solar costs $167/MWh because of Spain’s greater sunshine, states the IEA report, titled Projected Costs of Generating Electricity.

“The costs of renewable technologies – in particular solar photovoltaic – have declined significantly over the past five years,” the Paris-based IEA says. “These technologies are no longer cost outliers.” The study, based on figures from 181 power plants in 22 countries, concludes that no one technology is the cheapest in all circumstances, as costs depend largely on labour costs, available resources and local regulations.

Subsidy battlesPanasonic, a major supplier of solar panels in Britain, has urged the UK government to rethink plans to cut some feed-in tariff subsidies (Fits) by almost 90%, which could affect rooftop panel installations.

Daniel Roca, UK country manager for the company’s solar division, told the Guardian: “Let’s keep [the industry] alive, let’s help it further develop to become fully independent from state support, with energy storage and a closer involvement of utilities. But let’s not push the bird out of the nest before it can properly fly.”

Solar costs have fallen 60%

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The government should immediately open dialogue with the solar industry during the consultation period announced by Amber Rudd, the energy and climate change secretary, on plans to cut support for larger solar energy installations, Roca says. Ending the Renewable Obligation subsidy early, in April 2016, would “inevitably and irreversibly” cause substantial damage to solar installations up to 5MW, which can power 2,500 homes.

Ministers are also aiming to remove the guaranteed level of subsidy for coal or other fossil fuel power plants that switch to greener fuels such as biomass.

Frans van den Heuvel, CEO of solar panel manufacturer Solarcentury, says that in the four months since the Conservatives won power in the UK, the government had turned upside down the certainties that had characterised the UK renewables market and the cross-party consensus underpinning it. “If the consultation is enacted, we can expect to see a wholesale collapse in solar take-up by homeowners and businesses.”

Energy projectionsThe IEA report was published in early September, only months before international talks on a climate change deal, which are due in Paris in December. Average costs of power generation from gas and coal rose over the five years, the agency says. Nuclear energy costs are “roughly

on par” with those reported in 2010, “thus undermining the growing narrative that nuclear costs continue to increase globally”.

Power costs are likely to shift significantly in the coming decades as new technologies become mainstream, the study predicted. Coal plants will become up to 70% more expensive if they include carbon capture equipment; offshore wind and solar, by contrast, are expected to fall in price, the IEA study says.

New utility-size solar installations could produce power below $100/MWh before 2025 in the sunniest regions, while panels on rooftops could reach that level five years later, it says. “The cost drivers of the different generating technologies… remain both market- and technology-specific. As such, there is no single technology that can be said to be the cheapest under all circumstances,” the report states.

The UK is in the process of deciding whether to build more nuclear plants. Germany has increased coal-powered generation, having phased out its own nuclear stations since the Fukushima disaster in Japan in 2011.

Coal power has increased in nuclear-free Germany

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Ethical Corporation | August 2014??? Ethical Corporation | September 2015EthicsWatch: E-waste

EU

Europe’s e-waste mountain keeps growingBy Sam PhippsVast flows of electronic waste mean that weak regulation has serious consequences

Only a third of Europe’s electronic waste is ending up in official collection and recycling systems, while the remaining 6m tonnes is exported, recycled under non-compliant conditions for criminal gain or thrown into landfill, according to a report by United Nations University (UNU), Interpol, the WEEE (waste electrical and electronic equipment) Forum and other partners.

They call for better guidelines and formal definitions to help authorities distinguish used, non-waste electronics and electrical equipment from e-waste – equipment coming out of use or in post-use storage for collection or disposal. The report also recommends an EU-wide ban on cash transactions in the scrap metal trade and harmonising penalties to prevent criminals from shifting activities to lower-risk countries within the EU. At present prison and financial penalties for illegal e-waste trade vary widely.

The European Union-funded report, Countering WEEE Illegal Trade (CWIT), concluded that current WEEE legislation, which is aimed at both increasing the recycling and/or re-use of e-waste and eliminating certain metals such as lead, mercury and cadmium from products, was having only a limited effect. About 30% of EU members have not implemented the tough regulations that are required, and penalties for infractions at the national level are not high enough to deter wrongdoing, the report states.

The widespread theft of valuable components such as circuit boards and precious metals from waste electronics means an annual loss of between €800m and €1.7bn in materials and resources for compliant waste processors in Europe, the researchers find. Avoided costs of compliance with EU regulations (mainly de-pollution) are put at €150m to €600m annually.

Pascal Leroy, secretary-general of the WEEE Forum, says: “Electronic and electrical equipment represents the fastest-growing flow of the world’s waste streams. The weight of Europe’s mismanaged e-waste alone equals that of a 10-metre high brick wall stretching from Oslo to the toe of Italy. Valuable metals and components, including critical raw materials, need to be safely captured and recycled to the fullest possible extent.”

E-waste needs a clearer definition

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The study estimates 1.3m tonnes of discarded electronics left the EU in undocumented mixed exports in 2012, of which some 30% (about 400,000 tonnes) was electronic waste and 70% functioning equipment.

More than 10 times the 400,000 tonnes of e-waste exported – about 4.7m tonnes – was mismanaged or illegally traded within Europe itself. And even the few EU member states with robust reporting systems often lack monitoring of de-pollution efforts or suitable treatment conditions.

As well as mismanagement, the CWIT study highlights cases of tax evasion, fraud and money laundering, showing that offences could be tackled under existing financial crime charges. More targeted investigations, inspection systems and national monitoring are needed, the researchers say. Improving the involvement and awareness of users in the early stages of the e-waste chain is also vital.

EU legislation restricting the use of hazardous substances in electrical and electronic equipment (RoHS Directive 2002/95/EC) and promoting the collection and recycling of such

equipment (WEEE Directive 2002/96/EC) has been in force since February 2003.

‘Ambitious new approach’In the near term, focus is now on what the European Commission will unveil as its “ambitious new approach” to the circular economy, with a revised proposal due by the end of 2015. A 12-week public consultation on the main policy options closed at the end of August.

The options will look at waste policy “and beyond” and address the full product lifecycle, the Commission says, including actions on intelligent product design, reuse and repair of products, recycling,

sustainable consumption, smart use of raw materials, stronger markets for secondary raw materials and “specific sectorial measures”. The CWIT research was also undertaken in partnership with the UN Interregional Crime and Justice Research Institute, the Cross Border Research Association, Zanasi & Partners and Compliance & Risks.

Toxic materials in the world’s annual 41.8m tonnes of discarded electronics include lead in glass (an estimated 2.2m tonnes), batteries (300,000 tonnes), mercury, cadmium, chromium and ozone-depleting substances (4,400 tonnes of CFCs), according to a UNU study last year. Health problems linked with such toxins include impaired mental development, cancer and damage to liver and kidneys.

EU aims to reuse and repair electronic products

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PolicyWatch

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Dutch courageThe Dutch government will appeal a June court ruling that found it was not doing enough to combat global warming. The landmark ruling, from a court in The Hague, said the government was failing to protect its citizens from climate change, and that the Netherlands should cut its emissions by 25% by 2020 compared with 1990, and not by about 17% as currently planned. However, Dutch

deputy environment minister Wilma Mansveld said the ruling should be checked by a higher court because it could lead to judges intervening in other policy areas and could interfere with the government’s role in negotiating international treaties. While waiting for a further ruling, Mansveld said the government would act to implement the original judgment. The case was brought by citizens’ groups and is being closely watched as a test of the extent to which governments can be compelled to increase emission reduction targets.

Climate ruling sticks for now Fracking unfair

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Undue influence?The European Union Ombudsman has agreed to look into the alleged excessive influence of lobbyists in a European-level expert group on regulation of fracking for natural gas. According to campaigners Corporate Europe Observatory and Friends of the Earth Europe, 70% of members of the in-principle independent ‘European Science and Technology Network on

Unconventional Hydrocarbon Extraction’ are industry representatives or have financial links to fracking. The chairs of working groups set up to look at specific issues “are fracking proponents and have even lobbied against tougher regulations”, the campaign groups say. The European Commission, which convenes expert groups dealing with EU policy, has until 30 November to answer the allegations. In a separate enquiry, the EU Ombudsman is looking more broadly at industry influence in EU expert groups.

By Stephen GardnerDutch climate ruling, EU fracking, Indian idols and vaping dangers


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PolicyWatch Ethical Corporation | September 2015

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Polluting PoP idolsIdols immersed in rivers and lakes during religious festivals are causing pollution and should comply with a range of minimum environmental standards, India’s National Green Tribunal has said. In particular, idols should be biodegradable

and manufacturers should avoid toxic chemicals, paints and dyes. The tribunal, which promotes the enforcement of environmental regulations in India, upbraided the state governments of Rajasthan, Chhattisgarh and Madhya Pradesh for failing to crack down on “unchecked PoP idols” – referring to plaster of Paris. State governments were instructed to report their compliance by mid-September, in time for the Hindu rituals of Ganesh Chaturthi and Durga Pooja, the tribunal said.

Religious river pollution

A danger to young people

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Vaping dangersTrouble could be brewing for manufacturers of e-cigarettes. The California-based Center for Environmental Health (CEH) has published a scientific study linking the products to health risks and is notifying 20 e-cigarette makers that it intends to sue them in the US. “Vaping” e-cigarettes involves inhalation of toxic acetaldehyde and formaldehyde in

concentrations way beyond safe levels, the group says. According to CEH, e-cigarettes are generally marketed as safer alternatives to conventional cigarettes, but are increasingly being used by teenagers and young people and should be considered as health risks in their own right. “It’s not safe to vape,” CEH director Michael Green said. More widely, research on the health effects of e-cigarettes has so far been inconclusive. The CEH study is available at www.ceh.org/ecigs

http://www.ceh.org/ecigs

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Resource scarcity

Water: the new battle ground By Ellen R DelisioWater is rising on the sustainability agenda, as its scarcity is blamed for recent conflicts and corporations begin to understand their responsibilities

Water is becoming the new oil, a shrinking, contested, necessary resource associated with border disputes and armed conflicts. It determines

livelihoods, business locations, food availability, children’s well-being and even whether girls can go to school.

More than 1 billion people currently live in areas where water is scarce and as many as 3.5 billion could be in the same situation by 2025, according to the World Resources Institute. That may seem surprising since water covers 70% of the Earth, but only 3% of that total is fresh water and more than half of the fresh water is in glaciers or other hard-to-reach locations.

“There’s not really any area of the world not affected,” says Karin Krchnak, director of the Freshwater Program for WWF. “You could name any region of the globe and the forecast is pretty grim.”

The 2015 World Economic Forum named “water supply crises” as one of the top five global risks. Overuse and mismanagement of water resources, pollution, climate change and population growth all are reasons for water scarcity, although some conditions affect certain areas more than others. Many of the water sources that support ecosystems have become stressed, according to WWF, and more than half of the world’s wetlands have vanished.

The 2015 World Economic Forum named water supply crises as one of the top five global risks

Ethical Corporation | August 2014??? Ethical Corporation | September 2015Water briefing

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Agriculture uses the greatest share of the fresh water supply


In addition, the WWF notes, climate change is disrupting patterns of weather and water worldwide, leading to shortages and droughts in some areas and floods in others.

“One-third of the major aquifers worldwide are being rapidly depleted,” says Jay Famiglietti, professor of Earth System Science at UC Irvine and senior water scientist at Nasa’s Jet Propulsion Laboratory. “Unfortunately, these are the same aquifers that provide groundwater to irrigate the world’s major food producing regions. Our water and food security is at far greater risk than we realise.”

Globally, agriculture uses the greatest share of the fresh water supply, representing about 70% of water withdrawals. Industry uses 22% and 8% goes to domestic activities. Farming also is one of the largest sources of water pollution, due to runoff from fertilisers and animal waste.

Water resources in parts of South Africa, the Mediterranean countries, the US, South Asia and China are being drawn down due to agriculture, according to Ruth Mathews, executive director of the Water Footprint Network, which “provides science-based, practical solutions and strategic insights” to stakeholders to improve the way fresh water is used and shared. The large numbers of smallholder farmers in South Asia and elsewhere are cumulatively contributing to a large water footprint for agriculture. Industry also contributes to the world’s water footprint with some industries consuming a lot of water and others generating a high level of pollution.

“The drivers for shortages include competition and more demand than supply; there is a pretty set supply of fresh water,” says Brooke Barton, senior

Ethical Corporation | September 2015Water briefing

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Global warming intensified a severe drought in Syria


director of the water programme at Ceres, a US-based non-profit that works with investors, companies and public interest groups to foster sustainable business practices. “There has been very poor regulation of water throughout the world,” Barton says. “There has been very little data about how much water is being used, a lack of information about pollution, the economic or industry factor and lack of access. Many people struggle on a daily basis to get access to fresh water. And climate change adds incredible uncertainty to the system.”

Even in a water-rich country like Brazil, drought and mismanagement are leading to water scarcity, Barton adds. Water shortages in the US, China and India tend to be in certain regions, Barton says. In China, often the major culprit is pollution, while in certain parts of the US, an already-dry climate exacerbated by shifts in population and expanded agriculture tax a limited water supply.

Water and warTensions and conflicts over water supplies are only expected to increase. Scientists recently cited a climate-change-influenced drought as a major factor that contributed to the civil war in Syria that began in 2011. Global warming intensified a severe drought in the country that lasted from 2006 to 2010, according to a report co-authored by climate scientists at Lamont-Doherty Earth Observatory at Columbia University in the US. Citizens weary of the economic stress, lost jobs and food shortages called on the government to do more, leading to civil unrest. The administration of President Bashar al-Assad cracked down hard on the protesters, leading to many civilian deaths and people fleeing the country.

Adding to the problems, for years, the al-Assads, the country’s ruling family, encouraged the growing of export crops such as cotton, which are very water-intensive. Irrigation wells that were drilled illegally depleted groundwater that could have been used during the drought, the report says. With water scarce, agriculture production, usually about a quarter of Syria’s economy, dropped by a third.

Since 1900, the region’s temperature has increased by between 1°C and 1.2°C, which has been attributed to human greenhouse gas emissions, the

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report notes, leading to an average 10% drop in rainfall during the wet season. Syria also has experienced a jump in population, from 4 million in the 1950s to the current 22 million.

The war in Syria could be just the first of a series of conflicts spurred by water shortages throughout the region, the report’s authors warn. Prolonged droughts and competition for water could make simmering tensions boil over. Turkey, Lebanon, Israel, Jordan, Iraq and Afghanistan as well as East Africa and parts of Central America all are potential hot spots.

In other parts of the world, populations battle water shortages and water-borne illnesses. Out of the 783 million people worldwide who do not have access to clean and safe water, 37% live in sub-Saharan Africa, according to the Water Project. That means a member of each family must spend hours each day trekking to and from a fresh water supply with a jug. About 64% of households rely on women to get the family’s water when there is no water source in the home, and girls under 15 are twice as likely as boys to be assigned this job, often preventing them from attending school. The United Nations estimates that in Sub-Saharan Africa, 40bn hours a year are spent collecting water. And yet, for every $1 invested in water and sanitation, the economic return is between $3 and $34, notes the World Health Organization.

NGOs are playing a role in helping neighbouring countries negotiate water rights, says WWF’s Krchnak. “They are working to bring stakeholders together to have those dialogues.” WWF has been working in Cameroon to bring water supplies and sanitation into communities, she says. WWF also is collaborating with companies in Mexico, Belize and Guatemala that provide financial and technical support to improve the drinking water supply and sanitation. “When we go into countries to do these projects, we look at how they are done in terms of affecting the watershed, the impact on climate change and how to sustain the projects,” Krchnak adds.

Lack of adequate sanitation systems and safe drinking water also have a major impact on the health of the populations in many developing countries, particularly children. As much as 80% of illnesses in developing countries are related to tainted water and poor sanitation, the Water Project says. People with water-related illnesses comprise about half of the patients in the world’s


In Sub-Saharan Africa, 40bn hours a year are spent collecting water

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More companies are showing an interest in water conservation


hospitals and a fifth of deaths of children under five worldwide is attributed to a water-related disease.

Besides limited water supplies and access problems, in some countries, mismanagement in the form of uneven distribution of water resources and lack of oversight exacerbates the situation, says Water Footprint Networks’ Mathews. “Even in the developed world, choices are made for economic development, but making those choices is based on a value system; the water usage is not taken into account,” she says. “In developing countries, a problem grows and grows until the government steps in to make a radical change, so then a company either makes the change or the business shuts down.”

On the positive side, water stewardship is starting to feature more prominently in many companies’ sustainability reports, after decades of being off the radar. “For a very long time, businesses assumed water was cheap and limitless. There was a disconnect between the price and value of water,” says Ceres’s Barton. “Without a major signal, they really were not thinking about supply.”

Corporate conservationMore companies are showing an interest in water conservation as they realise water issues can pose a business risk, says Mathews. “We see companies reaching down into the supply chain to reduce their water footprint.”

The growing number of businesses participating in water conferences recently is a sign they are acknowledging global water concerns, Krchnak points out. “Businesses are really understanding [water scarcity], whether it is involving current business or future business. Most food and beverage and textile companies are starting to see water as a risk to their own operations and reputations. Mining companies have had to shut down because of massive flooding. They are working with us to see how they can take on these water challenges.”

Krchnak adds: “I see companies taking a stronger interest to see how they can be part of the solution to the global water situation. It’s amazing to see more companies working together. Since water scarcity is a collective as well as a local issue, you can apply some of the lessons used in other parts of globe,

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but have to take into account conditions in other countries.”

One approach Ceres is taking to get companies’ attention is working with investors who encourage companies to do more to conserve water, provide data about their activities and indicate how corporate decisions affect water resources. “Investors stress that portfolios need to reflect that companies are being as efficient as possible,” Barton says. “There is a growing interest among investors in climate and the environment, to integrate modelling into decisions about purchases. Investors need to see companies provide more data, so we are seeing more recognition of water’s value.”

InterContinental Hotels Group (IHG), a company operating in almost 100 countries, has appointed Water Footprint Networks to develop its water stewardship programme. While IHG has had a sustainability programme for many years, company officials decided it was time to address the water issue more directly. “We’ve spent a long time trying to identify the right partner,” says Paul Snyder, IHG vice-president for corporate responsibility – environmental sustainability. “What we’re trying to do is figure out where to go next.”

As one of its 2013-2017 corporate responsibility targets, IHG is aiming to reduce water use per occupied room by 12% in water-stressed areas. By the


Writing’s on the wallIn August, more than 60 North American and European institutional investors collectively managing $2.6tn in assets sent joint letters to 15 food and drinks companies calling for increased water risk management and disclosure practices, according to Ceres, a non-profit sustainability organisation. The letters were coordinated by Ceres along with the Interfaith Center on Corporate Responsibility and the United Nations-supported Principles for Responsible Investment.

The letter recipients were selected based on their relatively low water management risk scores in a recent Ceres report, Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks. Out of the 31 publicly traded US companies evaluated by Ceres’ report, 90% named water as a material risk in their 10-K filings, but only 30% indicated that water risks were part of major business planning activities and investment decision-making.

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end of 2014, the company had achieved a 4.2% reduction. IHG has 4,942 hotels globally.

IHG is looking to Water Footprint Networks to help it develop a deeper understanding of water usage at the local levels at its hotels and then employ best practices to address issues. “We want to combine that with the global scale to find more opportunities across the portfolio to do more,” Snyder says. “We want to be leaders in the area of water stewardship.”

The water stewardship programme will supplement IHG’s Green Engage system, which was rolled out in October 2014. Green Engage includes more than 200 actions designed to reduce hotels’ environmental impact and almost 30 of them pertain to water. Among the recommendations are the ability to track consumption on a monthly basis, as well as guidance on more specific water-saving solutions such as metering, rainwater harvesting and the installation


Refreshingly drierA partnership between Coca-Cola and WWF to address the impacts and risks associated with Coca-Cola’s water use has led to the global drinks giant improving water efficiency consistently since 2004.

Coke set a goal of reducing water use by 20% in 2012, and reached 21%. The next target is 25% by 2020, according to Greg Koch, the company’s director of Global Water Stewardship. By meeting the 25% goal, Coke can cut $1bn in costs between 2010 and 2020, Koch says. “We set up a tracking system, so we’re measuring water use not just overall, but where it is used throughout the plant.”

Among the water-saving measures implemented at some of its 900 plants worldwide, besides fixing leaks and optimising processes, are steps to remove water from the process entirely, Koch says. For example, instead of spraying conveyor belts with a soapy water mixture to prevent the scuffing of bottles, some facilities use dry lubricant. Rather than cleaning the inside of bottles with water before they are filled, some places are using ionised air.

Looking outside its plants, the majority of water Coke uses is embedded in agriculture, to grow fruit and sweeteners, Koch says. “We’ve set a goal of sustainably sourcing 100% of our ingredients by 2020.” This includes water, and sustainability means irrigation efficiency; ensuring the source of water is sustainable; monitoring, tracking and limiting runoff to make sure it is not picking up chemicals; and changing the way fertilisers are applied.

WWF has been a valuable partner in helping company executives understand more of the social and conservation science involved in water stewardship, according to Koch. “It is a true partnership: they do a lot of work with river conservation, so we go out in the fields together,” he says. “We also look at shared watersheds, and contiguous market places. We also are interested in the community and ecosystem we are involved with. WWF pushes us. They pushed us to set a goal around sustainable agriculture.”

Green Engage includes more than 200 actions to reduce impact

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of devices such as low-flow taps and showerheads. In 2014 alone, managed hotels cut $92m in costs by participating in IHG Green Engage, according to IHG. To address the severe drought conditions in California, IHG delivered water conservation kits to all of its 230 hotels in the state.

Water stressed areas only will continue to multiply. Parts of South America are likely to experience more water shortages, leading to social conflicts around water, according to Mathews. “Certainly in parts of South Asia as well as the Mediterranean area there will be continued problems.”

Other locations where shortages will probably worsen include the Rio Grande-Rio Bravo areas on the US-Mexican border, because an already dry region is being affected by climate change, says Krchnak. And as glaciers melt in the Himalayas, and water systems change, competition for water no doubt will increase there. A shrinking supply of surface water in the Middle East also will take its toll.

To really have an impact on water scarcity, corporations, agencies and governments are being encouraged not just to monitor their own water usage, but to get more involved in joint efforts, especially in areas where resources are shared.

“The future is getting companies to work together in these river basins, and working with governments,” says Krchnak. “We need to look down the supply chain, making changes to mitigate the situation and work collectively with companies and governments. With water that crosses borders, you need to work together to share data. Individual actions will help contribute to solutions, but what is more important is how we can do it together.” n


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Water management

The other footprint: waterBy April StreeterSome might say the race is on to measure and declare the first full water footprint comprehensively assessing a company’s water use throughout the supply chain. Others might say it’s a slow race

When Coca-Cola recently announced that it would be “water neutral” by the end of this year, the creator of that term, Arjen Hoekstra, was

bemused.Hoekstra, professor in water management at the Netherlands’ Twente

University, coined the idea of water neutrality as well as the concept of a water footprint (see box on p25). While Hoekstra was cheered that Coca-Cola is working to offset each gallon of water it uses by recycling or conserving water somewhere else in the world, he couldn’t help but also be disappointed.

“Water neutrality clearly entails water footprint reductions in operations and in the supply chain,” he said. “If you apply water neutrality only to operations as Coca-Cola is doing, and not to the supply chain, well that is not hiding anything but it’s a bit misleading.”

Hoekstra and many others feel that water users must urgently look at their consumption in this holistic “footprint” way, where all of the water that goes into the making of a product or service is accounted for. In the 2015 World Environment Federation (WEF) Global Risk Report, water was ranked as the number one risk to society in terms of impact. Hoekstra and others believe we won’t truly be managing water risk if companies count only the water used in

Coca-Cola announced it would be “water neutral” by the end of 2015

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Three types of water risks are common to all companies regardless of industry


their operations and not the “virtual” water embodied in their products down through the supply chain.

And while a growing number of companies are paying attention to their water risks, not one has yet come out with a firm goal to reduce its water footprint with supply chain water use included. “To me that is the next logical step,” Hoekstra says. “Companies are struggling a bit right now because they are not used to doing something through the supply chain. They are being cautionary. If there is enough public attention, though, companies will move, because they will have to.”

From here to thereWWF and others maintain that three types of water risks are common to all companies regardless of industry: physical risks, regulatory risks and reputational risks.

Ruth Mathews, executive director of the Water Footprint Network, says it is still a limited group of companies globally that are ready to envision


Neutrality and footprints Water neutrality is an idea similar to carbon neutrality. Arjen Hoekstra defined water neutrality in 2008 as: reducing the water footprint of an activity or product as much as reasonably possible, and offsetting the remaining externalities of the water footprint. The water footprint is itself an indicator of water use that looks at both direct and indirect water use, i.e. the volume of fresh water used to produce the product, summed over the various steps of the production chain. (Source: AY Hoekstra, Twente Water Centre, 2008.)

Calculating a company’s water footprint includes setting goals and scope; collecting data and doing footprint “accounting”; evaluating water use from social, environmental, and economic standpoints; and creating a water footprint response formulation. The ISO 14046 standard, released in 2014, encompasses the factors necessary to assess a product, service, or organisation’s water footprint.

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Companies large and small operating in California have experienced sudden media scrutiny


their complete water footprint. “Mostly the leaders – in terms of companies engaging in water stewardship – are those with the most financial or reputational risk,” Mathews says. “Though it is still a small proportion, there are many more than there were five years ago, and I think there will soon be exponential growth.”

That growth Mathews predicts is in part due to worsening water woes, like the extreme drought in California that has highlighted those physical and reputational risks water shortages impose.

Companies large and small operating in California have experienced sudden media scrutiny, with water bottlers such as Nestlé getting the most coverage (though its total usage is less than 1% of the state’s water) and other users such as almond growers,


Green, blue, and greyA water footprint can comprise blue water, green water and grey water components. Blue water refers to surface or groundwater used in production of a good or service. The green water footprint is the volume of rainwater consumed during a production process. The grey water footprint indicates freshwater pollution associated with the production of a product over its full supply chain. Source: Water Footprint Network

Water briefing

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beef and dairy farmers and power producers facing criticism. The drought has caused California consumers to become suddenly aware of the water footprint concept, especially as it relates to food production (see box). But as with climate crises, water calamities hit the world unevenly.

Transparency about water use, both internally and in the supply chain, is the first step in acknowledging our shared and problematic water footprint.


Sugar to soda, barley to beer, cotton to clothesIf it were simply a case of figuring out how much water a company uses internally to produce a product or service, water footprints would be easy. But then there’s “virtual” water, which isn’t obvious when looking at a half-litre bottle of Coca-Cola. In a landmark 2010 study by Coca-Cola and the Nature Conservancy, that half-litre bottle of Coke produced in the Netherlands was found to have a green water footprint of 15 litres, a blue water footprint of 8 litres and a grey water footprint of 12 litres.

Most of the green and blue water footprints are associated with the growing of the sugar beet used to sweeten the Dutch version of the drink. In fact the Water Footprint Network has estimated that it can take 442 litres of water to make a litre of Coke that uses cane sugar, and 618 litres of water for a litre of Coke that uses high fructose corn syrup. Meanwhile, the operational water footprint of a half-litre of the soda is calculated at just 0.4 litres.

Looking at beer, growing hops and barley takes far more water than SABMiller users to turn the grains into a heady brew. A 2010 study of water footprints of barley and hops production in four countries showed variations in the footprint but in all cases at least 89% of the total footprint of the beer was in the cultivation of ingredients.

In clothing, water footprints can be gargantuan because cotton growing is so thirsty: nearly 2,500 litres for a T-shirt, 7,500 litres for a pair of jeans, and 8,000 litres for a pair of leather shoes. Finally, hamburgers must be humanity’s Achilles heel in terms of water footprints: just one kilogram of beef needs 15,000 litres of water to produce it.

When it comes to a water footprint, the best reduction plan for individuals is simple but not very palatable: don’t wash your jeans, skip the cream and the coffee, or don’t put a burger on your bun. For companies, the road is just as hard, for once internal operational usage is minimised it’s time to look through the supply chain for ways to shrink the water footprint.

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In a study released this year, Hoekstra and colleagues at Twente University ranked the 75 largest Dutch companies on water reporting transparency. Brewing company Heineken ranked as the most transparent on water use reporting with a score of 43% out of a possible 100% transparency. Surprisingly, Unilever scored only 16%, while almost half (34 of the 75) companies scored zero.

Know your footprintThe tools for water use transparency are now many. For example, the American industrial products company 3M identified water as a “critical global challenge” long ago in its internal materiality studies. 3M started using the World Business Council for Sustainable Development’s Global Water Tool and the World Resources Institute’s Aqueduct Water Risk Framework to guide its water stewardship. By 2014, 3M achieved a 42% reduction in water use (indexed to sales) with 2005 as the baseline, and now will attempt to cut that figure 10% further by 2025.

All 3M sites in water scarce or water stressed areas are developing water conservation plans, says vice-president for sustainability Gayle Schueller, and 3M will begin to engage with communities on water conservation. While 3M says in its latest sustainability report that understanding its full supply chain footprint is important, thus far it is measuring and reducing only its operational water footprint.

Clothing company Levi Strauss views its water footprints through product lifecycle analysis. According to senior director of corporate affairs Amber McCasland, in 2015 the company completed an updated product lifecycle assessment (LCA) for multiple core products. The updated LCA, for example, pinpointed that cotton cultivation consumes 68% of the water in a pair of blue jeans’ lifecycle, while manufacturing uses 9% and consumer care, i.e. washing, uses 23%.

Levi Strauss is working on reducing water use on all three fronts. By


The tools for water use transparency are now many

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Levi’s advises US consumers to reduce the footprint of their jeans


developing WaterLess techniques – removing water from stone washing, combining different wet manufacturing processes – the company reduced its internal use by one billion litres of water since 2011. Levi Strauss has set a goal of producing 80% of its products using WaterLess techniques by 2020, compared with just 25% of its products that are made today using WaterLess.

On the agricultural front, Levi Strauss is a pioneer in the Better Cotton Initiative (BCI), which aims to help cotton growers use up to 23% less water (and 55% less pesticides). Levi Strauss says it plans to source 75% BCI cotton by 2020, up from just 6% today. Finally, the company hasn’t been timid about trying to get consumers involved in lowering jeans’ water footprint: CEO Chip Bergh declared over a year ago that jeans don’t need regular washings, and now Levi’s advises US consumers to reduce the footprint of their jeans by washing them only once every 10 wearings (the current average is after two wearings).

Levi Strauss is keeping track of the water footprint of its core products and, as McCasland says, is “focused on understanding where we can make the greatest positive impact”. The company claims to be the first in the clothing industry to adopt a water recycle/reuse standard. Companies such as Levi


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Companies that want to reduce their water footprint need to avoid water use where possible


Strauss have realised that partnerships, especially within an industry, can be key to getting water reductions in the supply chain.

Global clothing retailer C&A has worked in a three-year process with Mathews’ Water Footprint Network to create a supply chain water footprint. Stephanie Klotz, communications manager for C&A’s Foundation, says the company learned a lot during the assessment, including absorbing the data that cotton sourced to produce all C&A’s textile products has a water footprint of 3.6bn cubic metres per year – and C&A’s total water footprint is between 5.7 and 9.7bn cubic metres. That transparency of its water footprint drove C&A to increase its goals around organic cotton use, as well as identifying hotspots for water scarcity. C&A is focusing efforts on improving cotton farmers’ water efficiency and expanding the organic cotton supply – it overtook Swedish rival H&M to become the top buyer of organic cotton in the world. Yet C&A hasn’t committed to an overall water footprint reduction goal.

“Conventional cotton can generate as much as five times more pollution than organic,” Klotz says, “mainly because of the use of agro-chemicals.” She says once there is an understanding of the footprint, the next step is quantifiable targets. “Lack of insight on the water footprint across the supply chain makes it hard for anyone – factory, retailers, even customer – to act on it.”

Generally, companies that want to reduce their water footprint need to avoid water use where possible, reduce water use as much as possible, and compensate or replenish the water used. It also makes sense for companies to take action first in their own water scarce “hotspots”. C&A gets that, but acknowledges the kind of uncertainty and hesitancy Hoekstra mentioned with hard goals – C&A says in its final water footprint report that, “Achieving improvements in the water footprint of C&A’s supply chain may be difficult since they are not under C&A’s direct control.”

No thirst to be firstHoekstra says he believes a handful of companies are now working silently, behind the scenes, to get ready to formulate goals around reducing their


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total water footprints, though they hesitate to be the first out with commitments due to the media spotlight and scrutiny that that would entail.

David Grant, manager for water risk and partnerships at the UK drinks giant SABMiller, says his company has done a lot of work with WWF to look at the water use in the supply chain. Forty-six of SABMiller’s breweries (representing about 65% of the beer the company makes) have done “intensive” water risk assessments. Since 2010, the company has cut operational use from 4.3 litres of water to produce a litre of beer to 3.3 litres. The 2020 goal is 3.0 litres of water per litre of beer, and 1.8 litres of water per litre of soft drink.

SABMiller has made the business case for slimming its internal water footprint by developing a “user pays” principle at breweries, putting what it calls a true dollar value on water used in different parts of a brewery. Savings in 2014 was a total of 23bn litres of water and $117m (for water plus energy saving measures). As far as water use in the supply chain, SABMiller defines this as shared water risk and takes as a soft goal “mitigating shared risk for key crop origins”.

Grant says that working with the UN’s Water Action Hub has been an excellent way to find partners to collaborate on the best water efficiency projects. Grant acknowledges that goals in supply chain water footprint reduction are “a lot more difficult” than operations goals. “It’s easy if you control it internally, but looking at the supply chain means you are moving three to four levels down,” he says. “We are doing a lot of good work, but that also takes a lot more time.”

Hoekstra says it is hard to tell whether it will be a big global brand or a small, innovative social enterprise that might finally step into the limelight with a total water footprint reduction goal.

“But I do know that I am so much looking forward to that,” he says. He adds that Coca-Cola is in some ways well positioned to be the first. Coca-Cola has done its water footprint work. It has also received both praise and flak for announcing water neutrality, precisely because it does not include external supply chain water. Yet is so obviously proactive with its water footprint.

“On the one hand, Coca-Cola can be blamed a bit for a misleading message with the water neutrality,” Hoekstra said. “On the other hand, they really have undertaken crisper, more well-defined targets than any other company.” n


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Trade deal

TPP: free trade at what price?By Rikki StancichThe controversial Trans-Pacific Partnership has had a long and troubled journey. By all accounts it has now truly hit the rocks – and some say it’s sunk

Critics are urging governments to walk away from a controversial free trade deal after negotiators missed a key deadline at the end of July. Opponents

say the Trans-Pacific Partnership agreement’s hidden costs – namely compromised sovereignty, food safety, public health and environmental quality – far outweigh any free trade benefits. Looming elections in the US and Canada, coupled with the absence of an agreed date for the next round of talks, are fuelling speculation that the TPP may be shelved.

Failure to gain resolution on the TPP negotiations at the end of July in Maui prompted critics to suggest that the controversial trade deal may be foundering. Disagreements over how much market access to give on sensitive products such as dairy and a dispute over intellectual property rules have again stalled the five-year-long negotiations. While the negotiators were disappointed by the missed deadline, TPP critics are viewing it as a stay of execution for healthcare and the environment.

The sheer scale and combined economic clout of the TPP members, which account for 40% of global GDP and one-third of world trade, makes the TPP one of the most powerful free trade agreements ever to have been negotiated. The deal seeks to eliminate tariffs and standardise environmental, labour,

Opponents say the deal’s hidden costs outweigh any free trade benefits

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A leaked TPP chapter on intellectual property rights revealed extensive discord among its members


and intellectual property regulations across Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Despite being negotiated behind closed doors, leaked documents indicate that the gains to be had from increased access to some of the TPP’s heavily protected markets will be undermined by crucial tradeoffs. This has created a groundswell of opposition to the deal in many of the member countries.

Documents leaked so far reveal that the US is aggressively pushing an agenda for intellectual property and foreign investment that threatens to increase the cost of healthcare and undermine governments’ ability to enforce or implement laws that protect national interests such as labour, health and environmental quality.

In August, a leaked TPP chapter on intellectual property rights revealed extensive discord among its members. The text is “bristling with hundreds of brackets”, indicating that despite the agreement being at the late-stage draft, many TPP negotiators remain opposed to the terms, notes TPP commentator Professor Deborah Gleeson of Australia’s La Trobe University.

Visionary?“Our goal in TPP is to raise standards across the board, from promoting strong labour and environmental protections to upholding the rule of law,” US State Department spokesman Kerry Humphrey told Reuters journalist Alison Tang in August, suggesting that a standardised set of rules would raise the

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WWF initially seized upon the TPP as an opportunity to introduce stronger environmental obligations


bar on trade practices, supporting sustainable business practices among its members.

Given the potential influence of the TPP, non-governmental organisations such as WWF and sustainable oceans foundation Oceana had initially seized upon the TPP as an opportunity for its members to introduce stronger obligations on issues such as illegal trade in natural resources and the phasing out of fishing subsidies. Other advocates, such as the US Coalition for TPP, say it promises to give businesses access to about 600 million people with the result of increasing the gross domestic product of its member countries.

For smaller economies such as New Zealand, the prize is the reduced price volatility via increased market liquidity that trade liberalisation promises to confer. For New Zealand’s farmer cooperatives such as Fonterra, which are feeling the sting of China’s cooling economy, it’s a theoretically compelling deal. With 35% of New Zealand’s exports comprising dairy, it is little surprise that industry body Dairy Companies Association of New Zealand is urging New Zealand farmers not to miss a “once in a generation deal”.

Yet agriculture, along with autos and pharmaceuticals was a key sticking point at the July Maui talks. Talks are set to resume in the “near future”, but with Canada’s federal elections looming in October, lowered tariffs are unlikely to win the vote of its powerful farm lobby, making New Zealand’s objective of increased access to Canada’s lucrative dairy market a distant aspiration.

Japan’s ambition for increased access to the US and Mexico automotive parts markets is similarly being stymied. The US and Mexico are concerned that accessions to Japan will undermine aspects of the North American Free Trade Agreement, such as rules of origin on components.

In any case, the trade-offs in others areas of the economy may prove too significant for countries to ratify the deal. “The benefits are vastly overstated,” says Barry Coates, former executive director of Oxfam NZ, citing a range of hidden business costs embodied within the TPP, such as changes to patent laws “which, if anything, will inhibit business innovation”.

No such thing as a ‘free trade’The concept of free trade within the TPP has been steadily eroded since the negotiations on broadened TPP terms and the unresolved investment and

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The TPP includes an environment chapter containing a handful of binding clauses


financial services chapters began in 2010. Rather than engendering solidarity and cooperation for dismantling trade barriers, the successive TPP negotiations have instead fostered brinkmanship among its growing membership, with some members quietly cutting deals on the side.

One such example is the Healthcare Transparency Annex. Having originally been strongly rejected by TPP members, it was reintroduced in an updated format within the 2014 draft TPP agreement following sideline negotiations between the US, Japan and Australia. Instead of promoting free trade, the Annex tightly specifies the operation of countries’ schemes for subsidising pharmaceuticals and medical devices.

Such items set a “terrible precedent” for using regional trade deals to tamper with other countries’ health systems, says LA Trobe’s Gleeson. The Annex could restrict the options available to developing countries seeking to introduce pharmaceutical coverage programmes in future, she warns.

Ruling out sustainable development?The TPP does include an environment chapter, which contains a handful of binding clauses that support sustainable fisheries. Specifically, these prohibit new and existing subsidies that target the fishing of overfished stocks; and subsidies to flagged fishing vessels while listed by the flag state for illegal, unreported or unregulated fishing.

In this way, “the TPP will promote long-term conservation of marine resources, including sharks and other threatened species”, says US Trade Representative Michael Froman earlier this year. For depleted Pacific fish


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ISDS tribunals are being used to subvert regulations designed to protect public rights


stocks such as tuna, this is good news. But for broader sustainability issues, the good news ends about there.

The remaining body of the environment chapter advises its members to favour “flexible, voluntary mechanisms [to protect natural resources and the environment] … that avoid the creation of unnecessary barriers to trade”. The dispute settlement mechanisms it creates are cooperative instead of binding; there are no required penalties and no proposed criminal sanctions for damage to the environment by foreign corporations and investors.

The weak wording of the environment chapter contrasts starkly with the prescriptive language of the TPP’s investment and intellectual property rights chapters. The Investor-state Dispute Settlement provision (ISDS) within the investment chapter enables corporations to sue governments via closed-door tribunals for policies and regulations that erode a foreign corporation’s profits.

A number of TPP partners are small countries for which the threat of multi-million-dollar litigation from large foreign corporations would be enough to discourage regulators from pushing through reforms designed to protect the public interest, says the Sustainability Council of New Zealand’s executive director Simon Terry. “The environment and health sectors would be the chief casualties,” he says.

In countries such as New Zealand, whose agricultural and marine policies are shaped by environmental and biodiversity considerations, this could have a “regulatory chill” effect.

In Canada alone, under the North American Free Trade Agreement’s ISDS, 35 lawsuits have been levelled against the government. Of these, 63% involved challenges to environmental protection or resource management programmes that allegedly interfered with the profits of foreign investors.

ISDS tribunals are also being used to subvert regulations designed to protect public health and labour rights. Australian taxpayers have already shelled out $50m in litigation with Philip Morris, which is currently suing their government for implementing plain packaging laws designed to protect the health of its citizens. Labour issues, too, are at stake. Last month, activists at a migrant labour conference hosted in Jakarta by the Solidarity Centre highlighted that ISDS has been used to pressure states not to raise the minimum wage or enact labour reforms.

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The most hotly contested area of the TPP is intellectual property rights, patents and data exclusivity


Yet, despite a growing opposition to ISDS that includes former judges, law professors and prominent lawyers from TPP nations who urge TPP negotiators to exclude the Investor-State system from the agreement, Australia’s remains the only voice at the TPP table calling for an exemption from the ISDS rules.

And the winner is…The most hotly contested area of the TPP is intellectual property rights, patents and data exclusivity. The TPP chapter on intellectual property covers all intellectual property types included in Part II of the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (Trips) agreement, plus some others, including not only patents, copyrights and trademarks, but also “undisclosed information”, test data for the registration of drugs, industrial designs, layout-designs of integrated circuits among others, says James Love, director of Knowledge Ecology International (KEI).

Above all, Big Pharma is the big winner. A document leaked in August by KEI in the wake of the Maui talks reveals excessive intellectual property protections for medicines. US negotiators have aggressively pushed for 12 years of data exclusivity for biologic medicines, which include vaccines and drugs to treat conditions such as cancer and multiple sclerosis.

The leaked document, while pre-dating the Maui talks, indicates that the data exclusivity period has been reduced to eight years. Even in its watered down version, the TPP threatens to make national healthcare agencies such as New Zealand’s Pharmac the big losers.


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Data exclusivity provides an alternative monopoly to patents


Data exclusivity provides an alternative monopoly to patents. It prevents regulatory authorities from allowing price-competitive generic competitors to enter the market with previously generated clinical data. Unlike a patent, data protection cannot be challenged in court. It also presents a potential impediment to compulsory licensing, which has historically served as an important public health safeguard.

Keeping these drugs under monopoly is likely to cost the Pharmaceutical Benefits Scheme in the order of hundreds of millions of dollars per year, says Gleeson. “It’s a terrible deal for access to affordable medicines,” concurs Manica Balasegaram, executive director of NGO Médecins Sans Frontière’s Access Campaign.

Other contested areas of the intellectual property rights chapter include copyrights and patents. The US, under pressure from Hollywood lobbyists, has leaned on TPP members to accept a broad definition of a criminal violation of copyright where even non-commercial activities could result in a criminal conviction; excessive copyright terms of 70-plus years after an author’s death; and provisions that enable judges to unilaterally order the seizure, destruction or forfeiture of anything that can be traceable to copyright infringement activity.

Under such obligations, law enforcement could become ever more empowered to seize laptops, servers or even domain names, warns US NGO Electronic Frontier Foundation’s Maira Sutton. The broader impact on business will be to inhibit, rather than foster, innovation.

Given the division among members on major issues like pharmaceuticals, autos and agriculture, critics say it is unlikely that the TPP will ever see the


TPP quick factsOriginsThe Trans-Pacific Partnership was originally a tripartite trade agreement called the Trans-Pacific Strategic Economic Partnership, between New Zealand, Chile and Singapore, conceived of on the sidelines of an Asia Pacific Economic Cooperation summit back in 2002. In 2006 the agreement came into force among its four final members, or the P-4 (Brunei-Darussalam having signed up in 2005).

What has changed since 2006?The Trans-Pacific Strategic Economic Partnership, while designed to facilitate greater trade liberalisation, was worded to protect member governments’ discretionary powers to safeguard national priorities. The preamble that informed the 20 chapters of the agreement explicitly recognised “the rights of [the four] governments to regulate in order to meet national policy objectives”; and preserve “[the government’s] flexibility to safeguard the public welfare”.

Trans-Pacific Partnership

http://mfat.govt.nz/downloads/trade-agreement/transpacific/main-agreement.pdf

41


light of day. “People simply don’t believe that a deal that raises the price of medicines and handcuffs the right of governments to regulate is in their national interests,” says Jane Kelsey, law professor at Auckland University.

Articulating prevailing public sentiment within the 12 countries engaged in on-going TTP negotiations, Kelsey notes: “The underlying reason for the gridlock is the domestic opposition in almost all the TPP countries… politicians know they can’t sign a final deal that they can’t sell at home”. n

TPP timeline2002: New Zealand, Chile and Singapore enter into negotiations over terms of the

Trans-Pacific Strategic Economic Partnership. The partnership is dubbed the Pacific Three (P3).

2005: Brunei joins the negotiations.

2006: The Trans-Pacific Strategic Economic Partnership, dubbed the P-4, comes into effect, with the exception of the financial services and investment chapters. Negotiations on these two chapters are deferred for two years.

March 2008: Negotiations on the financial services and investment chapters begin. US president George W Bush announces US intentions to enter the agreement, pending a decision whether to participate in a negotiation for an expanded TPP agreement.

Sep 2008: The US announces its decision to fully participate in negotiations. Australia, Peru and Vietnam also enter negotiations.

2009: TPP talks delayed due to a change in the US administration. In November, president Barack Obama reaffirms US participation in TPP negotiations.

March 2010: Negotiations for an expanded agreement begin.

Oct 2010: Malaysia enters the TPP negotiations.

Nov 2011: Leaders of the nine TPP countries announce the broad outlines of an ambitious TPP agreement.

June 2012: Canada and Mexico are formally invited to join the TPP negotiations.

Nov 2012: Seven TPP leaders expressed desire to see an agreement concluded in 2013.

Dec 2012: Canada and Mexico enter TPP negotiations.

July 2013: Japan enters TPP negotiations bringing TPP membership to 12.

July 2015: Deadline to conclude TPP talks expires without resolution on intellectual property rights, agriculture and automobiles.

Trans-Pacific Partnership

http://mfat.govt.nz/trade-and-economic-relations/2-trade-relationships-and-agreements/trans-pacific/1-tpp-talk/0-tpp-talk-13a-nov-2011.php

http://mfat.govt.nz/trade-and-economic-relations/2-trade-relationships-and-agreements/trans-pacific/1-tpp-talk/0-tpp-talk-13a-nov-2011.php


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BrandWatch

BrandWatch


MIC

HAEL

JUNG

L’Oréal India leads on gender equality L’Oréal India has become the first company in the country to receive the Economic Dividends for Gender Equality (Edge) certification, a standard launched in 2011 to foster a balanced workplace for men and women. The cosmetics giant was awarded the certification following a comprehensive review of its approach to gender equality, including gender policies and the analysis of gender-related data.

As part of the process, employees took part in a survey on gender equality that covered areas such as recruitment and promotion, leadership development, equal pay, flexibility and company culture. Aniela Unguresan, co-founder of Edge, says that by receiving the certification L’Oréal India has “achieved a substantial milestone in creating an inclusive workplace culture”. The certification was granted to the company following independent third-party verification.

L’Oréal India recognised for equality

Acacia plantations retired

ULET

IFAN

SAST

I

APP’s move to protect peatland Asia Pulp & Paper (APP) says it is retiring 7,000 hectares of commercial plantation areas in order to protect threatened carbon-rich peatland, the first time plantations on tropical peatland have been retired for conservation purposes worldwide. The land marked for retirement is spread across five individual acacia plantation areas in the Riau province and South Sumatra.

Aida Greenbury, managing director sustainability at APP, says the decision to retire these areas of commercial plantations is “an important milestone in the delivery of our Forest Conservation Policy and we believe it is an unprecedented commitment. The retirement of active plantations is not an easy decision for any business to take, but we believe that taking urgent steps to protect remaining areas of peatland forest, as well as reducing and avoiding climate emissions from peatlands, must be a priority.” Peatland development in Indonesia represents a major source of greenhouse gas emissions.

By Nadine HawaIndian workplace diversity, APP peatland plans, Amazon investigation and Monsanto lawsuit


43

BrandWatch Ethical Corporation | September 2015

MAT

T CA

RDY

Another dispute over PCBs

AWAK

ENED

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Amazon chief rejects scathing portrayal Amazon founder and CEO Jeff Bezos has said he doesn’t “recognise” the company depicted in a scathing report by the New York Times called “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace”.

According to the report, for which the New York Times interviewed more than 100 former and current Amazon employees, managers at the multi-

billion-dollar internet retailer are forced to rate all employees and fire the lowest-scoring workers to satisfy performance quotas; managers expect employees to respond instantly to emails; and in one instance, a woman who had breast cancer was told that she was put on a “performance improvement plan” – Amazon code for “you’re in danger of being fired” – because difficulties in her personal life had interfered with her work goals.

In response, Bezos wrote to staff claiming the article didn’t describe the Amazon he knows or the caring Amazonians he works with, adding that anyone working for such a “soulless, dystopian” company would be “crazy to stay”.

Monsanto hit with pollution lawsuitMonsanto is facing a new lawsuit following claims it knowingly sold harmful chemicals that endangered human health and resulted in environmental pollution. The lawsuit filed by the city of Spokane, Washington, alleges that the agrochemical giant is responsible

for the high levels of poly-chlorinated biphenyls (PCBs) which have flowed into the Spokane River that stretches from northern Idaho to eastern Washington.

PCBs were produced by Monsanto from the 1930s until 1979, when the US Congress banned them over dangers they pose to humans and the environment. The latest lawsuit follows similar legal action taken by the city of San Jose, California, alleging that Monsanto knowingly polluted the San Francisco Bay with PCBs, and demanding that Monsanto pay to clean up the contamination. In a statement, Monsanto said it was reviewing the latest allegations coming out of Spokane.

CEO Jeff Bezos denies worker accusations

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Ethical Corporation | August 2014??? Ethical Corporation | September 2015Asia column

China

The politics of the marketBy Rajesh ChhabaraThe recent turmoil on China’s stock markets and the authorities’ attempts to intervene raise questions about the continued appetite for allowing market forces to prevail

China’s stock market crash in the recent weeks shows the dangers of investing in a market that is heavily manipulated by the government, lacks

transparency and whose fundamentals are unknown. The government machinery and media worked tirelessly to promote bullish

behaviour by openly encouraging retail investors to buy more shares. And people did invest as if the bull run would never end. The government campaign resulted in 40m new stock accounts between June 2014 and June 2015 and the Shanghai Composite Index went up by 150% in the same period. When the market crashed, the government tried to manipulate the market again by pumping more than $200bn into stocks to stop the rout, only to see the futility of its efforts. The government is now left red faced.

China’s leaders have viewed the rising stock market, erroneously, as a sign of the country’s economic might and a necessary manifestation of their growing global influence. A falling stock market therefore is perceived as a sign of political weakness. This explains why the government panicked over the crash and started an extraordinary rescue operation. Short selling was capped. Pension funds were ordered to buy more stocks. Initial public offerings were suspended to limit the supply of shares and the central bank

YIPENGGE

COLUMNIST:RAJESH CHHABARA

46


created funds for brokers to buy shares. Companies’ major shareholders were barred from selling their stocks for six months and companies were ordered to buy their own shares. Nothing worked.

There are some intriguing facts: even though the stock market lost almost one third of its value over a short period of weeks, it was still 80% higher than a year earlier; foreign investors do not account for a significant proportion of stock trading; state-owned companies dominate the two main stock exchanges – Shanghai Stock Exchange and the Shenzhen Stock Exchange – but offer only a tiny part of their shares for trading to maintain their control over the company.

Governments everywhere, particularly in developed countries, try to prop up stock markets by intervening when they have to. But in developed countries the stock markets account for more than 100 per cent of their GDP and the stakes are high as compared with China where the stock market investments represent only one-third of the GDP.

In summary, stock markets do not play a significant role in China’s economy. It’s actually the politicians who believe that booming stock markets reflect the government’s success.

It’s this sensitivity which led to the arrest of journalist Wang Xiaolu who worked for Caijing magazine and wrote in an article that the government was going to end interventions in the stock market. He was promptly arrested, with the authorities saying he “caused panic and disorder at the stock market, seriously undermined the market confidence and inflicted huge losses on the country and investors for the sake of sensationalism”. His video confessions and apologies were aired on the state-owned TV channel CCTV.

Press freedomThe authorities have warned other journalists and media outlets not to give too much coverage to stock market problems. Dozens of other people have been arrested in connection with the stock market crash, facing accusations of insider trading, malicious short selling and spreading online rumours about the markets.

The journalist’s arrest has turned the stock market crash story into a human rights and media freedom story. Human rights groups, within and outside China, have openly criticised the government’s move. The key question is this: will the government slow down the market reforms after failing to control the stock market crash and go back to the tight control over the markets? What incentive does it now have to reform the markets to let them function on economic fundamentals and transparency instead of driving through propaganda? The coming months will be crucial to watch. n

In China, stock market investments represent only one-third of GDP

Asia column

Rajesh Chhabara is the founder of Singapore-based sustainability consultancy CSRWorks International and a member of Ethical Corporation’s editorial advisory board.

Ethical Corporation | September 2015Ethical Corporation | August 2014???

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NGOWatch

Ethical Corporation | September 2015NGOWatch

ALFF

OTO

Workers dying in Central America’s sugarcane industryResearch by Fairfood International, Dutch trade union CNV International and the Central American Institute for Social Studies has shown that workers in the Nicaraguan and Guatemalan sugarcane industries are suffering from poor working conditions, with thousands of them contracting – and often dying from – chronic kidney disease of non-traditional causes (CKDnT) as a result.

The report, entitled “Give them a break, the bitter consequences of poor working conditions in the Central American sugarcane industry”, says that more than half of sugarcane cutters in the coun-tries in question work seven days a week, with work days often stretching to 18 hours.

In addition to long hours in extreme heat, the report also identifies lack of access to drinking water, limited breaks and no shade among the main causes of the disease. According to La Isla Foundation, in the main sugar producing region of Nicaragua, Chichigalpa, from 2002 to 2012, about 75% of male deaths of men aged 35-55 were caused by CKDnT.

Far from sweet conditions

MEI

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Campaigners welcome slavery pledge in SDGsCampaigners have welcomed a move by the United Nations to include the eradication of forced labour and modern slavery as one of the newly agreed 17 Sustainable Development Goals (SDGs), which will shape development and poverty eradication efforts over the next 15 years. Some 36 million people remain enslaved worldwide, the Walk Free Foundation estimates. The figure includes girls trafficked in the

sex industry, people forced into manual labour and victims of debt bondage.

Aidan McQuade, director of campaign group Anti-Slavery International, believes that if freed, those currently enslaved would “start working for themselves and their families instead of enriching some slave holder,” resulting in “a disproportionate impact upon poverty compared to other interventions that could be made”. Campaigners say countries of major concern include India, Qatar, the United Arab Emirates, Saudi Arabia, Malaysia, Thailand and Mauritania.

By Nadine HawaSugarcane industry deaths, SDG slavery pledge, Vietnam rights concerns and China’s air pollution

Slavery remains a problem in Thailand


48


BLUE

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5

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Europe shuns human rights assessmentThe International Federation for Human Rights (FIDH) and its member organisation the Vietnam Committee on Human Rights (VCHR) have expressed concern at the European Commission announcement that it had reached an agreement “in principle” for a Free Trade Agreement with Vietnam, while calls for a human rights impact assessment (HRIA) remain ignored.

The agreement comes despite the European Ombudsman Emily O’Reilly finding in March that the commission had committed “maladministration”

and stating that “the Commission should carry out a specific human rights impact assessment without further delay”.

The human rights organisations fear that, if finalised without conducting the HRIA and introducing human rights safeguards, the EU-Vietnam agreement would violate EU law, and is likely to cause an increase in human rights abuses in Vietnam.

“By ignoring such calls and by precipitating an agreement, the European Commission suggests it is above the law, with no institution, public debate or mechanism to prevent this from happening,” says FIDH president Karim Lahidji.

Air pollution in China killing 4,000 a dayA study by independent research group Berkeley Earth has found that toxic air pollution in China is causing one in five deaths, or an estimated 4,000 people a day.

According to the research, deaths related to the main pollutant, tiny particles known as PM2.5, which can trigger heart attacks, strokes, lung cancer and asthma, total 1.6 million a year, or 17% of China’s mortality. The study also identified coal-burning as the biggest single cause behind the deadly pollution levels in the Asian country, which sources 64% of its primary energy from coal.

Richard Muller, scientific director of Berkeley Earth, says: “It’s as if every man, woman and child smoked 1.5

cigarettes each hour.” The research analysed four months of hourly data for some 1,500 ground stations in China. It employed a model used by the World Health Organization to calculate the disease burden.

Workers’ rights concerns in Vietnam

Coal pollution kills

NGOWatch

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Ethical Corporation | August 2014???Cheat sheet Ethical Corporation | September 2015

Corporate responsibility cheat sheet

numbers produces annual opportunity shortfall of more than $10tn. The US Women’s Chamber of Commerce figures are based on recently published data from the US Census Bureau. US Women’s Chamber of Commerce

Top CEOs earn 183 times the averageUK workerThe chief executives of the UK’s largest 100 listed companies earn on average £4.96m, up from £4.13m in 2010. Their income compares with an average take-home pay of £27,195 for full-time employees in 2014. The rise in executive pay puts average CEO salaries at 183 times that of average full-time workers, up from 160 times in 2010. The figures, published by the High Pay Centre, a UK

thinktank, reveal that the top 10 highest-paid CEOs were paid more than £156m between them. Share-holders appear happy with the arrangement, with objections to executive remuneration comprising only 6.4% of total shareholder votes. The State of Pay: High Pay Centre briefing on executive pay

Most of US public unaware of resource scarcityOnly four in 10 US consumers are “very aware” of the growing scarcity of essential natural resources, according to research by the Global Footprint Network. Among actions consumers are willing to take to conserve resources, 75% say they would buy locally grown food as much as possible, 72% say they would buy only as much food as their household would definitely consume, and 69% would seek out products in renewable packaging. In total, 90% of women say that fuller knowledge of resource scarcity would persuade them to alter their shopping habits, compared with 77% of men. The world used up “nature’s budget” (i.e. the total amount of resources that can be replenished after use during the year) by mid-August this year, the Global Footprint Network says. The non-profit group marks “Earth Overshoot Day” on an annual basis. In 2000, it took until early October to reach this point.Global Footprint Network

Female-owned firms reach nearly 10m in USThe number of women-owned firms in the US jumped 27% between 2007 and 2012, reaching a total of 9.9m, according to government data cited by the US Women’s Chamber of Commerce. The surge comes despite a rise in overall employee-owned firms of only 2% during that period. More than one third of all private firms in the US are now female-owned. Firms with women owners tend to have an average of 8.5 employees, compared with an average of 13.5 employees for firms with male owners. Some 11% of women-owned businesses have employees other than the owner, compared with 23% of firms owned by men. Women-owned firms accounted for just 4.8% of receipts in 2012. The failure of women-owned firms to produce revenues commensurate with their

By Oliver BalchWe read all the reports so you don’t have to

CEOs of the UK’s largest 100 listed companies

earn on average £4.96m

www.uswcc.org

http://highpaycentre.org/files/State_of_Pay_Aug_2015.pdf


http://www.doingwhatsgood.us/moving-to-the-front/sub/embrace-renewability

http://www.doingwhatsgood.us/moving-to-the-front/sub/embrace-renewability

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Organisational Insights

Climate change apathy highest in rich countriesPublic denial continues to hamper efforts to prioritise global carbon reduction efforts. Three-quarters of adults in developed countries accept that climate change is happening, but only half think it is a threat to them. South Americans appear most concerned about rising tempera-tures, with more than 90% of citizens in every country expressing concern. This level is matched by Mexico, India, Tanzania and Morocco. In Europe, public opinion is swayed most heavily by education, according to the research, which analysed the results of Gallup polls taken in 119 countries. The United Nations warns that global warming will fuel war and migration. The frequency of natural disasters tripled between the 1980s and the first decade of this century. “Predictors of public climate change awareness and risk perception around the world”

Low power prices drive wind power in USDemand for wind power is running at an all-time high in the US as the cost of wind energy becomes increasingly competitive, a report by the US Department of Energy reveals. Prices offered by wind projects to utility purchasers average less than 2.5 cents per kWh, compared to 7¢/kWh in 2009. The drop in price is influ-enced by lower infrastructure costs. Wind projects built in 2014 had an average installed cost of $1,710/kW, down almost $600/kW from the peak in 2009 and 2010. The cost of wind turbines has fallen by between 20% and 40% over the past six years.

Investors are also optimistic. Last year saw

4.9GW of new capacity added to US wind capacity, representing a total investment of $8.3bn. Wind power represents one third of all new US electric capacity additions since 2007 and meets 5% of total electricity demand (as high as 12% in nine states).

At the same time, new federal government plans to push clean power could lead to the loss of 60GW of coal-fuelled power capacity by 2020, according to research firm GlobalData. The US has 326GW of coal power capacity at present. Natural gas is the other main source of power in the US, supplying 27% of all electricity. US Department of Energy’s Wind Technologies Market Report, GlobalData

EU consumers waste 47m tonnes of food a yearEuropeans waste around 47m tonnes of food every year, equivalent to 16% of all food sold to consumers, a new study published in the journal Environmental Research Letters finds. The waste equates annually to 123kg of food per head. Of this wasted food, 97kg (almost 80%) is edible. The research is based on an in-depth study of six markets: the UK, the Netherlands, Denmark, Finland, Germany and Romania. The figures include the catering sector as well as household waste. The embedded ground and surface water (known as “blue water”) in unused food aver-ages 27 litres per head per day, which is slightly higher than EU municipal water use. The rain-water (or “green water”) in wasted food amounts to 294 litres per head per day, the same as all the rainwater used for crop production in Spain. The figures come from data covering the period 1996–2005. Environmental Research Letters report via IOPScience

http://www.nature.com/nclimate/journal/vaop/ncurrent/full/nclimate2728.html

http://www.nature.com/nclimate/journal/vaop/ncurrent/full/nclimate2728.html

http://emp.lbl.gov/reports/re

http://emp.lbl.gov/reports/re

http://power.globaldata.com

http://iopscience.iop.org/article/10.1088/1748-9326/10/8/084008/pdf;jsessionid=8E9481A0191BA1C8225375F814C29505.c1


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Company snapshots Coca-Cola replenishes 154bn litres of waterCoca-Cola has improved its water efficiency by 10% since 2010, the drinks giant reveals in its latest sustainability report. The US-based multinational uses an average of 2.03 litres of water for each litre of product produced. It aims to reduce this to 1.7 litres by 2020. In total, the company used 304bn litres of water in 2014, the majority of which was either ground/surface water (154.2bn litres) or municipal water (148.5bn litres). Through its implementation of

209 conservation and offsetting projects, Coca-Cola replenished 153.6bn litres of water in 2014.

There are more than 3,600 products in Coca-Cola’s global portfolio, including 20 brands valued at more than $1bn. The company says that more than a quarter of its products have reduced-, low- or no-calorie contents. Its per-unit carbon footprint has dropped from 40.53 grams of carbon dioxide per litre of product in 2008 to 36.89 today. Coca-Cola’s overall greenhouse gas emissions for its manufacturing units have jumped from 5.14m to 5.55m tonnes over the same six-year period. Coca Cola 2014-15 sustainability report

UPS beefs up alternative fuel fleet

UPS’s fleet of alternative fuel and advanced technology vehicles logged 154m miles in 2014, nearly three times the distance covered in 2013, according to the company’s 13th annual sustainability report. The US logistics firm aims to achieve a cumulative overall distance of 1bn miles by 2017. It took UPS 13 years to reach a total of 350m miles. The company estimates that

its fleet will register the same amount in 2017 alone. UPS’s alternative fuel fleet has increased in size by 61% over the last two years. It now numbers more than 5,000 vehicles. The firm’s investment in natural gas, propane, ethanol and other renewable and low-carbon fuels has helped it displace 25m gallons of petrol and diesel over the past 12 months, equivalent to 5.4% of its total fuel requirements. 2014 UPS corporate sustainability report

In 2014 the company used

304bn litres of waterUPS’s alternative fuel fleet has increased

in size by 61%

http://www.coca-colacompany.com/sustainability/

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Diageo saves 2.87bn litres of water in 2014Diageo has improved its water efficiency by 10.4% over the past 12 months, saving 2.87bn litres of water, the UK drinks giant reveals in its latest sustainability report. The London-based company, which introduced a Water Blueprint

strategy in April this year, has cut wastewater by one third in water-stressed locations. Diageo has a goal of improving water use efficiency by 50% across its global operations by 2020. It has also committed to replenish the amount of water used in its final product in water stressed areas by the same date. The UK drinks giant produces more than 6.5bn litres of product across its brands – which include some of the world’s biggest-selling spirits – every year. It has manufacturing units in 30 countries. Diageo Sustainability and Responsibility Perfor-mance Addendum 2015 to the Annual Report

IBM shaves $37.4m off energy billIBM reduced its energy use by 6.7% last year, exceeding its annual goal of 3.5%, the US technology firm reports. Conservation efforts reduced electricity consumption by 325,500 megawatt-hours (MWh), and fuel oil and natural gas use by 267,200m British thermal units. Collectively, these measures saved 142,000

tonnes of carbon dioxide emissions and resulted in savings of $37.4m in energy costs. Between 1990 and 2014, IBM saved 6.8 million MWh of electricity consumption, thus avoiding 4.2m tonnes of carbon emissions (equivalent to 61% of the company’s 1990 carbon footprint).IBM 2014 corporate responsibility report

Mars reports on sustainable sourcing effortsThe overwhelming majority – 87% – of the palm oil that confectionery and pet food manufacturer Mars buys is now from certified sources, according to its fifth annual Principles in Action Summary report. Working with the Forest Trust, a non-profit membership initiative, the US multinational recently conducted a desk-based analysis of 250 Malaysian palm oil mills. The findings will help it determine areas at risk of deforestation and other unsustainable activities. Mars’s updated sustainable sourcing strategy prioritises 23 raw materials (including cocoa, coffee, fish and peanuts), which represent 60% of its sourcing volume. The proportion of all Mars’s fish, black tea and cocoa purchases that are sustainability certified is 26%, 32% and 36%, respectively. Mars’s Principles in Action 2014

IBM avoided 4.2m tonnes of emissions

Diageo has a goal of improving water use

efficiency by 50%

http://www.diageo.com/en-sc/csr/pages/resource.aspx?resourceid=2815


















http://www.mars.com/global/about-mars/principles-in-action.aspx




















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Interview: Peter Webster, CEO, EIRIS

Sleeping giants

By Andrea Spencer-Cooke and Fran van DijkGetting investors to drive corporate sustainability has been tough, but they seem to be finally waking up

Peter Webster is a patient optimist. That’s a must-have quality in his line of work – providing owners, managers and analysts with the information

they need to make socially responsible investment (SRI) decisions that move markets.

He’s been in the game a long time. As CEO of EIRIS since it was founded in 1983, Webster has been a pioneer in the development of ratings and research based on the environmental, social and governance factors more commonly known as ESG. Today EIRIS monitors some 3,500 companies globally across 100 ESG areas ranging from climate change and human rights to corporate governance, and has a client base that includes banks, wealth managers, asset managers and charities.

Investors have trailed behind corporates in terms of sustainability leadership, Webster admits, but an increasing number are starting to do interesting things. Signatories of the Principles for Responsible Investment (PRI), for example, have to report every year on what they’ve done to engage with companies and to integrate ESG into their investment practices, and this is driving best practice as more investors get on board.

Investors have trailed behind corporates in terms of sustainability leadership

Ethical Corporation | August 2014???C-suite interview Ethical Corporation | September 2015

MILANGONDA

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Ethical Corporation | August 2014???C-suite interview

Few people are better placed to take the pulse of responsible investment, and according to Webster we may be reaching a watershed in how investors approach sustainability. Here are four reasons why.

A tipping point on climateTraditional SRI concerns include international law, weapons, alcohol, tobacco and gambling, but the word increasingly on investors’ lips – mainstream and SRI alike – is climate. “Climate is huge. The question of low carbon futures: it’s not going to be a blip,” Webster insists.

He sees COP21 in Paris as hugely important, a potential tipping point. “It will reinforce the feeling that this is the way we’re going, so people will need to start thinking about the journey and how to get there.”


The Principles for Responsible InvestmentWith 1,380 signatories representing $59tn in assets under management, the United Nations-supported Principles for Responsible Investment (PRI) Initiative is an international network of investors collaborating to put six key principles into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate environmental, social and governance (ESG) issues into investment decision-making and ownership practices.

The six Principles are voluntary and aspirational, offering a menu of possible actions for incorporating ESG issues into investment practices across asset classes as follows:

1. We will incorporate ESG issues into investment analysis and decision-making processes.2. We will be active owners and incorporate ESG issues into our ownership policies and

practices.3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.4. We will promote acceptance and implementation of the Principles within the investment

industry.5. We will work together to enhance our effectiveness in implementing the Principles.6. We will each report on our activities and progress towards implementing the Principles.

Launched in 2006, the PRI Initiative has quickly become the leading global benchmark for responsible investment. Investors signing the Principles publicly commit to adopt and implement them, where consistent with fiduciary responsibilities. They also commit to evaluate the effectiveness and improve the content of the Principles over time.

EIRI

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Peter Webster, CEO, EIRIS

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That means huge discussions around getting resource companies to plan for a different future. “It calls for forceful stewardship – owners sitting down in a very direct way with companies that may be affected and saying we need an alternative plan and we need it soon – we own the company that you are running.” Inconceivable only a few years ago, Shell, BP and Statoil have all

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The divestment movementWhen Bill McKibben and the NGO 350.org launched their “Do the Math” divestment roadshow in 2012 on the back of McKibben’s landmark Rolling Stone article, no one could have guessed how it would scale. More than 250 major institutions – including universities, faith organisations, local authorities, pension funds and foundations – have since committed to divest from fossil fuels. Now California has become the first US state to pass a state-level divestment bill, SB185.

The aim of divestment is to get rid of unethical stocks, bonds or investment funds – in this case due to their climate change impact. By late 2013, research by Oxford University showed the fossil fuel divestment movement had become the fastest growing social campaign in history – far greater than the anti-apartheid movement and anti-tobacco lobby in their time. And its impact is far from over.

In October 2014, the heirs to the Rockerfeller oil fortune withdrew the John D Rockerfeller fund from fossil fuel investments and in June 2015, Norway’s sovereign wealth fund pledged to sell off its coal investments.

According to 350.org’s website, divestment “isn’t primarily an economic strategy, but a moral and political one”. The total value of divestment is tiny, not even a “blip on the world’s capital markets” according to Marc Gunther, writing on Yale Environment 360. But that may change as the spectre of stranded assets increasingly shapes the debate.

With heavy-hitters such as the Bank of England and World Bank now warning of potential losses in share values, former US treasury secretary Henry Paulson talking of a “carbon bubble”, and Carbon Tracker predicting losses of up to $6tn in the next decade, divestment may turn out to be the most financially savvy strategy of all.

Fossil fuel divestment is increasing

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The Corporate Human Rights Benchmark will apply more than 50 indicators


recommended shareholder climate resolutions to their shareholders.The divestment movement is reinforcing this shift. “It’s the biggest thing

I’ve seen in 30 years: much, much bigger than apartheid, which was a big feature when my company was being formed,” Webster says. “Divestment has challenged investors of all sorts across every type of fund. A lot of people who say ‘we do not do divestment in principle’ or ‘we do ESG another way’ suddenly have to come up with good explanations as to why these strategies are better than divestment.”

Protect, respect and remedyAnother issue impacting investment is human rights. When it comes to the social element of corporate performance, the cutting edge for Webster is the new level of rigour being brought by top companies to the way they manage and report on human rights.

The UN Guiding Principles Reporting Framework sets out good challenges, and companies are being encouraged to raise their game to meet them. EIRIS has also co-developed a Corporate Human Rights Benchmark (CHRB) to rank companies’ human rights performance. Designed to harness market competition, the benchmark will apply more than 50 indicators based the concept of salient risk to drive better human rights performance, improved

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Oil companies are engaging on climate change

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CHRB will be expanded to cover the top 500 global listed companies


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policies, processes and practices.Following public consultation the CHRB draft indicator methodology will be

finalised and test-driven in June 2016 in a pilot ranking covering the top 100 globally listed food and drink/agriculture, apparel and extractives companies. Over the next three years the CHRB will be expanded to cover the top 500 global listed companies.

Getting to the topThe G may come last in ESG, but how corporate boards set tone, vision and strategy comes first for investors. “Investors want to know that the boards of companies have a clear vision about where the company is going – a clear strategy, a good way of getting there, a clear way of managing risk, and succession planning,” Webster explains.

That increasingly includes good board-level metrics for environmental and social performance and how well the dots are being joined between company impacts and business strategy so that knowledge can be used to the advantage

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A values shift is taking place as millennials enter the market


of the company.A sustainability skill-set

will be key to board appointments. “In the future,” Webster predicts, “the level of expertise on these issues on boards is likely to be something that people look at.” Investors need to be sure the right skills, processes and experience are in place for people at board level to make good judgments, that a broad range of stakeholder views is represented, and that there is sound understanding of environmental issues and regulation.

“People will be looking at the CVs of board directors to check if they’ve got the right skills,” Webster says. “If companies aren’t performing well in one area, which members of the board may be falling behind? We have some clients who are interested in using their re-election votes if they’re not happy, who may start to withhold votes for directors at the point of re-election to get the communication going.”

The best companies in Webster’s view are the ones already demonstrating how ESG issues tie up with their business models and long-term success. This more integrated reporting approach is a step towards being able to link ESG with growth projections. To enable this, investors need disclosures that show:• whether the company has saved money by looking at these issues;• whether the company is spending money in order to deliver on them;• what benefits the company sees in terms of its future licence to operate;• what the thinking is in the company about why these issues are important.

Generational shiftA final wake-up call for investors, if they need one, is the values shift taking place as millennials enter the market, with strong convictions about investing in ways that back their beliefs about the way the world should be. This,

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according to Webster, will be a big driver of the responsible investment space and that, in turn, will be a driver of the corporate space.

“This has all the features of a trend that’s going to stick,” says Webster. “I’ve seen US wealth managers surveying their client base and the millennials and saying ‘wow this is different’. The corporates are saying the same – the generation of people they want to attract into management share millennial values.”

It’s a move that really can’t come soon enough. Investors, like regulators, have huge market clout and the power to make all companies – not just leaders – lift their game. Helping with the “tail”, as Webster puts it, is where investors can really make a difference. n


Quick facts about EIRISWho EIRIS is a social enterprise founded in 1983 in London, providing research for responsible investors.

What Provides environmental, social, governance (ESG) research and independent assessments for responsible investors of companies’ ESG performance, and advice on integrating this with investment decisions.

WhereOffices in London, Paris and Washington, DC, and a network of partners in Australia, Brazil, Germany, Israel, Mexico, South Korea and Spain.

Key areas of interestIn-depth coverage of about 3,500 companies globally, and about 100 different ESG areas including climate change, human rights and corporate governance. EIRIS does not give overall company rankings.

Main client groupsMore than 200 clients including asset owners, asset managers, banks, wealth managers and charities around the world.

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COLUMNIST:ANDREA BONIME-BLANC

Ethical Corporation | September 2015Latin America

Dramatic opportunities for better business are developing in Latin America. Accelerated by the eruption of the Petrobras and Fifa scandals of the past

year, this trend towards greater accountability and transparency was already under way. And the trend is unlikely to be reversed. Much like the political turn towards democracy that took root in Latin America over the past two decades, a trend towards better governance, risk and integrity management is also occurring, even if imperfectly and unevenly. The movement is, arguably, inexorably in one direction, reflecting a global pattern linked to the rise of the age of hyper-transparency where everything is known and few can hide.

While focused on a region – Latin America – it is wrong to lump all countries in this region into one overall “Latin American” bucket with countries as different as Brazil and Guatemala or Chile and Venezuela. The regional view must also acknowledge the more specific picture that exists within each country – historically, culturally, ethnically, linguistically, geographically, economically and politically. Let’s first drill down to understanding the reputational impact of Petrobras and Fifa and then pan out to the bigger picture in which these developments are taking place.

The GlobalEthicist

A new era for governance in Latin AmericaBy Andrea Bonime-BlancHigh-profile recent scandals affecting Latin America reflect a changing landscape for accountability in the region

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It is evident how damaging the current corruption scandal is to Petrobras and its stakeholders

Petrobras and Fifa – opportunity within chaosThe two charts below tracking the reputation risk exposure of both Petrobras and Fifa underscore the importance of this issue to stakeholders – whether the public, the voter, the consumer, the employee or the prosecutor. This is a data point that helps to explain how intense, impactful and prolonged an event might be with its key stakeholders, who can determine the sustainability, profitability and/or long-term viability of an organisation.

According to the RepRisk Index (RRI)1, Petrobras is currently at its peak levels at 66 (its highest RRI has been 67, considered by RepRisk’s methodology to be “high”). As compared with its peers in the oil and gas sector today, which average an RRI of 30, it is evident how damaging the current corruption scandal

Latin America

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Several countriesin the region have adopted broader anti-corruption laws

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is to Petrobras and its stakeholders. While the Fifa scandal is not specifically Latin American, it is an unfolding global scandal with serious reverberations in Latin America given that the football World Cup took place in Brazil in 2015 and many national football bodies and government officials in the region are being dragged into investigations.

Fifa’s RRI is in the high range (currently 64 though it was 78 at its highest). As compared with the sporting sector with an average RRI of 26, the negative reputational impact on Fifa is clear. This is not only about stakeholders’ perceptions, but has serious financial implications, as global sponsors, for example, withhold their contracts, partnerships unravel and other economic impacts unfold.

Putting Petrobras and Fifa in context: the bigger picture Petrobras and Fifa are manifestations of a larger movement that is taking place in Latin America, which coincides with global trends. Six are outlined below.

The growth of the anti-corruption movement and related law enforcement: • Over the past five years several countries in the region have adopted

broader anti-corruption laws (and, in some cases anti-money-laundering laws) – Chile in 2009, Colombia in 2011, Peru in 2010 and Argentina in 2011.

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The Brazilian prosecutors in charge of the Petrobras case demonstrate an important trend

• In 2007 the Organisation for Economic Cooperation and Development (OECD) and the Organization for American States (OPAS) signed a memorandum of understanding establishing a framework for co-operation on anti-corruption efforts, implementing the 1996 Inter-American Convention Against Corruption (IACAC) and the United Nations Convention Against Corruption (UNCAC).

• There are five Latin American parties to the OECD Convention on Anti-Corruption – Argentina, Brazil, Chile, Colombia and Mexico.

• Though enforcement is still spotty, the current Petrobras prosecution in Brazil is widely hailed as a textbook case of aggressive and professional prosecution encompassing not only the prime target (Petrobras) but related private companies and their executives (domestic companies Camargo Correa and Oderbrecht, and foreign companies doing business in Brazil) and the political establishment, many of whom, including Brazil’s current president, are under suspicion and/or investigation.

• The Brazilian prosecutors in charge of the case demonstrate an important trend: the professionalisation of local regulators, government officials and other career professionals.

The impact of global corporate best practices:Many global companies are doing business in Latin America and as they become more established locally, their business practices and standards also become part of the local fabric as they bring with them their ethics, compliance, risk and corporate responsibility programmes to local operations, thereby directly or indirectly influencing local and regional competitors, third parties and supply chains. This is evident in the work of such global companies with major Latin American presence as Siemens, Walmart, Microsoft, GE and others.

The customisation, “glocalisation” or “tropicalisation” of best practices:At the same time, larger national and regional corporations in Latin America are developing their own versions of governance, risk, ethics and compliance programmes – adapted and customised to their businesses, regions and

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More conferences are taking place regionally

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locations. This takes the shape, for example, of unique new forms of corporate training, adapting to local conditions and issues that may not have a parallel elsewhere. For example, in the autumn of 2014, Ecopetrol led an initiative in Colombia to influence its entire supply chain to sign a commitment to anti-corruption practices.

Growth of a profession – the ethics and compliance officer: Ethics and compliance programmes and certifications such as the ones offered by the Ethics & Compliance Initiative (ECI) in association with the IAE Business School of the Universidad Austral of Buenos Aires are starting to garner attention. More conferences are taking place regionally as well – for example the very successful and impactful Ethisphere’s Annual Latin American Ethics Summits that took place in Brazil in 2014 and 2015. These trends demonstrate a continuing interest and growth by local, national and international businesses in spreading and deepening the adoption of such programmes in the region.

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Corporate responsibility and stakeholder awakening: Local corporate responsibility causes and movements are growing around specific projects or scandals or more broadly around the needs of those adversely impacted by pervasive corruption and abuse, touching on such issues as human rights, indigenous people’s rights, environmental pollution, health and safety, fraud and corruption.

The power of the global supply chain:As local and national businesses compete for global supply chain clients, they are being increasingly asked to live up to higher business practice standards – whether ISO, code of conduct or quality-related. They need to elevate their standards or risk misrepresenting or defrauding their prospective clients. This is acting as a catalyst for change at the local, national and regional levels.

Other catalysts and environmental factors.There are a number of other important factors that will continue to play an important role in the development of governance, risk and integrity programmes in Latin American countries. Among them are:• the 2016 Rio Olympics, especially

in light of the Fifa and Petrobras scandals;

• the continuing development of human rights and indigenous rights issues in several countries;

• environmental health and safety developments especially in the context of the oil and gas business; and

• political developments including upcoming elections in several countries and the continuing increase in public outrage against political corruption including in Brazil, Argentina, Guatemala, Honduras and Mexico.

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Get to know your stakeholders well – locally and regionally

Creating opportunities for better businessIn the midst of the scandals and challenges hitting emerging economies such as Brazil and Mexico, it is possible to muster a few strands of optimism for the longer term.

What follows are a few ideas for businesses – whether global companies investing in Latin America or Latin American based companies developing their own standards – to develop sustainable business opportunities in the region: • Learn and adapt to local cultural, economic,

historical and political conditions. Don’t have a “Latin American” programme. Understand the specifics – historical, cultural, geographic, economic, political – of each country you are doing business in.

• Get to know your stakeholders well – locally and regionally – and understand their key expectations, concerns and requirements.

• Bring your global best practices to the table but adapt them locally without compromising your standards or applicable laws.

• Learn from local experience when designing your governance, risk and integrity management programmes.

• Hire and deploy local talent.• Have your home-grown headquarters work closely with local personnel –

make it a mutually beneficial empowered partnership.• Have executive team meetings in the region periodically.• Have a board meeting in the region to meet local leaders periodically.

By simultaneously globalising and localising (“glocalising”), local and global businesses will be able to take better advantage of long-term business opportunities and create sustainable value for their stakeholders.

Footnotes:1 RepRisk Index, data, and chart courtesy of RepRisk AG. The RepRisk Index (RRI) is

RepRisk’s proprietary algorithm that dynamically quantifies reputational risk exposure

related to ESG issues. The RRI does not measure a company’s overall reputation, but

rather is an indicator of the company’s reputational risk. The RRI ranges from 0 to 100

with 0-25 indicating low risk exposure; 25-50 indicating medium risk exposure; 50-75

indicating high-risk exposure; and 75-100 indicating very high-risk exposure. The “Peak

RRI” signifies the highest level of criticism in the last two years.

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Dr Andrea Bonime-Blanc is chief executive of GEC Risk Advisory, a global strategic governance, risk & reputation consultancy. She is one of the 2014 Ethisphere 100 Most Influential People in Business Ethics and tweets @GlobalEthicist.

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Natura 2014 annual report

Cosmetic difficulties?By April StreeterThe latest report by Brazil’s Natura comes in a strange two-part structure, and the company must start moving towards its ambitious goals if it wishes to remain a sustainability leader

Natura, though little known in the US and unevenly available in Europe, is a significant force in Brazil and in the global personal care and cosmetics

industry, as well as a leader in sustainability reporting and actions. Impressively, Natura follows International Integrated Reporting Council

(IIRC) guidelines, which means its financial, social and environmental results are blended into a single report. Integrated reports are supposed to give a holistic picture of a company’s performance, prospects, strategy and governance, and Natura has evolved this style of integrated reporting since it became the first company in Brazil to produce an integrated report in 2002. Natura has used IIRC’s guidelines since their debut in 2013. The company also has used the GRI reporting framework since 2000.

How well does this work? On the one hand, reading Natura’s 22-page summary – what it calls the “annual report” – of its economic, social and environmental results is an easier and more coherent experience than reading the giant sustainability reports that are becoming normal for large multinationals.

On the other hand, the brevity of the main report means there is a 100-page “Indicators” addendum needed for the G4 Global Reporting Initiative indicators that are essentially the data ‘meat’ of the Natura sustainability story.

Whatever the pluses and minuses of the reporting format, though, what shines through is Natura’s transparency and its ambitious goals. Natura has already garnered many awards for being one of the globe’s most ethical big companies, and at the end of 2014 it was the first publicly traded (and largest) multinational to be awarded B-Corp certification. Last year the company refreshed its sustainability vision, and the new vision is described in the report as aiming to generate “positive impact” for society. The vision includes business directives for the next 35 years and goals through 2020.

Materiality makeoverAn updated materiality matrix in this 2014 report puts six areas at the top of the company’s sustainability priority list – solid waste, climate change, social biodiversity, water, transparency and product origins, and education. (One


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complaint here – some areas that are of high stakeholder and internal concern on the matrix are shown as dots but are not identified.)

The goals set in the new vision are thus far proving challenging for the company. In use of post-consumer recycled material in packaging, for example, the 2020 goal is 10%, while 2014’s performance stands at just 1.2% and is moving backward from 2013’s 1.4%. Greenhouse gas emissions reductions are set at 33% by 2020 (that’s Scope 1, 2 and 3) yet in 2014, emissions increased 2.2%. In water consumption the company is undergoing a rigorous water footprint analysis that will be completed this year. In the meantime, however, consumption rose from 0.4 litres per product produced in 2013 to 0.45 litres per product produced in 2014.

Overall the 2014 report implies some growth pains for Natura, and perhaps unrealistic expectations for balancing economic imperatives with desired “positive impact”. In 2014 the three-person founding team was supplanted with a new CEO, in part, according to press reports, to deal with a small loss of market share in Brazil (-1.1%) last year as well as declining profitability. Net revenues for 2014 were $1.9bn, slightly higher than 2013’s $1.8bn but Natura’s profits have continued to slide in 2014 and the first three quarters of 2015, with the company citing weak demand, higher expenses and rising debt costs.

On the good news side the report details a couple of environmental wins: the release of 100% post-consumer PET bottles for refills of the Ekos Frescores line of fragrances, reducing the product’s carbon footprint by 72%. Another highlight is Natura’s pan-Amazonian strategy. The company has a 2020 goal to buy 30% of its raw materials and ingredients from Brazil’s Amazon region (it is currently at 13.3%). In 2014 it opened its “Ecoparque” in the Amazonian city of Benevides. A soap factory founded on circular economy ideals and producing the company’s Ekos soap, Ecoparque has a wastewater filtering garden, and geothermal and ventilation features to supplement conventional air conditioning.

As Unilever has suggested, Natura intimates that an extreme focus on short-term profitability is detrimental to companies’ longer-term sustainability goals. Now it just remains to be seen whether the company, whose slightly circular tagline is “well being well” (“bem estar bem” in Portuguese) can weather Brazil’s recent economic turbulence and its internal global challenges and keep plugging away at a well-developed sustainability vision. n

Snapshot:Follows GRI? Uses G4 guidelines, provides a separate G4 “indicators report”.Assurance? Not specified – Ernst & Young in previous reports.Materiality analysis? Yes.Goals? Yes.Targets? Yes.Seeks feedback? Not directly.Key strength: Succinct, pleasant layout.Chief weakness: Separation of GRI indicators in a separate report makes for a short and sweet yet lightweight main report.Pleasant surprise: Far better readability than the company’s 2013 report.Level of integration: (1 to 5): 4.75


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PVH 2014 CSR report

Fashion faux pas

By Simon PropperClothing giant should dare to wear more heart on its sleeve

PVH’s 2014 CSR report is boldly titled “Driving Positive Impacts from Source to Store”. Does it

provide evidence to support this claim? If you don’t know PVH, you certainly know its

brands: Calvin Klein, Tommy Hilfiger, Van Heusen, Izod, Arrow, Speedo, Warner’s and Olga. The group generates more than $8bn in annual revenue, employing more than 30,000 people in 40 countries.

PVH’s seventh annual CSR report is in line with the G3 GRI standard. In addition to the PDF format, selected content is also presented on a microsite (www.PVHcsr.com). Both are structured in three main sections: Responsible Business, Source & Make and Sell & (Re)Use. Stories are further categorised by PVH’s three key CSR focus areas: empowering people, preserving the environment and supporting communities.

PVH follows a current trend to start its report with a summary infographic. The highlights selected give a good indication of the strength of material in the report: “$5m commitment to Save the Children”, “38m shirts produced according to Oeko-Tex Standard for testing textiles”, and, oddly, “700,000+ individuals throughout our supply chain”.

The interest lies not in how many people work in factories, but in establishing if PVH has a positive impact on these 700,000 people. Unfortunately the answers do not lie within. Despite seven years of reporting, PVH has not learned that transparency equals credibility. Its reporting of labour issues in supplier factories is determinedly opaque. Consider some key questions a reader might ask, and the answers given:

Q: What are average working hours?A: “58% of assessment findings remediated.”Q: How many instances of child labour did you uncover?A: “100% of assessment findings remediated.”Q: What proportion of factories had health and safety violations?A: “72% of findings remediated”.Interrogating the PVH report is like a conversation with an automated phone

system – you never quite get the information you need. The bland assurances continue in what could have been an interesting item: “A Day in the Life of a CSR Assessor”. Instead of a first-hand account from the assessors, the piece is written


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Simon Propper is CEO of Context sustainability strategy and communicationswww.contextamerica.comsimon@ contextamerica.com

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by an unidentified reporter. None of the gritty realities of inspecting factories come across. No mention of duplicate labour records, incorrect age IDs or coaching and intimidation of workers. In reality, factory assessors are savvy people with many techniques for unearthing management malpractice. But in this report it’s “an open discussion with management … emphasizing our commitment to partnership”.

PVH reports on a number of “environmental initiatives in the works”, including current participation in industry working groups such as the Textile Exchange, the Responsible Down Standard and the International Working Group of the Responsible Wool Standard. Moving forward, PVH says it will continue to flesh out its pilot approaches to issues such as water stewardship, sustainable materials sourcing and an animal-welfare policy.

Tommy Hilfiger plays a lead role in PVH’s environmental work, and rolled out its 2020 Sustainable Evolution Strategy this year, which includes specific 2020 environmental targets; notably, sourcing 100% of cotton sustainably and reducing greenhouse gas emission by 20%. The report says that Tommy Hilfiger sourced 1.13m pounds of cotton through the Better Cotton Initiative in 2014 but does not reveal the total cotton use. Similarly the brand’s GHG emissions are not disclosed so progress towards the 2020 goal cannot be verified.

The report does have strengths. It’s a very human document with personal voices telling the story on nearly every page. Executives and managers seem genuinely engaged, with contributions from Tommy Hilfiger CEO Daniel Grieder and Calvin Klein creative director Amy Mellen. The design of the PDF and microsite is clear and appealing with good photographs and infographics. The microsite is particularly strong, and would be even more engaging if immersive storytelling and video features were added. This would help attract a wider audience profile than the PDF report.

PVH says that next year, it will conduct a new materiality assessment in line with G4 GRI guidelines, and continue developing KPIs for its programmes. We suggest the company digs deeper. The problems with this report do not stem from a lack of understanding of the issues – PVH shows good awareness of labour and environmental concerns. The issue is the lack of transparency and willingness to provide the reader with information with which to form a view on the company’s progress.

Sustainability is a “show me” world not a “trust me” world. PVH’s undoubted investment in social and environmental progress is bringing the company less credit than it deserves, because of its reticence. We encourage PVH to share its journey, frustrations as well as successes, in the knowledge that the increased candour will be disarming and engaging. n

Snapshot:Follows GRI? Yes.Assured? No.Materiality analysis? Yes.Goals? Some.Targets? Some.Stakeholder input? Yes.Seeks feedback? No.Key strengths? Dynamic case studies. Chief weakness? Transparency and metrics.Pleasant surprise? Human element.




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Business school bulletin

Ethical Corporation | September 2015Academic news

Saying sorry“We’ve been doing a terrible job … meeting demand for our products,” admitted Min Liang-Ten, chief executive of gaming laptop manufacturer Razer in April last year. For a corporate leader, that’s some confession. But he went on. “We suck at this. I suck at this,” he said. Finally, he did what so many companies struggle to do. He said: “I apologise to all of you.”

The reluctance to apologise is enormous. That’s understandable. Business leaders, like everyone else, are psychologically predisposed to avoid saying they are sorry. Doing so feels risky and uncomfortable. Companies also worry about potential liability. Apologising could, as lawyers readily point out, be read as an admission of guilt. The few times that companies do say sorry, their effort is often botched or mealy mouthed.

This superb Harvard Business Review article presents an “apology formula” to help companies hit the right note. Much of it is common sense. The issue of who should say sorry (preferably, a senior leader), when an apology should be made (as soon as possible), what an apology should contain (candour, remorse and a commitment to change) and where an apology should be issued (in a high-profile setting) all sound straightforward. Yet in a tense situation, with emotions running high, it’s easy to slip up. Hence, the authors’ recommendation for companies to prepare themselves ahead of time by running “apology rehearsals”.

Compared with the “how” of apologising, the question of whether to say sorry or not presents a trickier dilemma. Companies shouldn’t apologise willy-nilly: doing so quickly becomes tiresome and disingenuous (consider, “we are sorry for the late running of this train”). The paper lays out four primary questions companies should ask. The most basic is determining whether a violation has occurred, either real or perceived. If so, there’s no debate: say you’re sorry.

Next, decide if the violation was “core” or “non-core”. If a carmaker makes a car that is faulty, then that’s core; if it engages in transfer pricing, that’s less fundamental (although an apology may still be required). Gauging public reactions is critical too. Remember: in the days of social media, a single customer complaint can impact the views of millions of potential customers. Finally, and most importantly, a company must determine its willingness to change. An apology that comes without evidence that the mistake will not happen again comes across as weak and insincere. Done badly or not done at all, an apology (or lack of one) can make a negative situation worse. Done well, however, it can provide companies with a low-cost way of improving relationships with customers, employees and the public. Schweitzer M, Wood Brooks A and Galinsky A (August 2015) The Harvard Business Review, 44-52.

Core violations demand an apology

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Public relations and codes of ethicsMore than 4 million professionals now wear the “PR” label at work. Establishing codes of ethics marks one way that these practitioners seek to build credibility for their profession. This should be seen as a positive development. Unethical public relations can serve to bolster nefarious political regimes or allow unscrupulous corporations to “greenwash”. Undertaken ethically, however, PR can help promote a “fully functioning society”, the authors maintain. But what does “ethical” look like for a PR executive? And is there such thing as a universal or normative set of PR ethics, or are they culturally specific?

In an effort to answer these questions, the researchers analyse a collection of 33 national and eight international codes of ethics to see where they converge and diverge. Codes are

created in one of two ways: either in response to local values and contexts, or at the instigation of international firms when they invest overseas. Research into globalisation suggests society is increasingly “networked” across borders and that “common cultural codes of values” are the glue that sticks such networks together. So as the PR profession grows and cross-border interactions between practitioners increase, the assumption is that codes will begin to converge. Is that happening?

The evidence suggests not. Instead, countries with similar value systems group

together into regional “clusters” (the researchers identify five in total). While marked similarities exist among their respective ethics codes, the differences between clusters are considerable. To some extent, the issue is one of weighting. Six priority values feature in all codes – professionalism, advocacy, clients’ interests, moral standards, expertise and relationships – but they are interpreted differently and with different emphasis. Countries with an “organisational-centric” approach to PR such as Canada and Australia, for example, prioritise the first three in the list. Those with a “societal” approach, such as Brazil, France and Germany, give more focus to moral standards.

It’s too early for a global ethics model to exist for the PR professional, the authors conclude – an outcome that is reflective of an ongoing dialogue between clients, practitioners and society around the world. This paper opens the door for a similar study of codes governing other areas of business communications, such as advertising and marketing. It also invites future investigation into the relationship between ethical codes and actual practice. After all, if anyone knows how to cover their tracks with fine-sounding words, it’s the masters of PR.Taylor M and Yang A (September 2015) “Have Global Ethical Values Emerged in the Public Relations

Industry?” Journal of Business Ethics 130: 543–555.

France takes a societal approach to PR

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Academic news

New books

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Our reading suggestions

Connect: how companies succeed by engaging radically with societyBy John Browne, Robin Nuttall and Tommy StadlenHardcover: 320 pages, £16.59Publisher: WH Allen Published: September 2015ISBN: 0753556928Drawing on the experience of John Browne, former CEO of BP, and the insight of two McKinsey experts, Connect articulates and explores the recurring rift between big business and society, offering a practical manifesto for reconciliation.

Green giantsBy E. Freya WilliamsHardcover: 288 pages, £20.99Publisher: Amacom Published: August 2015ISBN: 0814436137Green Giants examines nine companies that are merging social responsibility with profitability – and reveals the six factors responsible for their success, including: iconoclastic leadership, disruptive innovation and mainstream appeal.

Sustainable water: challenges and solutions from CaliforniaBy Allison Lassiter Hardcover: 408 pages, £44.95Publisher: University of California Press Published: August 2015ISBN: 0520285360The unfolding story of California’s drought includes warnings and solutions for any region seeking to manage water among the pressures of a dynamic society and environment. Written by leading policy makers, lawyers, economists, hydrologists, ecologists, engineers and planners, Sustainable Water addresses the sustainable use of water in urban areas.

Ethical Corporation | August 2014??? Ethical Corporation | August 2014Review

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Ethical Corporation | August 2014???Review

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Recycling and extended producer responsibility By Rui Cunha Marques and Nuno Ferreira da CruzHardcover: 220 pagesPublisher: Ashgate Published: September 2015ISBN: 1472450817Today, European packaging waste management is at the top of policy agendas. Comparing countries at different stages of maturity in this area, Marques and Da Cruz evaluate the costs and benefits of waste management options. This book offers interesting insights into the complex relations between local authorities, industry and consumers. n

Somebody else’s problem: consumerism, sustainability and designBy Robert Crocker Paperback: 360 pages, £24.99Publisher: Greenleaf Publishing Published: September 2015ISBN: 1783534915Somebody Else’s Problem calls for a radical change in how we think about our material world, and how we design, make and use the products and services we need.

Strategy and sustainabilityBy Mike RosenbergHardcover: 238 pages, £29.99Publisher: Palgrave Macmillan Published: September 2015ISBN: 1137501731This book offers practical examples from a variety of business sectors and geographies and builds a roadmap with which senior management might think about engaging with the topic of sustainability, not to save the planet but to fulfil its medium- and long-term responsibility to shareholders and other stakeholders.



People on the move

Ethical Corporation | August 2014???People on the move

By Claire ManuelWith thanks to Miriam Heale, Allen & Yorkwww.allen-york.com


Appointment of the month: Lesley TreacyLesley Treacy has joined the London office of UK planning consultancy Turley, strengthening its sustainability team. Treacy, who is associate director, is the first member of the sustainability team to be permanently based in Turley’s London office. She joins the firm from Greengage Environmental, where she was associate partner.

Turley’s sustainability team acts for developers and local authorities across the UK, providing a range of sustainability services at a strategic, planning

and corporate level. Treacy has much experience in corporate social responsibility, having led major projects for clients such as British Land and Development Securities.

Colin Morrison, director and head of sustainability at Turley, says: “I am delighted with Lesley’s decision to join us as an associate director in London. Her appointment represents the next evolution of our sustainability business as we seek to expand our service offer to the dynamic London market.”

Treacy says: “My appointment as the first sustainability member in London presents me with an exciting challenge and I am looking forward to developing my career with the firm.” Turley is involved in many high-profile projects, including the LSE’s Saw Swee Hock Student Centre, the expanded Canadian High Commission building and the development of Pinewood Studios in Buckinghamshire.

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Kemira. He was previously responsible for Kemira’s compensation and benefit.

Swedish mining and smelting company Boliden has appointed Thomas Söderqvist as senior vice-president corporate responsibility. Söderqvist was previously general manager of Boliden’s mining operations.

Boston-based Zevin Asset Management LLC, an independent socially responsible investment management firm, has hired Greg Peterson as a senior portfolio manager. He joins from Ballentine Partners.

The UK Green Investment Bank (GIB) has appointed Jacqueline Redmond as chief risk officer. Redmond joins GIB from Royal Dutch Shell, where she was most recently its head of commercial power, based at Shell’s headquarters in the Hague.

Recycling and renewable energy company Viridor has appointed Inder S Poonaji as director of sustainability and safety, health, environment and quality. He was formerly head of sustainability at Nestlé.

Tomas Biström is the new director, corporate responsibility at global chemicals company

www.allen-york.com

Ethical Corporation | August 2014???People on the move

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Abigail Noble, former head of impact investing initiatives at the World Economic Forum, has become CEO of The ImPact, a new social enterprise.

The US Water Alliance has appointed Radhika Fox as its next president. Fox is currently the director of the Value of Water Coalition and previously directed policy and government affairs for the San Francisco Public Utilities Commission.

Adam Crossley is the new UK director of environment at construction and development company Skanska. Crossley joined the company in 2007, and for the past two years has been business transformation director in Skanska’s utilities business.

Don Gerritsen has joined the Principles for Responsible Investment (PRI) as senior manager of asset owner insight. Before joining the PRI, Gerritsen worked at the Dutch Association of Investors for Sustainable Development (VBDO).

Rewilding Britain has appointed Helen Meech as director. The charity, which launched in July, campaigns to restore nature and reintroduce missing species. Meech will take up her position on 28 September from the National Trust, where she is currently assistant director, outdoors and nature engagement.

Hermes Investment Management has appointed stewardship expert Emma Hunt as director, strategic client management and business development for Hermes Equity Ownership Services. Hunt joins from Towers Watson, where she was global co-head of sustainable and responsible investment. n

Cleveland-based corporate responsibility and sustainability consulting firm BrownFlynn has appointed Mike Krzus as senior adviser and integrated reporting expert. Krzus will develop integrated reporting and strategic management services to help BrownFlynn’s clients tie ESG issues to financial performance.

“The Beatles song ‘The long and winding road’ describes my path to BrownFlynn,” says Krzus. After three years in the army, including a year in Vietnam, he joined Illinois Central Railroad as a staff accountant in March 1973,

then worked for 38 years in industry and public accounting before founding Mike Krzus Consulting in 2011. As well as Illinois Central Railroad, he worked for Checkers Simon & Rosner (a Chicago accounting firm), BDO Seidman, Arthur Andersen and Grant Thornton. “Up until the time I worked for Grant Thornton, I was an accounting, auditing and SEC reporting technical geek,” he says.

At Grant Thornton, he worked on an enhanced business reporting initiative, where he learned that only 25% of a company’s market value could be attributed to accounting book value, with the remaining 75% based on value drivers such as strategy, product innovation, people and customer loyalty. “That was my ‘a-ha’ moment regarding the need to provide high-quality nonfinancial information about a company in addition to the financial statements and notes,” he explains.

His goal is to help BrownFlynn build an integrated reporting practice that is as highly respected as its sustainability and CSR services.

Webinar recording:Materiality in CSR reporting and communications

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Destination sustainability managerUnited Kingdom, LondonAcre is working with the leading UK travel industry trade association to help appoint a destination sustainability manager. The destinations and sustainable tourism team works with the UK and destination governments, NGOs and key stakeholders to enable the well-being of destinations and provide best practice in strategic and operational solutions on a range of destination matters.

Hot jobsAssociate director / UK NetworkUnited Kingdom, LondonAcre is working with the Principles for Responsible Investment, an investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact. Launched by UN secretary-general Kofi Annan, the PRI is a set of voluntary best practice principles to assist investors in integrating environmental, social and corporate governance issues into investment processes and ownership practices.

Senior consultant, fashion and apparelNetherlands, AmsterdamMADE-BY, a highly regarded European organisation with global reach, is looking to hire a dynamic and knowledgeable senior consultant to join their Amsterdam office. The organisation’s mission is to improve environmental and social conditions in the fashion and apparel industry through consultancy.

Job listings

Partners and projects communications managerUnited Kingdom, LondonThe UK’s leading sustainable development organisation is looking for a creative all rounder to join its communications team. The partners and project communications manager will be instrumental in embedding innovative communication approaches in to partnership and project work, in order to maximise change outcomes.

Ethical compliance program managerUnited Kingdom, South YorkshireAcre has been engaged by one of the world’s leading manufacturers of pharmaceutical products and technologies to identify an ethical compliance program manager to join its dynamic ethical compliance team. The main focus of the role is to deliver the company’s ethical trade policy and procedures, and to promote ethical practices across the business as part of a global team.

Performance services director, fashion and apparelEurope, London or AmsterdamMADE-BY, a European not-for-profit organisation, is looking to hire a highly entrepreneurial individual to lead the launch of its comprehensive and transparent sustainability tracking tool.

Program Manager CFSICanada, VancouverThe EICC is seeking a detail-oriented individual with programme management experience to work on the Conflict-Free Sourcing Initiative (CFSI). The CFSI is one of the most utilized resources for companies addressing conflict minerals issues.

Some of the latest jobs in sustainability and CSR across the world

Job listings

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http://www.ethicalcorp.com/jobs/program-manager-cfsi

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