The Market as CSR Driver The role of the international media

Henning Høy Nygaard

Programme Director

SUSBIZ Kenya

The Market as CSR Driver The role of the international media

Drivers of CSR

• The pull from the market: Companies are becoming aware of the new market opportunities – consumers and business partners increasingly demand high ethical standards and new ethical products (CSR innovation)

• The push from critical actors: Companies are increasingly managing risks for negative publicity, e.g. critical NGO’s journalists, consumer organisations, governments, etc.

Drivers of CSR

• Ethical standpoint: whish for minimising negative impact – and optimising positive impact – on environment and society, related to managing businesses. High Ethical Management goals.

strategic CSR

Demand

Value chain

relations

Four strategic drivers of CSR

Human resources

Production processes

Push from critical actors

Push from critical actors

Ethical Stand Points

Ethical Stand Points

The international view on CSR

CSR in the view of the European market

• Labour standards (working hours, payment, forced labour, child labour, disciplinary practices, freedom of association, collective bargaining etc.)

• Occupational health and safety (exposure to hazardous substances, machine guarding, ergonomics, noise, dust, first aid, fire safety, emergency preparedness etc.)

• Environmental protection (discharges of hazardous substances to water, air and soil)

• Community activities at foreign suppliers isnot the focus of much attention ofEuropean buyers

Market demand as a driver of CSR• 70 - 75 % of US and EU consumers think a company’s

commitment to CSR is an important parameter for their buying behaviour

• 59 % of US consumers are planning to spend the same or more from socially responsible companies within next year

• Yet only 11 % of US consumers have heard communications about CSR from any company in the past year

• 77% say that it is very important for the apparel industry to be socially responsible – only 52 % believe the industry has performed well (various studies including PSB/Burson-Marsteller CSR branding survey 2010)

The Danish CSR Media Focus

CasesWolff Manufacturing, China•Danish manufacturer of acoustic and magnetic electronics, sales offices in Europe, USA and Asia. Headquarters in Denmark. Own manufacturing facilities in Korea and China.

Media case 1: Wolff Manufacturing, China

• National Danish TV reveals Wolff Manufacturing China in:

• Paying wages below the official minimum wage

• Denying workers their right to organize• Laying off political active workers• Retaining fired workers permits to work• Not abiding by court judgments about

re-hiring fired workers

• New channels of information:• The scandal reaches Chinese and

Danish national radio and TV, because of Chinese workers blogging extensively about their conditions and communicating directly with the Danish Union 3F using the internet.

Media case 1: Wolff Manufacturing, China

•First reaction from Wolff headquarters in Denmark: Denies knowledge of any illegal or unethical business, claims that the responsibility lies with the Chinese management.

•ILO joins the case, asking for a meeting with the Danish management.

•Case brought up in the Danish parliament, Danish minister of commerce asked to take action by MPs.

•Wolffs major customer Danfoss, member of Global Compact, joins the case, demanding Wolff to comply with Global Compact guidelines.

•Second reaction from Wolff: Engages in dialogue with Chinese union, promises to take action and solve the matter. Company reputation is severely damaged as result of the reluctant CSR-strategy.

Media case 2: Jysk, Bangladesh

• Jysk, major Danish corporation, manufacturer of beds, bed linen, towels etc.

• Holds 1450 shops in 32 countries.

• Production outsourced to more than 500 suppliers all over the world.

Media case 2: Jysk, Bangladesh

• Jysk promotes a sustainable product line. The idea behind the line is to support education for the children of the workers at the production facility in Bangladesh.

• As part of the promotion, Jysk invites a media delegation to see their suppliers factory in Bangladesh.

• The visit reveals poor social and environmental standards at the factory.

• Several critical articles about the case in Danish newspapers.

Media case 2: Jysk, Bangladesh

• First reaction from Jysk:

– Accepts responsibility immediately.

– Explains the poor conditions by the fact that CSR-management has been outsourced.

– Takes action by involving external consultants in CSR-management.

– Explains that it would be unethical to cut off the cooperation with the supplier. Instead Jysk takes responsibility by increased audits and training and education of personnel in Bangladesh.

– Though damage to company reputation is inevitable, the damage is minimized because of the action taken.

Media case 3, Telenor & Sony-Ericsson, Bangladesh

Entering the Bangladesh market for mobile telecommunication Norwegian Telenor and Sony-Ericsson have mobile masts produced at their Bangladesh manufacturer Grameenphone.

The Danish TV-documentary “A tower of promises” reveals poor social and environmental standards at the supplier in Bangladesh:

• Child labour• Unsecured acid pools for galvanizing• Other severely hazardous working conditions

The documentary is broadcasted on national TV in all Nordic countries. Severely damaging the companies reputation

Unethical sourcing and risk: Mærsk Container Industry Duangong, China

• Owned by Danish multinational, A.P Møller-Mærsk Group

• Established in 2006 as container production was outsourced from Denmark to China

Mærsk Container IndustryDuangong, China

• Sole costumer: Mærsk Line, one of the worlds leading shipping companies and part of A.P Møller-Mærsk Group

Production level 2008: 183.000 containers = 500 containers per day

Mærsk Container IndustryDuangong, China

• Mærsk Container Industry is accused of corruption, dangerous OHS-

The case is the main story of the day in national papers and in the news on national TV.

conditions and suppression of workers, by human rights organization Globalization Monitor

Mærsk Container IndustryDuangong, China

• The issues:

– Damage to hearing and lungs among workers as result of excessive noise and dust and poisonous gasses at factory

– Middle leaders paying there way to higher positions

– Workers victims of violence from factory safety personnel

The issues. 73 point disciplinary set of rules e.g. prohibiting

workers from revealing their salary, hiding sexually transmitted diseases. In most cases non-compliance results in lay-off.

Previous protests by workers met with opposition, resulting in strikes and riots.

Practice by factory is violating national laws and ILO conventions.

Mærsk Container IndustryDuangong, China

The future European media approach to CSR

Media and ‘watch-dogs’ will be hunting innovative CSR companies. Next step will be to focus on certified products.

Possible developments:

1) Nobody can hide – responsibility for the entire value chain. Strong demands on suppliers. Co-operation or force?

2) Demands in public procurements – difficult for small suppliers3) Everybody afraid of implementing own initiatives/programmes.

Companies move away from CSR or try to hide behind external certification programmes and auditors.

4) Very few very focused (and dedicated) B2B co-operations on CSR improvements.

5) High CSR standards implemented imposed on both small and large companies; Own fairtrade, the entire value chain, community programmes, close follow up on CoC