This document provides a summary of recent ethics-related news stories:
1) A report from Global Witness accuses HSBC of bankrolling unsustainable logging companies in Borneo that are violating the bank's forest policies.
2) The EU has decided to cut the aviation industry from the EU Emissions Trading Scheme due to pressure from China, India, and Russia.
3) The US has toughened its stance against human trafficking by introducing new rules to rank countries based on their efforts to combat trafficking and protect victims.
4) There is debate around the potential of wind energy given uncertainties over subsidies and public opposition to wind farms in some areas.
1. ECM Dec-Jan_Layout 1 10/12/2012 16:06 Page 1
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Ethical Corporation • December 2012 – January 2013 Contents 3
Contents
5 From the editor
EthicsWatch
6 HSBC
Battered and bruised
7 Emissions trading
Aviation cut out
8 People trafficking
US toughens stance
p22 Are there new alternatives?
9 Wind energy
So much potential
22 Alternative vehicles
Electric cars left behind
24 Cheat sheet
10 Mallen Baker
Insight and analysis distilled p35 Sustainable products people want
Options for GRI
26 NGOwatch
Water risks addressed
Review of the year Strategy and management
12 2012’s ups and downs 35 Sustainability commercialised
Briefing: corporate reputation
Nike’s big steps forward
16 2013’s potential
28 Stakeholders, crises and bad
38 Essay
management
Nature’s business solutions
32 Transparency and disclosure that works
19 Peter Knight
American voters explained
41 China column
20 CRwatch
Paul French has high hopes for China’s new
How Sandy brought out the best
premier
Review
42 Report: Microsoft
43 Report: Symantec
44 New books
45 Academic news
People
46 Recruitment
Sector that bucks the trend
48 People on the move
REUTERS/CARLO ALLEGRI
50 Toby Webb
p11 Looking back, looking forward p27 Business bashing Give reporting some glitz
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Ethical Corporation • December 2012 – January 2013 From the editor 5
Welcome to the December 2012 – January 2013 issue
t’s been quite a year. As ever, the focus for our final issue of activism, which carefully and effectively identifies corporate
I 2012 is to reflect on the events of the past 12 months, and
try to analyse where the progress has been made and where
targets, companies need to be nimble and engaging. They
need to demonstrate that they know where their corporate
the new challenges have come from. behaviour needs improvement, and that they are doing
While many parts of the world have for some time been something about it. Transparency is the key, of course, and an
experiencing seemingly more-frequent extreme climate ability to accept there are problems – and that there will be in
events, there’s no doubt that Hurricane Sandy sweeping the future. And as the recent corpo-
through the eastern United States in the autumn focused rate tax scandals – not least
attention on the issue. Ironically – and despite a severe involving Starbucks – show, simply
drought this year in many crucial grain growing regions else- operating within the law is often
where in north America – climate change was hardly not enough.
mentioned for much of the US presidential election. It really Elsewhere this time we examine
was all about the economy (stupid), despite the fact, of course, the future for electric vehicles, and
that climate impacts may well be the most serious economic explore some potentially much
issue over the coming years. better alternatives. And in the next
Is the game up already? As Penny Shepherd, chief execu- of our sustainability commercialised
tive of UKSIF says in our 2012 review, this past year may well series, we focus on Nike’s leader-
become regarded as the time when everyone involved in the ship in the apparel and footwear
climate debate concluded that the 2C “safe” temperature rise sector in the drive for radically more sustainable products. In
target that the UN’s climate panel have set is in practice addition we have reviews of the latest reporting from
unachievable. Microsoft and Symantec, and the usual roundups and
We’ll review next time how far the Doha climate talks analysis from our columnists.
addressed these thorny issues. But, one thing the experts We’ll be back with our February issue. Until then, many
from the Ethical Corporation advisory panel agree on is that thanks from all of us at Ethical Corporation for your feedback
business is taking the lead on the climate and other sustain- and support during 2012, and best wishes for a successful
ability matters that are so pressing. Chris Wille from the 2013.
Rainforest Alliance sums it up well, pointing out that as we all
share the responsibility for a sustainable future, everyone has
to do something.
There are no surprises that, increasingly, the companies
that are seen to be doing their share are also winning in terms
of corporate reputation, the focus of this issue’s management Ian Welsh
briefing. In the age of interconnected stakeholders and smart Editor
Publisher: Toby Webb Contributors: Rob Bailes, Oliver Balch, Mallen Baker,
toby.webb@ethicalcorp.com Jeni Bauser Yaghoubi, Elaine Cohen, Jon Entine,
Editor: Ian Welsh Paul French, Stephen Gardner, Phoebe Hayes,
ian.welsh@ethicalcorp.com
Giles Hutchins, Peter Knight, Claire Manuel, Sam Phipps,
Rikki Stancich, Toby Webb
Contributing editor: Mallen Baker
Sub editors: Sarah Burton, Gareth Overton
Business Intelligence for Sustainability
People on the move Advertising and sales: Oliver Bamford Design: Alex Chilton Design
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6. ECM Dec-Jan_Layout 1 10/12/2012 16:06 Page 6
6 EthicsWatch Ethical Corporation • December 2012 – January 2013
EthicsWatch Banking boost
Britain’s Green Investment Bank has
By Stephen Gardner opened for business. The Edinburgh-
HSBC under fire, aviation cut from EU emissions trading, US people trafficking rules based GIB officially opened its doors
tightened and the wind power dilemma at the end of November, with initial
state backing of £3bn. The bank has
GORDONBELLPHOTOGRAPHY/ISTOCKPHOTO.COM
Analysis: HSBC Tom Picken of Global Witness says: “HSBC also made its first investment, placing
have tried to deflect the seriousness of this by £8m into a project to construct
‘World’s local bank’ stating almost all of their clients are ‘compliant Britain’s biggest anaerobic digestion
accused over or near-compliant’. They won’t, however,
explain what ‘near-compliant’ means.”
logging clients Global Witness suggests that while HSBC’s
forest policies are more progressive than those
of other banks, it has failed to monitor and
By Rob Bailes implement those policies.
Embattled British bank HSBC finds itself Picken adds: “It is deeply disappointing
embroiled in yet another scandal that HSBC have still not agreed to a meeting
with Global Witness at a level higher than
ust when you thought things couldn’t get simply fielding HSBC’s sustainability people –
J any worse for HSBC, a report published by
Global Witness in November accuses the British
this suggests they are not taking these matters
seriously.” Green bank will boost energy, says Cable
financial giant of bankrolling unsustainable
logging companies in Sarawak, Borneo. A new low plant (for conversion of waste into
According to the Global Witness investiga- The Global Witness report represents a new biogas), in Teesside. The bank’s
tion, a number of HSBC’s Sarawak clients have nadir for the embattled bank. In July 2012, a 12- contribution is matched by £8m in
been engaging in illegal logging and unethical month US Senate investigation found that private funding. The GIB will “place
practices, violating the bank’s 2004 forest HSBC’s compliance culture had been “perva- the green economy at the heart of
sively polluted for a long time” our recovery and position the UK at
after years of poor anti-money- the forefront of the drive to develop
laundering controls allowed billions of dollars green energy”, according to business
to be laundered through its US and Mexican secretary Vince Cable. Some of the
banking operations. bank’s powers, including its freedom
A Senate subcommittee concluded HSBC to borrow from the capital markets,
had “exposed the US financial system to money remain to be clarified, however.
laundering, drug trafficking, and terrorist
financing risks” through a systematic failure to Sweet success
enforce internal controls. HSBC says: We are The self-declared “pre-eminent
actively engaged in discussions with US author- player in global snacking”, Mondelez
ities to try to reach a resolution, but there is not International, formerly known as
yet an agreement. Kraft Foods, and the owner of brands
The bank is currently preparing itself for such as Cadbury’s, has celebrated the
fines from the US authorities that could reach launch of its new name with a plan
Stakeholders kept in the dark as much as $1.5bn – one of the largest ever to invest $400m over 10 years in a
imposed in the financial services industry. For Cocoa Life sustainability programme.
policy – and earning it $130m. comparison, Standard Chartered recently The scheme will help cocoa farmers,
HSBC’s 2004 forest policy required the bank received a fine of $340m from US regulators for especially in Ivory Coast, where
to drop clients unlikely to achieve Forest Stew- its alleged role in illegal banking transactions $100m will be invested to double the
ardship Council or equivalent certification for with Iran. productivity of 75,000 smallholders.
70% of their operations, by 2009. Global If money laundering and bankrolling of Money will also be spent on commu-
Witness says that as of 2012, none of HSBC’s unsustainable logging companies weren’t nity, youth and environmental
Sarawak forestry clients analysed in the report enough, last month HSBC also found itself projects. Cocoa Life is the scaling up
hold an FSC or equivalent certification, repre- looking into evidence that criminals and tax of the Cadbury Cocoa Partnership,
senting a 100% compliance failure over an evaders were using offshore accounts at its which has run projects in the
eight-year period. Jersey operations following a leak from a Dominican Republic, Ghana and
Responding to Ethical Corporation, the bank whistleblower. India. In Ghana, it helped partici-
says that “99% of our customers in the forestry While it is not the responsibility of the bank pants increase their household
sector are compliant or near compliant with our to police the tax affairs of its account holders, incomes by 200%, according to the
policy” and that it is ending its relationships HSBC shareholders, regulators and the public company. “It’s about empowering
with the “remaining 1%”. will surely be very concerned. I cocoa communities,” Mondelez senior
vice-president Bharat Puri says.
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Ethical Corporation • December 2012 – January 2013 EthicsWatch 7
Gender balance
At least 40% of non-executive board- Analysis: international aviation national aviation emissions. “Our concern was
member positions in European Union that by putting international aviation into the
publicly listed companies should go
to women, the European commis-
Aviation falls EU emissions scheme, policy-makers were
putting off difficult political decisions around
sion says. Under proposals published
in mid-November, the quota would
from emissions UK airport capacity and expansion,” says
Wyatt.
have to be met by 2020. Commission
vice-president Viviane Reding says 11
trading scheme There is, however, scepticism that ICAO can
deliver. “The track record of ICAO in terms of
EU countries, including France, Italy By Rob Bailes delivering real emissions reductions is poor,”
and Spain, have introduced some The ICAO has a year to come up with a adds Wyatt. “That’s why aviation needs to be
kind of rule on gender balance in framework for aviation emissions, as the part of a global deal.”
boardrooms, and other countries EU suspends international flights from its
should follow suit. However, trading scheme Stung into action
although it would be binding for Addressing greenhouse gas emissions from
n November the European commission international aviation has long been a
countries to take measures to meet
the goal, no sanctions would be
applied to companies missing the
I unexpectedly announced it would freeze the
application of the EU emissions trading
headache for international policy-makers.
Excluded from the 1997 Kyoto protocol
target if it could be shown that scheme to non-EU flights for a year. because of difficulties in determining how to
suitable candidates were not avail- According to climate commissioner Connie allocate emissions to different countries,
able. The proposal must survive Hedegaard, the decision by the EU will enable responsibility for reducing emissions has
examination by the European parlia- the International Civil Aviation Organisation instead rested with the ICAO.
ment and EU member state (ICAO) time to develop a global framework for Now, ICAO appears to have been pressured
governments before becoming law. a market-based emissions reduction scheme into action. In mid-November it announced
relevant to international aviation.
JORDIRAMISA/ISTOCKPHOTO.COM
Local tariffs for local Industry experts say the EU’s
people climbdown is a result of pressure
People living close to wind farms from aircraft manufacturers and
might have less of a not-in-my- overwhelming global opposition
backyard attitude if they receive a to the EU’s decision to pull inter-
bonus via their electricity tariff. Good national aviation into the EU ETS.
Energy, which provides renewable Countries such as China, India
power, is offering a 20% discount to and the US have consistently
opposed the EU ETS decision on
TIMMY/ISTOCKPHOTO.COM
the grounds that any agreement
on international aviation emis-
sions must be global and come
through ICAO.
Most recently, a new US law
was enacted that shields US Can aviation avoid a bumpy landing?
airlines from the EU ETS. While
the move will have no immediate effect in light the formation of a special high-level group
of the EU’s decision it could affect future rela- charged with investigating the feasibility of a
tions between the US and EU, should ICAO fail global market-based measure and a global
to develop and agree a global framework. policy framework to guide its application.
According to the Aviation Environment According to ICAO’s secretary-general,
Local generation can turn back the clock Federation, opposition to the EU ETS has been Raymond Benjamin, a draft resolution on a
one of political principle rather than any global policy framework will need to be
people living within 2km of its wind fundamental rejection of the scheme itself. produced in time for the organisation’s annual
farm in Delabole on the north Cornish “Disquiet towards the EU’s decision is not general assembly in September 2013. Putting in
coast, in southwest England. The so much based on how it will impact in terms place a global market-based scheme may take
scheme is the first of its kind, of cost, but more in terms of the principle – much longer, however.
according to the company. An extra that the EU was looking to impose measures “We don’t have to come to that general
bonus depending on how much elec- beyond its borders,” says Cait Hewitt, deputy assembly with a global scheme. We have to
tricity the wind farm produces could director of the federation. come with a global framework and an answer
bring the net benefit for local resi- Environmental groups have tentatively to the question about the feasibility of a global
dents up to £150 a year. The local tariff welcomed the decision as positive. According scheme,” says Benjamin. “The objective
would “put renewables at the heart to Vicky Wyatt of Greenpeace UK, the EU ETS remains carbon-neutral growth of the aviation
of the community,” says Good Energy was never a panacea to the problem of inter- industry by 2020.” I
chief executive Juliet Davenport.
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8 EthicsWatch Ethical Corporation • December 2012 – January 2013
Prototype published
Analysis: supply chains workforce agencies and educators. Integrated reporting of financial and
This would help ensure that “victims are non-financial results has come a step
Anti-trafficking always treated as victims and not criminals,” closer according to the International
measures go federal he said. Integrated Reporting Council (IIRC),
which has published its “prototype”
Now for action framework. Paul Druckman, the IIRC
By Sam Phipps Human rights NGO Stop The Traffik has chief executive, says the prototype
While the US government is targeting praised Obama’s adoption of the California framework will help companies dip
human trafficking, companies must take law on a federal level but cautions against their toes in the waters of integrated
ultimate responsibility for their supply complacency. reporting. “We are encouraging busi-
chains “It is excellent that anti-human trafficking is nesses to start testing the principles
on top of the agenda for President Obama, as of integrated reporting and evalu-
new executive order from the US presi- this will inspire others to also make it a
A dent, Barack Obama, requires all US
government contractors and subcontractors to
priority,” says Jantine Werdmuller von Elgg,
global project officer at Stop The Traffik.
ating their relevance and
applicability,” he says. Feedback is
welcome, though the prototype
ensure they do not engage directly or indi- But she argues that putting legislation in framework is not part of the IIRC’s
rectly in forced labour. The measures mirror place won’t necessarily bring about change. “It formal consultation process. The final
laws passed in California two years ago with is only employees taking action in a company framework is expected at the end
the purpose to “provide consumers with infor- that will disrupt the global trade in people.” of 2013.
mation regarding [companies’] efforts to Von Elgg also cites imminent UK legislation
eradicate slavery and human trafficking from that has much the same thrust as the US law. Adding fuel to the fire
their supply chains”. The proposed Transparency in UK Company The European commission has infu-
“Our fight against human trafficking is one Supply Chains (Eradication of Slavery) Bill is riated environmental groups by
of the great human rights causes of our time,” expected to resume its second reading debate listing as “sustainable” palm oil
Obama said, announcing the order shortly in January 2013. certified by the Roundtable on
before his re-election. More than 20 million Obama also announced more resources for Sustainable Palm Oil (RSPO). The
people around the world are ensnared in traf- services and legal assistance to victims of traf- listing means that biofuel produced
ficking, according to the White House. ficking, including the launch of $6m in special from RSPO palm oil can count
The executive order reinforces an existing awards – with support from the Goldman towards a legally binding European
zero-tolerance policy on trafficking in govern- Sachs Foundation – for local communities to
develop collaborative and comprehensive
RZELICH/ISTOCKPHOTO.COM
solutions to help trafficking victims.
EDSTOCK/ISTOCKPHOTO.COM
Laurel Bellows, president of the American
Bar Association (ABA), also welcomes the exec-
utive order and says she expects a uniform law
against trafficking to apply in the US from next
July or August 2013, covering the whole
private sector as well as the state.
More than 100,000 US citizens are in slavery
today, and that excludes “tens of thousands of
men, women and children who are brought
over our borders and subjected to captivity for
sex or labour for the profit of their captors,” Green fuel greenwash?
Bellows says.
In Chicago alone 16,000 underage girls are Union target for 10% of transport
Officially zero-tolerant on people trafficking forced into prostitution each year, though fuels to come from renewable sources
Seattle and Atlanta are the main hubs, Bellows by 2020. Friends of the Earth and
ment contracting and requires compliance says. Greenpeace say that the decision
measures for overseas contracts and subcon- “We have to make certain that every single amounts to “greenwashing” of palm
tracts of more than $500,000. These include an employer in this country incorporates into a oil, the production of which can drive
employee awareness programme, a process to handbook or short presentation a basic plan destruction of tropical forests as areas
report violations without retaliation, and for all employees to sign off when they join are cleared for plantations. The RSPO
recruitment and housing plans. and at the end of every year: how do you says the decision was “critical in
Obama has pledged more training and identify a victim and what’s the hotline making real progress towards the
guidance to federal prosecutors, law enforce- number to call if you think you have.” supply and demand of sustainable
ment officials and immigration judges, as well Bellows concluded: “Americans have to commodities” and that certified palm
as to commercial transportation officials, state understand that they all have a job they can do oil does not “contribute to the
and local law enforcement partners and state on this issue.” I sustained destruction of valuable
tropical forests”.
9. ECM Dec-Jan_Layout 1 10/12/2012 16:06 Page 9
Ethical Corporation • December 2012 – January 2013 EthicsWatch 9
Deforestation down
Some rare environmental good news: Analysis: wind power the IEA. If these subsidies were removed
the rate of Amazon deforestation today, greenhouse gas emissions would be 6%
was down 27% in the year to 31 July Blowing hot and lower by 2050 (according to OECD analysis),
2012, and the lowest rate since
records began in 1988. Andre Correa
cold and renewables such as wind and concen-
trated solar power would be cost competitive
do Lago, Brazil’s head negotiator at By Rikki Stancich in Hong Kong with, if not cheaper, than coal and gas, says
the United Nations climate conference More commitment to wind power could Greenpeace’s renewable energy expert, Sven
mean hitting global emission reduction Teske, a co-author of the GWEO report.
RICARDOAZOURY/ISTOCKPHOTO.COM
targets. But it’s looking unlikely
Within reach
ovember was an important month for According to the report, the power sector is
N climate change mitigation. The Interna- responsible for more than 40% of all CO2 emis-
tional Energy Agency made a historic first, sions from burning fossil fuels, and about 25%
initiating dialogue on climate change. It of total greenhouse gas emissions. This makes
advises that to achieve the goal of keeping any a compelling case for installation of renewable
global temperature rise to 2C, only one-third of energy generating capacity.
proven reserves of fossil fuels can be With political commitment, the 2030 emis-
consumed before 2050. sions goal can be met and even exceeded,
All eyes then turned to COP 18 in Doha, stresses the report. In a best-case scenario,
and the UK’s Department of Energy and wind energy could meet roughly 24.8% of total
Welcome cut in cutting Climate Change’s long-awaited energy bill. electricity demand.
The latter signals a switch away from coal Since 2009, however, growth in the wind
in Doha, Qatar, says measures to towards nuclear and renewables, sector has slowed significantly. According to
curb illegal logging had had an particularly wind, but with consumers facing the report, “recession in most of the OECD, the
impact, and that emerging countries higher bills to pay for new power installations. lack of EU ambition to ‘fix’ its emission trading
could do more on deforestation and With the window of opportunity to stave system, fickle policy in the US and elsewhere”,
other carbon-related issues if rich off runaway climate change
SHAUNI/ISTOCKPHOTO.COM
nations provided more funding, narrowing, the stakes are higher
including to address poverty. than ever. Even so, “the politics
Despite the improvement, more don’t look very good”, says the
than 4,600 square kilometres of latest Global Wind Energy
the Amazon rainforest was lost in Outlook (GWEO) report.
2011-12, an area nearly twice the To rein in climate change,
size of Luxembourg. annual global emissions must
be pared down from the IEA’s
How to avoid 2020 business-as-usual scenario
corruption of 56bn tonnes of CO2, to a
Executives hoping to avoid large fines 44bn tonne goal. Today,
or even prison sentences should they however, there is already a
get caught up in corruption in foreign “gap” of 10bn tonnes of CO2
countries should read a 120-page per year between current
guide to the United States Foreign confirmed national emission
Corrupt Practices Act, published reduction targets and that
recently by the US government. The 2020 goal. Still untapped potential
guide includes case studies, details “Even if the pledges made in
on the scope of anti-bribery provi- Copenhagen and confirmed in Cancún are have undermined the sector’s growth poten-
sions, definitions of terms such as met in full, a gap of 6bn tonnes per year tial, according to the GWEO report.
“corruptly” and “wilfully”, defences remains,” notes the GWEO report. Meanwhile, Growth is likely to pick up again around
that might be accepted and the global emissions continue to rise. 2014. But the Global Wind Energy Council’s
penalties that might apply to wrong- Unless market corrections such as efficient secretary-general, Steve Sawyer, argues it is
doers. Because of the damage done carbon pricing and removal of fossil fuel subsi- unlikely that the best-case scenario can be
by corruption, enforcement of the dies are made now, the current opportunity to achieved. Instead, he says it is more likely that
Foreign Corrupt Practices Act is a contain global warming will be missed, 760GW will be installed by 2020, meeting 8.3%
“continuing priority at the Depart- according to IEA projections. of electricity demand, with annual CO2
ment of Justice and the Securities However, governments continue to back savings of around 1bn tonnes. As the report
and Exchange Commission,” the the wrong horse. Subsidies to fossil fuels are concludes, this is “not sufficient for wind
guide said. The act’s provisions can now 30% higher than in 2010 and six times the energy to play its full part in combating the
extend to non-US, as well as US, amount received by renewables, according to climate crisis”. I
companies.