1. Ethical Corporation • December 2010-January 2011 Review of the year 11
TOM_WANG/DREAMSTIME.COM
2010 Other events that attracted wide atten-
tion and controversy during the year
A year dominated by macro trends included Cadbury’s acquisition by Kraft
Foods, Google’s threat to leave China over
censorship issues, and Vedanta Resources’
controversial plans to mine bauxite on tribal
By Rajesh Chhabara land in afforested area in Orissa, India.
From Deepwater Horizon to ISO 26000, it’s been a year of big events Global supply chains had a few
refreshing moments. Riding high on the
he world entered 2010 with optimism as biggest corporate responsibility disaster of success of its sustainability initiative Plan A,
T the global credit crisis had eased and the
economic recovery was in sight.
the year. BP executives have been accused of
first neglecting the safety aspects in oper-
the UK retailer Marks & Spencer
announced an ambitious target to become
However, the recovery in the US and ating the rig, then underplaying the the world’s most sustainable retailer by
Europe has been sluggish; more of the potential damage caused by the spill and 2015. The company also added 80 new
global economic power has rolled over acting slowly in plugging the leak. BP chief pledges to the previous 100 commitments
towards China, India and a few other executive Tony Hayward lost his job for under Plan A and extended the programme
rapidly developing countries; and inflation failing to contain the leak and then the to more than 2,000 suppliers and 10,000
is planting new fears of bubbles forming in ensuing crisis. farmers.
various pockets of the global economy. Also BP has lost reputation, and loads of
in the mix have been currency wars making money. On the New York Stock Exchange, Supply chains good and bad
multinational companies reconfigure their BP shares dropped 52% in 50 days following Wal-Mart continued to up its sustainability
UK retailer Marks & Spencer
financial projections and countries mulling benchmarks by pledging to cut 20m tonnes
new measures to protect their markets. of carbon from its supply chain by 2015.
Twelve months ago, corporate responsi- And Unilever announced its ambitious new
bility commentators were obviously announced an ambitious target sustainability plans – Sustainable Living – in
conservative in predicting their outlook for to become the world’s most November.
the year. Companies recovering from reces- California’s new supply chain trans-
sion were, it seemed, more likely to sustainable retailer by 2015 parency laws mean that any company with
continue cutting budgets on corporate a turnover above $100m operating in the
responsibility initiatives. the spill, falling from $60.57 on April 20, to state will have to disclose its efforts to erad-
But a couple of incidents may have $29.50 on June 9. The stock price has since icate forced labour in its supply chain. The
changed the mood. First, the embarrassing recovered and was trading at around $48 in influence this will have is as yet unclear. But
recall by Toyota Motors, which started mid-November, still about a third down certainly pressure groups will monitor what
towards the end of 2009, leapt up to disas- from the pre-spill price, representing a loss companies disclose and incorporate this in
trous levels, bringing the reputational risk in market capitalisation of more than $60bn. to future campaigns.
back in focus in boardrooms. Second, and The company faces potential liability In 2010, activists did keep up the
more defining, a jolt came in April when BP from a number of legal claims including a pressure. Dirty Clothes, a report by the
became the poster child of bad business class action lawsuit arising from those National Labour Committee, a US-based
after the oil leak following an explosion on affected by the spill. BP has estimated the rights group, accused a Wal-Mart and JC
the Deepwater Horizon rig in the Gulf of likely cost of the spill will be more than Penney supplier in Jordan of human traf-
Mexico. $40bn. The cost may be twice as much if ficking and abusing young women migrant
The BP oil leak, the worst environmental gross negligence is proven on the part of the workers from Sri Lanka, Bangladesh and
disaster in US history, is certainly the company. India.

2. 12 Review of the year Ethical Corporation • December 2010-January 2011
CHERYL_CASEY/DREAMSTIME.COM
2010’s ups and downs
January • The credibility of the fourth assessment report of the Intergovernmental Panel on Climate Change is
challenged after several embarrassing errors are discovered.
February • Wal-Mart announces a huge target of removing 20m tonnes of carbon emissions from its supply chain
by 2015.
• The Environmental Justice Foundation released a new report – Slave Nation – exposing how cotton
production in Uzbekistan continues to violate human rights.
April • Marks & Spencer announces target to become the world’s most sustainable retailer by 2015.
• Explosion on BP’s Deepwater Horizon oilrig in the US.
May • GRI and Global Compact announce collaboration to align their work.
June • An Indian court convicts seven former Union Carbide officials of criminal negligence in the 1994
Bhopal gas tragedy.
July • IFC/World Bank releases a draft framework for engagement with palm oil sector.
• UK Stewardship Code published.
• US Congress passes the Dodd-Frank Bill that bars banks from risky and speculative investments such
as proprietary trading, operating hedge funds and private equity fund.
August • International Integrated Reporting Committee launched by GRI and A4S.
• Indian government halts Vedanta Resources mining project in Orissa due to serious violations
of environmental rules.
October • The Convention on Biological Diversity produces a global agreement on 20 goals by 2020.
• The final Teeb (The Economics of Ecosystems and Biodiversity) report issued.
November • First CDP Water Disclosure Project report launched.
• ISO 26000 guidance standard on social responsibility launched.
America blames BP
Apple set a new benchmark in supply producer Sinar Mas and said it would use operating practices, consumer issues, and
chain reporting when it included disclosure only certified sustainable palm oil by 2015 in community involvement and development.
of labour standards violations in supplier its products. “The big question now will be to see how
factories this year. However, the iconic IT A number of other brands have stopped well it is received by the market and how it
brand soon found itself under attack after a sourcing from Sinar Mas including Unilever is used,” Hohnen says.
series of tragic cases of suicides by workers and Burger King. Greenpeace had alleged ISO’s decision to charge 192 Swiss francs
employed by the company’s largest that the palm oil producer was responsible (about $198) for the ISO 26000 standards
supplier Foxconn in China. for destroying rain forests, threatening the document, instead of making it available for
Notorious for shunning responsibility, endangered orangutan and the livelihood free, may discourage small and medium-
the palm oil industry uncannily managed to of the local people. sized enterprises from accessing the
come under the spotlight this year as standards.
Greenpeace continued its campaign against Macro-level developments And corporate responsibility observers
unsustainable practices. However, the year was more remarkable for say ISO 26000 can potentially become more
Major companies that found themselves macro-level initiatives. The most significant than voluntary. For example, some govern-
at the receiving end of high-profile event was the final passing of the much ments may want to pass domestic
campaigns were Nestlé, HSBC and Burger awaited ISO 26000 guidance standards on legislations to adopt and implement stan-
King for their connections with the Sinar social responsibility. dards contained in ISO 26000.
Mas group, one of the largest palm oil “The publication of IS0 26000 is truly Another possibility, which sounds more
producers in Indonesia with dubious historic. It provides what is the most immediate and real, is that NGOs are likely
credentials. comprehensive and authoritative definition to identify and target companies which do
Greenpeace’s attack on Nestlé’s use of of what being ‘socially responsible’ means not live up to the ISO 26000 standards. This
unsustainable palm oil, with a spoofed Kit- in the age of globalisation,” says Paul will force multinational companies in partic-
Kat video clip on YouTube, was perhaps one Hohnen, an Amsterdam-based sustain- ular to demonstrate that they have
of the most talked about campaign of the ability consultant and an expert participant embedded ISO 26000 guidance standards in
year, and became an example of how social in the ISO working group on social respon- their corporate responsibility strategy.
media can be used effectively by pressure sibility since 2004. Higher uptake of ISO 26000 may see a
groups. Nestlé retaliated by asking YouTube The guidance standard, which is volun- rise in annual corporate responsibility
to remove the clip and in the process tary and not certifiable, covers seven core reports and more companies opting for
attracted even greater criticism by activists. subjects: organisational governance, human independent assurance of their reports as
Eventually, Nestlé cut ties with palm oil rights, labour practices, environment, fair the guidance standards emphasise the

3. Ethical Corporation • December 2010-January 2011 Review of the year 13
value of social responsibility reports and
independent verification of information
contained in the reports.
Corporate responsibility reporting itself
saw important developments.
A landmark initiative during the year
included the formation of the International
Integrated Reporting Committee (IIRC), led
by Global Reporting Initiative and the
Prince of Wales’s Accounting for Sustain-
ability Project. This aims to create a globally
accepted framework for integrated
reporting by 2020, an ambitious goal with
potentially far-reaching implications for
how companies report.
An integrated reporting framework
would enable companies to produce a
single report that includes information
about their financial performance alongside
the information about their environmental,
social and governance performance.
“The decision by GRI to move towards
integrated reporting is a risky move when
corporate responsibility is still emergent as a
management function,” says Leeora Black, Marks & Spencer still sets sustainability standards
founder and managing director of
Australian Centre for Corporate Social use of social media tools, more robust online sible for promoting corporate governance
Responsibility, a consulting and training formats, issue-based reports, and better and reporting, published the Stewardship
firm. reporting on materiality and stakeholder Code for institutional investors.
“But if it pays off as I think GRI intends, engagement. The code, which will mainly apply to
it will be a huge step forward as it brings the Badly bruised from the recent financial asset managers, institutional investors,
muscle and know-how of the accounting crisis and suffering from depleting public pension funds, insurance companies,
profession to bear on the subject of manage- trust, financial institutions appeared more investment trusts and foreign investors, is
ment information – a potential ‘fast’ route to open to embracing responsible investment aimed at improving transparency on how
mainstreaming,” Black adds. principles. institutional investors manage their invest-
The number of investment institutions ments in the investee companies.
Reporting rules signing up to the Principles for Responsible The code, based on a comply-or-explain
GRI is also advocating that environment, Investment (PRI), an initiative by the United approach, expects institutional investors to
social and governance reporting should be Nations Environment Programme and the publicly disclose how they discharge their
made mandatory for all large and medium- Global Compact, jumped to more than 835 stewardship responsibilities, have a publicly
sized companies by 2015 in the OECD in 2010 representing $22bn assets under stated conflict management policy, actively
countries. management, up from about 600 in 2009. monitor investee companies, be willing to
In another significant move, GRI and the act collectively with other investors, have a
United Nations Global Compact decided to clear voting policy and disclose voting
work together to include the Global
NGOs are likely to identify activity, and periodically report on their
Compact adopting the GRI guidelines as the and target companies which stewardship.
recommended reporting framework for its do not live up to the “High quality stewardship supports and
more than 5,800 signatories. protects value creation over the long term.
“The debate on reporting moved in 2010 ISO 26000 standards By meeting the broader interests of society,
from whether to report to how to report, it also protects the continuing ‘licence to
and this includes fundamental questions The initiative had only 50 signatories when operate’ of pension funds and other asset
about presentation of CR reports – online or it was launched in 2006. owners and of the investment managers
print/download – versus integrated and PRI signatory companies are obliged to who are their agents,” says Penny
frequency of update,” says Elaine Cohen, complete an annual survey on their Shepherd, chief executive of UK Sustainable
head of consulting firm Beyond Business progress on responsible investment activi- Investment and Finance.
(and a regular report reviewer for Ethical ties. This year, 40% of them decided to make Shepherd says increasing numbers of
Corporation). their survey answers public, up from 25% pension funds are requiring their invest-
Cohen says the other trends to watch for last year. ment managers to demonstrate their
in 2011 include non-profit reporting, online In the UK, the Financial Reporting commitment to the UN-backed Principles
engagement around reporting, increasing Council, the independent regulator respon- for Responsible Investment. “Use of the UK

4. 14 Review of the year Ethical Corporation • December 2010-January 2011
FRANZ DEJON
profit Carbon Disclosure Project (CDP) has
climbed to more than 3,000 this year – a
major leap from just 235 companies in 2003.
A number of companies including
PepsiCo, Dell, Juniper Networks and Reckitt
Benckiser have started asking their
suppliers to disclose emission data by
participating in the CDP supply chain
programme.
In the US, a number of consumer compa-
nies including Starbucks, Nike, Levi Strauss
and Timberland continued lobbying for a
strong climate change law through their
association Business for Innovative Climate
and Energy Policy.
The first CDP Water Disclosure report,
based on responses from 147 companies,
which are among the world’s largest, this
year indicated that water security was
already high on the corporate agenda. Of
the companies, 67% are reporting responsi-
bility for water-related issues at the board or
executive committee level while 89% have
Despite pressure, real agreement on biodiversity remains elusive already developed specific water policies,
strategies and plans.
Stewardship Code can form an important 193 governments got together for the The flipside is that only 50% companies
part of this commitment.” Convention on Biological Diversity (CBD) that were sent the CDP questionnaire chose
More than 55 asset managers, including in Nagoya, Japan, in October to hammer to respond.
big names such as Aviva, Aberdeen, Axa, out a global deal for conservation – the
Goldman Sachs, HSBC, JP Morgan and UBS summit participants don’t seem to have The year ahead
and about a dozen pension funds have allowed the report to guide their approach. So, at the end of 2010, environmental
already signed up to the code. The CBD eventually succeeded in impacts remain in the spotlight. We will
reaching a last-minute agreement on 20 report next issue the outcome of this year’s
Biodiversity politics objectives for 2020, but analysts warn it is climate change summit in Cancun. In the
The Economics of Ecosystems and Biodiver- too early to celebrate the deal, as its long- run up, there has been little hope that the
sity (Teeb) study, an initiative supported by Cancun meeting will produce any substan-
the G8 countries and Brazil, India, China, tial global deal to cut greenhouse gas
Mexico and South Africa, published its final
Badly bruised, financial emissions, much like Copenhagen a year
report this year making progress towards institutions appeared more earlier.
understanding the global economic benefit open to embracing responsible A lingering recessionary hangover in the
of biological diversity, and the costs of the US and limping economies in several
loss of biodiversity. investment principles European countries would discourage these
An international agreement on the nations from making any meaningful
economic value of biodiversity could have term implications will take some time to commitment to cut carbon. China and India
far-reaching implications for companies in become apparent. Commentators have have not changed their outlook on climate
biodiversity sensitive industries such as even criticised the CBD for declaring the change, either, since the Copenhagen
mining. summit a success while failing to publish summit: both of them still refuse binding
Shepherd of UKSIF says the Teeb report the agreement. targets.
could facilitate the development of regula- Observers say the goals adopted are Otherwise, the year 2011 may well be
tory and public policy measures to make weak, unclear, lack the sense of urgency partly shaped by some of the macro-events
usage and replenishment of natural needed to halt nature’s destruction, and are of 2010, such as the extent to which compa-
resources material to the bottom line for largely unbinding. nies apply ISO 26000, use biodiversity
many industry sectors. While the global community failed to agreements and the Teeb report to realign
“Managing their use of ‘ecosystem arrive at any deal on climate change in their strategies.
services’ may soon be business as usual for Copenhagen in 2009, a number of busi- Corporate leaders will continue to
companies not just in natural resources but nesses continued their own initiatives to improve their carbon emissions reduction
in a range of industry sectors,” Shepherd reduce carbon emissions from their opera- performance – even in the absence of a
says. tions. global political deal – and take their corpo-
Though the timing of the Teeb report The number of companies disclosing rate responsibility reporting to the next
was just right – it came out a week before their carbon emission data through the non- level. I