Corporate taxation Where to pay and why Responsible business in Turkey Turkish delight? Sustainabilitys business case Why company ethics paySeptember 2011 www.ethicalcorp.comBrands under fireCan ethical PR help?
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Ethical Corporation • September 2011 Contents 3 Contents 4 What’s on the web Briefing: public relations 4 Obituary: Ray Anderson 12 Good ethics make better PR 5 From the editor 17 Boutique advantage 20 Activist interaction EthicsWatch 22 Brendan May on PR’s sustainability 6 Gulf of Mexico challenges Biodiversity in strange places p50 Krafts Bunker on sustainable supply 7 Blood diamonds 23 Peter Knight Kimberley Process in disarray New media, same old marketing Country briefing: Turkey 8 Lego Smarter packaging 27 Getting beyond philanthropy 24 CRwatch 9 Sustainable finance 29 An internationalising economy Mobile phones reunite broken families UK leadership? 33 More compelling NGO debate 35 Government-led cultural change? 26 Jon Entine Price remains king for consumers 10 Mallen Baker It’s not just Rupert Murdoch’s fault 36 Paul French Beijing just wants to be loved Strategy and management 37 Corporate tax Where, how and when to pay 40 The business case How the good guys win 44 By invitation Two Tomorrows’ Jason Perks on assurance p27 A slice of ethical Turkey Review 45 Academic news 46 Report: Puma 47 Report: Toshiba 48 New booksCOVER IMAGE: TRACK5/ISTOCKPHOTO.COM 49 People on the move 50 CEO interview with Nick Bunker, Kraft Foods UK and Ireland p11 What does ethical PR look like? p37 Feeling taxed?
4 EthicalCorp.com Ethical Corporation • September 2011 What’s on the web Keep checking online for more analysis and debate In a question and answer interview with Ethical In the latest of her online comment pieces, Carbon value on low carbon and renewable energy, Corporation’s Toby Webb, Johnson & Johnson’s Retirement’s Jane Burston calls for an urgent encouraging more investment in this sector could Patrick McCrummen, senior director for corporate rethink in how markets value carbon-based fuel ease the risk of a carbon bubble. citizenship, outlines some of the headline points reserves. There is an increasing risk, she says, of a from the company’s new Healthy Future 2015 plan. carbon bubble developing. She highlights a new In a new opinion piece, climate change expert, and This sketches out J&J’s environmental and social report from the Carbon Tracker Initiative that makes regular contributor to Ethical Corporation, Rory goals for the next few years. two basic points. First, we cannot burn all the avail- Sullivan suggests how businesses can focus their McCrummen highlights how the new goals were able fossil fuel reserves if we are to meet climate capital expenditure to best protect themselves against developed over the course of two years with input change targets. Second, this first fact is ignored by the future impacts of climate change. This, he argues, from experts both within the company and from financial markets in which all fossil fuel reserves – will require a change in how companies think about outside. In doing this, the company examined how including those we cannot burn – add value to the capital deployment. Rather than the existing “capital- successful existing programmes and targets had share price of the companies that own them. It is light” approach, in which investments need to be been, and used this to develop new goals that were attaching value to the “unburnable” carbon that is modest and provide quick returns, Sullivan suggests both meaningful and challenging. McCrummen the potential driver of a dangerous carbon bubble. that companies need to think in the long term. He stresses the importance of both educating and A possible solution is for company value to be argues that business should think of climate-change- engaging his colleagues – which have been the based on a wider range of criteria, Burston says, related risks in the same manner as other business core focus points of the communication effort including the future emissions associated with risks and opportunities. Only then will they be more surrounding Healthy Future’s release. carbon assets. Coupled with this, placing a higher effectively future-proofing themselves. n Obituary Ray Anderson: how to show the art of the possible way to make it work, and to make it profitable. If it was easy, By Mallen Baker everyone would be doing it already. Some business leaders pursue sustainability because they are Ray Anderson was a true sustainability pioneer in a market position where it may provide some competitive advantage. Some CR commentators and promoters encourage ay Anderson has sadly lost his them to do so. Rfight against cancer. It’s worth reflecting on the But Anderson understood that the only point in Interface trailblazing a path towards zero impact was if the majority of example he gave, because it isn’t just other businesses followed suit. Why else was he so generous that he was an inspirational figure with his passion for the Interface sustainability story? He gave who argued for a sustainable around 1,500 talks on the subject since the journey began in 1994. business model. He leaves his company in good shape, well on its journey. The main reason why he stood Sadly, the rest of us are more in need of his drive and inspira- out was that he stepped outside of tion than ever before. Any thoughts of progress towards his business model, and saw the sustainability in the US are foundering on the complete break- world from the outsider’s perspective. down of civil political discourse. Lots of business leaders have signed up for a more sustainable And the example of successful business leaders who haven’t business future. He was the only one who started off by waited for permission, but have begun to build the key compo- describing himself as “a plunderer”. nents of a successful future and proven that it can be done? Well, Lots of companies have focused on incremental improve- those people are in short supply. ments to their environmental performance, stressing the When you step outside the expectations of where everyone business case and their commitment to the success of the thinks you should go, and aim to take them with you in taking a business. completely new direction, that is real leadership. He laid out “mission zero”. Ultimately, only a zero environ- We mourn the passing of Ray Anderson – a real business mental footprint was going to be the satisfactory end of the leader where so many are mere followers. n journey. This wasn’t dependent on market conditions, or customer preference. The challenge to the business was to find a Ray Anderson, founder and chairman of Interface, 1934-2011.
Ethical Corporation • September 2011 From the editor 5Welcome to the September 2011 issue t’s been quite a summer. Few will look back on the past couple of their taxes is the least they can do. See p37 in our strategy andI months and think wistfully of peaceful days, and recharging thebatteries. management section for more. Our country briefing this month is on Turkey, from p27. While There’s been a lot going on. Internationally, of course, the the Turkish ethical business agenda is growing, it is thanks to a fewsweeping changes initiated by the Arab Spring have continued. progressive companies and NGOs. Here in the UK the domestic news agenda has been dominated In such a rapidly developingby two issues. The first of these – the fallout over mobile voicemail economy, however, there are ofhacking by tabloid journalists and the vilification of Rupert course some smart companies thatMurdoch’s News Corporation’s newspapers – is dealt with by have latched onto sustainable devel-Mallen Baker’s column this month. Baker argues that the malaise opment as a competitive advantage.goes further than the Murdoch press, but that the whole saga Much of the country’s corporatepresents an opportunity to clean up an entire profession. ethics stems from a tradition of The second issue has been the aftermath of the civil unrest in philanthropy – as is common else-early August, where over the course of several evenings there was where – and the emerging leaderssystematic rioting and looting in a number of cities across England. are the companies that can see It was striking how shops stocking specific brands were beyond “CR” being an extension oftargeted. And so over the coming months, we’re going to be exam- this, and as simply the smart way toining the role of companies and brands in developing and do business.maintaining social cohesion. The disaffected have a connection On a sad note, on the oppositewith those brands, so what can the brands do to help? And should page we have our obituary of a true ethical business pioneer Raythey be obliged to do so in the first place? Are more partnerships Anderson. He was the worthy winner of Ethical Corporation’s firstand charities like London’s Boxing Academy – featured in an op-ed ever lifetime achievement award, and we were lucky enough tostory available online at www.ethicalcorp.com – required? We’ll have been able to publish an extract from his most recent book infind out. our July issue. He will be missed. Of course, some brands and companies have become targets for Among next month’s highlights will be briefings on waterother reasons. As this issue’s briefing on the public relations resources, and responsible business in Mexico. As always, pleaseindustry shows, when business comes under attack, ethical PR can don’t hesitate to contact us if you have any comments.help. The big question is, of course, how ethical is the PR industry? Finally, many thanks to Burson Marsteller, the only company toFind out from p11. respond to our survey of the PR industry! n Increasingly, companies have been coming under attack becauseof the way they structure their tax affairs. Simply following thelegal letter of the law, while simultaneously doing everythingpossible to mitigate tax liabilities, is now targeted by activist organ-isations – UK Uncut is an example. Ethical PR will help companiesexplain where they pay tax and why, but if businesses genuinely Ian Welshwant to be good corporate citizens then, as for the rest of us, paying Editor Publisher: Toby Webb Contributors: Oliver Balch, Mallen Baker, Amy Brown, firstname.lastname@example.org Jeni Bauser, Jon Eldridge, Jon Entine, Paul French, Editor: Ian Welsh Stephen Gardner, David Grayson, Jennifer Hattam, email@example.com Luke Jones, Claire Manuel, Eric Marx, Brendan May, Contributing editors: Mallen Baker, Brendan May Jason Perks, Kathee Rabernak, Rikki Stancich, Business Intelligence for Sustainability Sub editors: Sarah Burton, Gareth Overton Rachel Stine, April Streeter People on the move Advertising and sales: Oliver Bamford Design: Alex Chilton Design 7-9 Fashion St, London E1 6PX UK firstname.lastname@example.org email@example.com | +44 (0) 20 7375 7518 firstname.lastname@example.org | +44 (0) 20 8834 1354 Subscriptions: +44 (0) 20 7375 7575 Editorial: +44 (0) 20 7375 7213 Subscriptions Corporate subscription Ethical Corporation is printed by Four Way Print Ltd on Green Coat plus paper, which ISSN 1758-1575 email@example.com | +44 (0) 20 7375 7575 packages from £495 comprises 80% recycled and 20% Forest Stewardship Council certified source material.
6 EthicsWatch Ethical Corporation • September 2011 EthicsWatch Brand risk Brands such as Adidas and G-Star featured prominently in photographs An unintended legacy, Kimberley Process problems, Lego’s supply chain and UK financial services and footage of looters involved in August’s riots in several English cities. NIEKUBIEKLONU/ISTOCKPHOTO.COM Stores stocking such brands were Analysis: Gulf of Mexico oil assets targeted by looters. British media commentators, such as Janet Street- Perfect storm for Porter, noted that, while “Waterstones marine life escaped unscathed,” certain stores and brands were targeted because 1000WORDS/DREAMSTIME.COM By Rikki Stancich A US mandate threatens to destroy the world’s largest collection of artificial marine habitats in the Gulf of Mexico Unlikely marine ecosystem saviour y ordering the removal of roughly 650 idle B oil and gas structures from the Gulf of Mexico over the next five years, the US Depart- Independent oil company Black Elk Energy has also picked up on the anomaly. “One law ment of the Interior ’s “idle iron mandate”, says I have to remove the platform, another Brands targeted which came into effect in October 2010, says I can’t touch it. Therein lies the conflict and threatens protected species that thrive in the the need to make a change,” Black Elk chief they had cultivated an association artificial habitats these installations provide. executive John Hoffman recently told RigZone. with “gangsta” culture, with Adidas, The rationale behind the mandate is that it Dr Paul Sammarco, marine biologist at the for example, featuring convicted is more efficient, financially and environmen- Louisiana Universities Marine Consortium, criminal Snoop Dogg in its advertising. tally, to remove old installations and seal has raised the issue with BOEMRE. “The laws Meanwhile, Levi’s postponed an redundant oil wells than leave them open to are not in alignment,” he says. advertisement featuring scenes of storm damage with the risk of potential leaks. rioting. The company says the ad was Storm damaged installations are more expen- Life-giving structures? pulled “out of sensitivity for what is sive and dangerous to remove. EcoRigs has long lobbied for the preservation of happening in the UK”. The advertise- But the mandate is in conflict with several offshore platforms beyond their productive life ment remains on YouTube, and US federal environmental laws, according to a on the grounds that they provide exceptional received widespread coverage in a report by Louisiana-based non-profit organisa- nursery habitats, refuge and food supplies for number of newspapers, however. tion EcoRigs. certain marine species. While BOEMRE points (And we’ll be examining further the Roughly 7bn marine invertebrates, many of out that the mandate includes provisions for role of brands in building social which are protected species, and 37m fish will reefing structures, this involves toppling and cohesion over the coming months.) be wiped out over the next five years, as oil towing the structure to a designated rig drop and gas operators scramble to comply with the zone. But Kolian stresses that reefing a structure Ray of light mandate, says EcoRigs’ director and founder, in this way causes 90% of the organisms to Corporate sustainability pioneer Ray Steve Kolian. This is due to both the use of either perish, or move from the site. C Anderson died in August, aged 77. explosives to cut the pilings, and the removal He also says offshore platforms are a foun- Anderson founded US carpet tile firm of the pilings themselves. dation on which to rebuild damaged fisheries Interface, which has earned plaudits The mandate is “illegal, because it results in in the Gulf of Mexico, which is still nursing the for its attempts to put environmental the mortality of protected organisms”, Kolian effects of last year’s BP Macondo well blow- integrity at the heart of its business. says, pointing out that the Magnuson-Stevens out (that led to the Deepwater Horizon spill). Interface’s progress towards sustain- Act prohibits the removal of protected coral, Ongoing research confirms that high levels ability began in the 1990s, when hydrozoans and gorgonians from federal waters. of oil and toxic Corexit dispersant are still Anderson said he realised it was “an Further, the National Environmental Policy present in sediments, waters, seafood and extension of the petrochemical Act requires the federal government to biota in the Gulf following the incident that led industry” because of what went into describe the environmental impacts of the use to 783m litres of crude oil and 7m litres of its products. Interface subsequently of explosives and platform removal. But there dispersants being released into the water. reformulated its carpet tiles, and took is no evidence that the Bureau of Ocean and “The removal of platforms from the Gulf of steps to dramatically cut water usage, Energy Management (BOEMRE), the National Mexico will further stress fish populations greenhouse gas emissions and waste. Oceanic and Atmospheric Administration fish- contaminated by the Deepwater Horizon Anderson pushed other companies, eries service or the Gulf of Mexico Fisheries incident,” says Kolian. Rather than blasting 1,800 such as Wal-Mart, to follow his lead, Management Council (Gulf Council) have acres of coral reef habitat out of the water, Kolian and received widespread recognition, carried out such an assessment, says the suggests leveraging existing environmental laws such as in 2007 when he was named report. to prevent the removal of offshore structures. n a Time magazine Hero of the Environ- ment. (See p4 for an obituary.)
Ethical Corporation • September 2011 EthicsWatch 7First case concludedThe OECD national contact point Analysis: Kimberley Process hostage to political and commercial vestedin Norway has become the first to interests”.conclude a mediation based on the Lost sparkle In June, Kimberley Process chairmanrevised Guidelines for Multinational Mathieu Yamba’s decision to declareEnterprises, the update of which was By Eric Marx Zimbabwe’s controversial diamonds ascompleted in May. The revised guide- The Kimberley Process is flawed, possibly suitable for sale without a consensus almostlines provide a more comprehensive fatally. Those who are determined to keep ripped the organisation apart.social responsibility framework for the diamond industry clean are seeking Because South Africa has made clear that itcorporations, encompassing a wider ways to repair it – or replace it stands by Zimbabwe and will allow imports ofrange of elements on issues such as Marange diamonds, civic organisations worry he campaign to halt conflict diamonds got that Marange stones exported to South Africahuman rights, supply chains andgreenhouse gas emissions. TheNorwegian national contact point used T off to a remarkably fast start in the early 2000s after 75 governments signed the first could be mixed with other gems and receive Kimberley certification.the guidelines to deal with a case regulatory system tracking the sale of roughinvolving Norwegian fish farming firm diamonds. Voluntary, and premised on a certi- Things fall apart?Cermaq, which admitted, following fication-of-origin system backed by the force of “There is a risk that ethical retailers will cutan NGO complaint, that its aquaculture law in each country, the Kimberley Process is, African diamonds out of the supply chainactivities in Chile were not sustainable. however, now in some trouble. completely,” says Nadim Kara, campaignCermaq has now pledged to do better. Its fundamental failure, observers say, is an director of natural resources at Partnership ambiguous tripartite structure that has sown Africa Canada (PAC), an organisation special-Clutching at straws? discord among member states, NGOs and ising in sustainable development in Africa.Work has started on a brownfield site industry participants. The Indian diamond industry, likely to bein Bradford, UK, to construct what Action can only be taken against non- Zimbabwe’s biggest customer by far, is urgingwill be Europe’s largest suite of compliant countries if there is 100% consensus India’s political leadership to follow Southoffice buildings made of straw. The among member governments. Zimbabwe, the Africa’s lead, a decision that could plunge thedevelopment, the Inspire Bradford Democratic Republic Kimberley Process into ABENAA/ISTOCKPHOTO.COMBusiness Park to the north of the of Congo and Angola an unparalleled crisis.city, will comprise 2,787 square metres could each block their “Obviously, if there isof offices with wall panels made of own suspensions – a prolonged situation inhalf-metre-thick straw bales. The this despite over- which questionablepanels are highly energy and carbon whelming evidence in merchandise is beingefficient and, combined with solar each of these coun- imported into certainpanels on the roof and an onsite tries of either serious countries, the integrity ofground-source heat pump, will mean human rights viola- the system is threat-that the offices will need little energy tions or weak internal ened,” says Eli Izhakoff,from external sources. The construc- controls certifying president of the World diamonds’ origins. Diamond Council, a TASOSK/DREAMSTIME.COM Secondly, the Too much hand-washing leading industry group Kimberley Process is formed in 2000 to help essentially an empty construct, given that manage the Kimberley Process alongside there is not a headquarters or professional Global Witness and PAC. staff. It lacks independent third party moni- To resolve the current impasse, some are toring – the backbone enforcement tool of any talking of creating a new parallel structure of regulatory body. like-minded governments – what has been “The KP has shown in more than half a variously dubbed a “KP-plus” or “KP 2.0” – that dozen cases of serious noncompliance, crime would have tougher rules and would brand and violence, that it is incapable of remedial itself and its diamonds accordingly. action,” says Ian Smillie, a Canadian who led “By creating a commercial incentive, a few the campaign against the illegal diamond key governments could create a magnet that trade. He helped create the Kimberley Process other governments would be drawn to,” says but then walked away in 2009 over the body’s Smillie. It is an idea that originated in and was refusal to deal with clear human rights viola- quickly withdrawn by the US state department tions committed by Zimbabwean military but has long been talked about in variousBuilders merchant of the future forces at the Marange mine. circles. Smillie says the process needs “indepen- “NGOs, having walked out of the June KPtion, due to be completed by the end dent third party monitoring, effective and meeting in Kinshasa, are licking their wounds,”of this year, is costing £4m, with credible sanctions for noncompliance, and a says Smillie. “They are trying to develop afunding from the European Union decision-making process that isn’t held coherent approach to an incoherent mess.” nand local and regional sources.
8 EthicsWatch Ethical Corporation • September 2011 Black gold Analysis: Toy manufacturing and expertise in environmental matters is a While many countries seek to cut their valuable tool as the toy company develops its greenhouse gas emissions, Canada Lego builds a new packaging policy. expects its to rise by 7% by 2020 sustainable supply Despite the progress made with its new policy, Lego still faces a challenge in ensuring compared with 2005, because of the DAVEWEBBPHOTO/DREAMSTIME.COM chain that its suppliers are not involved in deforesta- tion outside of its dealings with Lego, By Rachel Stine Kaspersen says. Due to these difficulties, Lego Lego’s quick action to smarten up its relies upon maintaining good relationships packaging supply chain is a model some with its suppliers based on trust and dialogue competitors should copy in order to ensure that only sustainable mate- rials are used in Lego products. fter being targeted by a Greenpeace While Lego’s new policy addresses the A campaign, Lego has cut out deforestation in its supply chain with a new sustainability policy. increased risks from producing its products in China, the company must now thoroughly Greenpeace, the leading environmental implement its policy to cut deforestation out of advocacy group, launched a social-media-heavy its supply chain, says Ian Duff, Greenpeace’s campaign in June against major forest campaigner in the UK. MATTJEACOCK/ISTOCKPHOTO.COM toy industry players Mattel, Confident in the company’s Dirty business Hasbro, Disney and Lego for ability to do so, Duff says, sourcing packaging materials “[Lego is] much better placed growth of the Canadian oil sands from endangered Indonesian in many ways to implement industry. According to the latest rainforests through controversial this solution than environmen- government forecasts, emissions from supplier Asia Pulp & Paper (APP). talist groups because they have oil sands will increase by more than According to a recent Green- a very good understanding of 200% from 2005 to 2020, wiping out peace report – How APP is international supply chains.” savings from other sectors, such as Toying with Extinction – Lego pulp and paper, and electricity exposed itself to greater risks of Weak response production from coal. Total Canadian being linked to APP and defor- Greenpeace has, however, crit- greenhouse gas emissions in 2020 are estation by increasingly icised the “weak responses” of on track to be 785m tonnes, about manufacturing its products in Mattel, Hasbro and Disney, 200m tonnes more than the UK’s China where paper products stating that these companies annual total. Canada had pledged, have a high risk of being Now better packaged have “so far failed to commit after the 2009 Copenhagen climate connected to APP . to clear action to remove rain- conference, to cut its 2020 emissions Coincidentally, at the time of the campaign forest destruction from their packaging”. to 607m tonnes. launch, Lego was in the midst of developing a Mattel and Hasbro say they have directed their new packaging and paper policy to reduce its suppliers to stop sourcing from APP Mattel . Low scorers production impact on the environment, says says it will develop a sustainability policy that Indian companies are corporate Helle Sofie Kaspersen, vice-president for Lego’s will require suppliers to commit to sustainable responsibility laggards, according to corporate governance and sustainability. forestry management practices. the fourth annual survey carried out Lego has set forth plans to reduce the While Greenpeace acknowledges these in India by social platform Karmayog. amount of packaging materials used for its companies’ responses as “a start”, the environ- The survey ranks India’s 500 largest products, and use recycled fibre whenever mental organisation claims that companies’ press companies from 0 (worst perform- possible. When it is not possible to use recycled releases have been vague, lacking adequate ance) to 5 (best), and only 15% of fibres, the company will use materials that changes to their sustainability policies for the companies score 3 or 4, and no have been produced in a sustainable manner. company to successfully address deforestation. companies score a 5. The greatest All virgin fibres used will have Forest Steward- Disney says that it is assessing the chal- proportion of companies (62%) rank ship Council (FSC) certification. lenges of its complex supply chain, but has not in categories 1 and 2. Karmayog Lego had been working on the new sustain- mentioned involvement with APP . recommends that companies dedicate ability policy as a response to stakeholders’ Without adequate action, Greenpeace 0.2% of their sales income to corpo- concerns about the company’s packaging, warns that the toy companies will continue to rate responsibility activities. The better according to Kaspersen. be linked to destroying rainforest homes of performers include papermakers Contacted by Greenpeace prior to the start species such as the endangered Sumatran tiger. Ballurpur Industries, Kansai Nerolac of the campaign, Lego representatives met While Lego has demonstrated that compa- Paints and Tata Steel. Among those with members of the environmentalist group nies can effectively address deforestation in making up the rear, according to to discuss the company’s paper procurement their supply chains, the hesitant responses of Karmayog, are Indian subsidiaries of policy three days after the campaign’s start. the other companies leave little hope for wide- western multinationals, such as Bayer Kasperson says that Greenpeace’s knowledge spread change in the toy industry. n CropScience and Gulf Oil, which is now part of the Hinduja Group.
Ethical Corporation • September 2011 EthicsWatch 9Trace mineralsIndustry platforms the Global e- Analysis: sustainable finance As a relatively wealthy nation, the UK may beSustainability Initiative (GeSI) and somewhat cushioned from these resourcesthe Electronic Industry Citizenship UK urged to invest demands and the impacts of climate change mayCoalition (EICC) have published aConflict Minerals Reporting in future not be as clear as in poorer countries, according to Seb Beloe, the head of SRI research atTemplate, which they say will help Henderson Global Investors. Yet, he suspectscompanies manufacturing products By Rachel Stine that the UK remains vulnerable in ways thatcontaining materials such as gold, The UK’s financial services sector has a may not be immediately anticipated.tantalum, tin and tungsten to ensure chance to reassert leadership by focusingthat those substances have not come on sustainability Cushioned from the blows?from illegal sources. The template The key to meeting these monumental he UK’s sustainable finance and invest- demands for the UK is embracing sustainablehelps companies trace sensitivemetals and minerals back throughthe supply chain to the smelters that T ment association UKSIF has called on the government, pension funds, and all financial finance in order to maintain a successful economy within the environmental limitationsproduced them, and is needed sectors to take on environmental, social and of the future, Shepherd says.because “smelters or refiners are corporate governance factors to build a more And Beloe argues that socially responsiblemany levels removed from the sustainable and resilient economy. investing is no longer considered a riskycompanies that sell the end products Launching a new report on the 20th investment if done intelligently and has thewhich use those materials,” GeSI and anniversary of its founding, UKSIF is pushing potential to offer ethical and commercial value.EICC say. The template is aimed at for the UK to bring sustainable investment The report offers recommendations for amanufacturers of products such as from the “margins to the mainstream” in order variety of financial actors, including assetcomputers and mobile phones. to preserve its position as the world’s leading owners and managers, financial regulators, financial centre and meet the approaching trade and professional associates and civilSun train challenges of limited resources and climate society, on how to embrace and enhanceBelgian rail infrastructure operator change, says UKSIF’s chief executive Penny sustainable investing. Primarily, UKSIF encour-Infrabel has achieved a European first Shepherd. ages these actors to ensure transparency,by powering trains directly from solar “The UK must recognise the green jewel in particularly in dealings with environmental,energy. Trains passing through the 2.1- its crown and invest in it,” Shepherd says. social, and corporate governance factors.mile “Sun Tunnel”, which is on the UKSIF’s report – Taking Responsibility: UKSIF promotes sustainable and respon- Achieving Resilience – warns that the world sible investing by offering networking will soon be facing a “perfect storm” of climate opportunities for financial institutions, invest- change conse- ment consultants and ROLAND NAGY/DREAMSTIME.COM quences. The report researchers, financial quotes Sir John advisors, pension Beddington, the UK funds and founda- government’s chief tions, and others scientific adviser, throughout the UK, who says that by and supports other 2030 the world will sustainable finance need to produce and investment asso- approximately 50% ciations throughout more food, 50% more the world. energy, and 30% Despite the difficul- more fresh water ties of the tasks at while adapting to the hand, meeting these effects of climate challenges alsoWrong kind of clouds? change. presents the UK with “Today, we are all an opportunity to leadhigh-speed Amsterdam to Paris via working our way out the way in sustainableBrussels route, receive electricity of one global crisis, finance, Shepherddirectly from 16,000 solar panels the warning signs of says.installed on the roof of the tunnel. which went largely Reach for the sky Currently, nearlyAccording to Infrabel, even in cloudy unrecognised,” says £940bn in assets isBelgium the panels can generate 3,300 Martin Clarke, UKSIF’s chairman. “The next responsibly managed in the UK, which ismegawatt hours of electricity annually, crisis is plainly visible and even more chal- nearly 14% of the £6.5tn-plus in responsiblyequivalent to the annual consumption lenging.” Clarke argues that “everyone” has to managed assets that is tracked by sustainableof 1,000 households. The rail network’s play a part in accelerating “the drive to sustain- investment and finance associations aroundcarbon dioxide emissions will be cut able investment and finance”. the world. nby 2,400 tonnes per year. n
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10 Columnist: Mallen Baker Ethical Corporation • September 2011 ICTOR/ISTOCKPHOTO.COM News International A chance missed to bring tabloids to book Mallen Baker says that rather than just Murdoch-bashing, we should take the chance to reform journalism properly any of us watched with interest When sent an email promising M the recent questioning by a UK parliamentary committee of Rupert imminent publication of details of her early youthful indiscretions, she and James Murdoch. The big head- promptly circulated that email, and lines had been for weeks that the her reply, to all media outlets, Was News of the World a convenient target? News of the World newspaper had adding the comment that she engaged in the most disgraceful would not be intimidated. bully anyone who thought to hold invasion of privacy of victims of It was pretty mild stuff, compared it to account. crime. At last, it seemed, Murdoch with what happened to the likes of The beating of News International senior was getting his comeuppance. former cabinet minister David is good news for those that believe For many it was payback time. Mellor, who once threatened the that all corporate abuses get found Out of all the media moguls of press that they were “drinking in the out in the end, and sooner or later the recent decades, it had been last chance saloon” only to find chickens will come home to roost. Murdoch who wielded the power media stories of his private life But there is plenty of evidence we of the press most shamelessly to suddenly bursting forth. It got to the haven’t got there yet. The final make, or break, the political parties point when the Sun, then News edition of the News of the World cele- or individuals that most suited his International’s top-selling UK daily It is a wider brated some of the “great” headlines interests. It was Murdoch that was tabloid, could taunt him that he had story than of its long and controversial history. feted by prime ministers who gone “from toe job to no job”, a refer- telephone The newspaper’s editors wrote that acknowledged his part in their ence to lurid accounts of an they regretted the phone hacking ascendancy and were respectful of extramarital affair. hacking. It is outrage. But at the same time, they his potential role in their downfall. But for decades, society had about ongoing celebrated the intrusiveness whose The fact that the News of the come to accept this as a normal, logic had inevitably led there. World had been caught enabled the even entertaining, part of public life. and routine Hence it would not be surprising critics to make the story about him abuse of power if Louise Mensch’s tack – that this is and News International. What they Fair game? an industry-wide problem, not just want is what people always want in After all, nobody was threatening to something to fling into the face of such circumstances – to see the seriously disrupt News Interna- Murdoch – managed to provoke suddenly changed environment to tional when its bullying and more of a fightback from those lead swiftly to the downfall of an intrusion was “only” aimed at companies that want phone hacking individual. politicians and celebrities. The self- to go down in history as a tale of But it is a wider story than tele- serving logic was that such figures, illegal methods, not immoral ends. phone hacking. It is about ongoing because they sometimes benefited It’s a direct challenge to any and routine abuse of power. by good publicity, were fair game. company that owns news outlets to The most effective questioner on Live by the word, die by the word. re-evaluate what constitutes an the committee (who ironically It allowed the rest of us in the ethical approach to journalism and almost didn’t get to ask her ques- UK to continue with our comfort- what defines the public interest. For tions due to the intervention of a able myth – that we lived in a well all that the apologists of the status moron with a foam pie) was Louise managed society with a fair judicial quo will spin yarns about the Mensch. She asked pointed ques- process. And those who made deci- tabloid press sniffing out corrupt tions about whether the culture of sions were held accountable for politicians, that is no more credible hacking and intrusion into private those decisions, and there was a than the protection-racketeers who lives was endemic throughout the mechanism for redress when will tell you that they are there to tabloid press, not just restricted to anything went wrong. help protect your safety. n this one newspaper. All the while, we had raw unac- Within a very short period, countable power in our midst that Mallen Baker is founder of Business Respect and unnamed people were sniffing was routinely flaunting its ability to a contributing editor to Ethical Corporation. around in her past seeking informa- retell the story of our lives in its COLUMNIST: email@example.com tion that could undermine her. own self-serving words, and to MALLEN BAKER www.businessrespect.net
Briefing: public relations12 Sustainability challenges17 PR as consulting20 NGOs wade in22 Too much discretion? FERNANDO GREGORY/DREAMSTIME.COM
12 Briefing: public relations Ethical Corporation • September 2011 MEDLAR/ISTOCKPHOTO.COM PR and sustainability The reputation economy By Stephen Gardner The public relations industry is facing the challenges of sustainability and transparency, and some agencies are working to help their clients become genuinely sustainable ublic relations used to be a simple business. The service to PR campaign to media coverage was once P PR agency would take a brief about a client’s latest ground-breaking product or service, spin it as “linear ”, corporate communications has become “organic – things grow and ebb and flow,” says Flic “You can’t just put an ad in the creatively as possible, and pitch it, normally via a Howard-Allen, UK lead counsel for sustainability at paper and that badly written press release, to a well-defined range global PR giant Hill & Knowlton. of media outlets. The holy grail was favourable “You can’t just put an ad in the paper and that does your job” coverage in a mass market mouthpiece, which in the does your job,” she says. That advertisement could UK would be a tabloid newspaper such as the now be spoofed, end up on YouTube and only then Flic Howard-Allen, Mirror or the Sun. attract media coverage, when its message has been Hill & Knowlton It was a tried-and-tested formula that worked for completely changed from the original intention. everyone. Harassed journalists received a never- “Some of it you can predict, some of it you can’t,” ending tide of information that could quickly and Howard-Allen says. easily be turned into stories. The more skilful PR The PR industry and its clients are also having to spinners generated coverage for their clients that far deal with broader social and political pressures that outweighed the impact and value of standard impinge on business in general. Two trends in advertising. particular stand out: the pressure for transparency, The PR industry, especially in its symbiotic and the pressure for sustainability. relationship with popular newspapers, earned a power beyond its relatively small size. In his industry Shining a light exposé The Invisible Persuaders, former PR man The pressure to be transparent arises from the David Michie noted that up to half of general news alteration of the media and technological landscape carried by the papers was produced or influenced by through trends such as social networking. PR agencies. The irony of “our consumerist times”, Companies are also under more political and he wrote, was that “while we have become acutely legislative pressure to be transparent after a series of aware of the pesticides, growth hormones and corporate scandals, from Enron to Parmalat. artificial additives contained in much of the food we The internet means that companies are in the eat, we are largely oblivious to the fact that the media spotlight more than ever before. “Social media gives we consume has undergone similar treatment”. a whole level of consumer power that didn’t exist Spin doctoring, said Michie, involved “conjuring previously,” Howard-Allen says. up front page headlines out of the ether or killing off Opinions about brands are now blogged and negative tales at birth”. Since the publication of his tweeted, or broadcast on numerous websites from book in 1998, however, the arena that PR firms kitchen-appliance-advisor.com to cigarinspector.com, operate in has changed dramatically. resulting in potential PR headaches. Even the Whereas the progression from new product or ultimate defensive move of obtaining a so-called
Ethical Corporation • September 2011 Briefing: public relations 13super-injunction has been steamrollered by the platforms such as Twitter, which the executive The best defenceinternet. compares to “kids running into a sweet shop and Commodity trader Trafigura discovered this nicking everything, on the assumption that only one or is not to havewhen it obtained an injunction to suppress two get caught”. A startlingly appropriate metaphor anything to hidediscussion of an internal report about the offloading given the August street riots and looting in the UK.in the Ivory Coast of toxic waste, which was allegedsubsequently to have been illegally dumped, and Opening upthen linked to the deaths of 15 people. Circulation of Some PR firms believe that their clients must workinformation online quickly rendered the injunction with rather than against the information revolutionuseless. by moving beyond traditional defensive PR and Technology also means that burying bad accepting the need to be more open aboutbehaviour is harder, as News International has everything they do.discovered from the voicemail eavesdropping Walter Gelens, a partner in one of Belgium’sscandal, which has escalated into an uncontrollable leading independent communications consultancies,PR disaster. Technology at first seemed to give News Akkanto, says the best defence for a corporation in aof the World journalists an advantage, as they were tight corner is not to try to spin its way out, but toable to exploit loopholes to illicitly obtain have nothing to hide in the first place. “We areinformation. But technology also leaves traces such entering the reputation economy,” he says.as email archives and phone records, which can be Akkanto works with the New York-basedhighly compromising. Reputation Institute, which claims to provide an One PR executive says companies are only starting assessment of how corporations are really seen byto grasp the implications of the new media age. their customers. Reputation Institute managing“There’s no informational discipline, there’s no director Kasper Ulf Nielsen, in an online video, sayssecurity; people can hack your phone.” The covering companies depend on “customers to buy theirup of corporate scandal through devices such as products, investors to recommend their stock andinjunctions has become nearly impossible because of employees to deliver on their strategy. At the heart
14 Briefing: public relations Ethical Corporation • September 2011 The PR business – punching above its weight The public relations industry is surprisingly compact. The UK is typical, with the top 150 PR consultancies generating fee income of £839m in 2010, according to the trade press. This, relatively speaking, is a tiny slice of economic activity in the business services sector. It is dwarfed, for example, by the turnover of just one of the big four accounting and professional services firms, PwC, which generated £6.8bn in western Europe in 2010. Britain’s biggest PR firm is Bell Pottinger Group, which earned fees of £68m from 907 clients, according to PR Week magazine. Second and third in the rankings are Brunswick, which deals mainly with financial PR, and Weber Shandwick. The UK industry is heavily concentrated in London. The leading agency outside the capital is Glasgow’s The Big Partnership, which comes in 34th position overall in PR Week’s league table. The business is growing, posting an impressive increase in fee income of about 9% in 2010 compared with 2009. It even emerged relatively unscathed from the financial and economic crisis, continuing to grow in 2009 compared to 2008, though by a slim 0.75%. Despite its relatively small scale, the PR industry is credited with significant influence, and this is where the problems start. The so-called “father of public relations”, Edward Bernays, regarded it as the “engineering of consent”, using psychology and the social sciences as the key to the “group mind”, which could then be influenced by clever campaigns of subtle Trafigura has been in need of good PR advice messages. The concept of PR provokes a number of ethical questions. Lord toxic waste in Ivory Coast in 2006. (Tim) Bell, the British godfather of PR and chairman of Chime PR is also problematic when it focuses its power on politicians Communications, which owns Bell Pottinger, has said the popular through quiet lobbying. However, shadowy deals are increasingly perception of his industry is that it tries to “make a rat look like a a thing of the past, according to one PR insider, who says registers squirrel”. In an expanded definition, PR aims to emphasise “the of lobbyists in Brussels and London mean “it is much harder now good bits of a rat, if there are any, and try and talk about those”. to be opaque in your advocacy”. Nevertheless, there are many ways in which the waters get Opacity may become even more difficult. The UK Public muddied. PR consultancies are frequently reticent about disclosing Affairs Council maintains a voluntary register of PR firms, which their clients, so it can be unclear which rat is served by the reveals interesting facts such as that Hill & Knowlton lobbies on messages being pumped out. behalf of the Serb Republic, and Portland Communications Bell Pottinger is happy to declare on its website clients such as represents the Russian government. Airbus, Cadbury, Emirates Airlines, Visa and Vodafone. However, The UK’s coalition government has said it will consider making the firm is less keen to advertise its work for the governments of the register mandatory. PR industry body the Public Relations Bahrain and Sri Lanka, and for Imperial Tobacco. Lord Bell also Consultants Association has said it will fight mandatory advised commodity trader Trafigura, after it allegedly dumped registration. of all of this is the trust and emotional connection that the company behind the brand is genuinely that companies have with their most critical working in their interests. This embodies product stakeholders.” quality and customer service, but also the ethical Only well-reputed companies will prosper in the performance of the company. “There is of course a reputation economy, and transparency means that clear overlap between reputation and corporate only companies that genuinely deserve a good responsibility,” Gelens says. reputation will be credited with one. Betrayal of trust Europe’s most reputable company, according to will become the corporate cardinal sin. the Reputation Institute, is Lego, which has set itself The idea of the reputation economy implies that sustainability targets including using only renewable the old model of brand building through advertising energy by 2020 and achieving zero product recalls, and PR might become redundant. Brands are a and which in 2010 recycled 87% of its waste against representation of the values of a product, such as its a target of 80% (though see also EthicsWatch on p8). quality or the benefits it offers. But in the reputation Other high-scoring corporations are Canon, Google economy, consumers are more interested in knowing and Kelloggs, according to the Reputation Institute.
Ethical Corporation • September 2011 Briefing: public relations 15 ANDREJS PIDJASS/DREAMSTIME.COM Along with the pressure to be transparent comesthe pressure to be sustainable, increasingly afundamental reputational factor. In this respect, thetraditional idea of corporate social responsibility – asa means of offsetting a company’s footprint and as amarketing tool – is, like the traditional view ofbranding, under threat. This can be seen clearly in the exposing ofgreenwashing by campaign groups, bloggers andcitizen journalists. Greenwash is rebutted via aproliferation of websites. Greenpeace maintainswww.stopgreenwash.org, while US consultantsEnviroMedia Social Marketing and the University ofOregon’s school of journalism and communicationencourage the reporting of greenwash advertising onwww.greenwashingindex.com. Hill & Knowlton’s Flic Howard-Allen says hercompany sets out to dissuade clients fromgreenwashing because it “will eventually destroywhat they want to do”. It leaves “no room formanoeuvre” when exposed, she adds. Firms that attempt greenwashing PR are in anycase behind the times, says Alex Osten, chair of thePublic Relations Consultants Association in theNetherlands. Simple statements from companiesabout “showing their good intentions and spreadingthe message that they are green is not how it shouldbe. It doesn’t impress people any more.”Transparent and sustainableIn principle, the dual pressures to be transparent andsustainable mean big changes for the PR industry. Itis no longer enough for PR firms to attempt to put agloss on a bad product when it is likely thatshortcomings will be ruthlessly exposed. PRcompanies must get involved in the business of Authenticity leads to effective communicationsmanaging reputational risk by making sure that theirclients have nothing to hide. companies, there is complete detachment between It is no longer This is potentially problematic. One former PR the CR department and the PR consultancy.consultant says it provokes two main issues: are PR Nevertheless, there is a role for agencies going to enough for PRcompanies qualified to “take on the mantle of clients and identifying good sustainable practice that firms to attemptsustainability consultants”, and, when their fees is not being adequately communicated, Morganmight be on the line, are they prepared to give adds. to put a gloss on“brutal advice” to clients that represent a significant A number of the major agencies have set up a bad productreputational risk? sustainability units or practices. Hill & Knowlton in “Inevitably consultancies are beholden to their London is one. Howard-Allen says the emphasis isclients. Sometimes they’re a little bit conflicted,” the on clients behaving with integrity, and conveyingformer PR executive says, adding that in terms of this in order to build reputation. “The more authenticproviding the right advice on transparency and you are, the more ability you have to communicatesustainability, “broadly they are not really the right effectively,” she says. “Companies still needpeople to do this job”. communications professionals to spot what they’re The Chartered Institute of Public Relations (CIPR) doing but not talking about, and to find a way toalso plays down the role of PR companies in driving bring it alive.”sustainability. CIPR’s communications director, Phil She says Hill & Knowlton does not follow “hardMorgan, says PR agencies still largely work to client and fast” rules when working with clients onbriefs rather than working to promote more sustainability. “There are many brands thatsustainable behaviour in their clients. understand the wider and economic justification for “It depends what the client wants to get out of it,” CR.” Hill & Knowlton aims to be a “critical friend”he says. More sustainably minded clients want to that will provide honest advice on thorny issues, shehighlight what they are doing but, in other says.
16 Briefing: public relations Ethical Corporation • September 2011 PIPPAWEST/ISTOCKPHOTO.COM Risks arise when there is a mismatch between what a corporation does and what is expected of it Beware the blogger Advertising and PR giant Ogilvy also emphasises as the best way to build trust and thus increase sales. sustainability in its offering to clients. Jeff Chertack, The former PR professional says that some PR managing director of Ogilvy’s Brussels office, says companies continue to “defend the indefensible”, that attacks on the credibility of companies’ citing Cohn & Wolfe’s work on behalf of Asian Pulp sustainability strategies have become “normal”. “It & Paper (APP), a subsidiary of Indonesia’s Sinar Mas happens all the time,” he says. “PR can be helpful [in Group. APP stands accused by Greenpeace of being order] to build issue management into the CR responsible for extensive deforestation, but the strategy.” company “has a very good story to tell,” according According to Ogilvy’s sustainability website, to Cohn & Wolfe chief executive officer Donna reputational risks arise when there is a mismatch Imperato, speaking to PR Week magazine. between what a corporation does and what is Another PR executive hints that the emphasis on expected of it. Issue management to deal with this sustainability and transparency could even result in a can involve either “changing the company’s defensive PR backlash, and that this could make use behaviour or its stakeholders, or both”. of digital technologies in the reputational war. In However, the eight-step Ogilvy CSR issues principle, the internet offers the opportunity to management programme seems to place the “rewrite history – start with Wikipedia,” the executive emphasis more on defensive PR, rather than on says. Twitter, Facebook and similar services can be challenging the business practices of clients. The used to “push out ideas”, and companies are starting objective, the programme states, is to anticipate to emerge that “offer services to scrub online potential corporate responsibility reputational threats reputations”. Meanwhile bloggers and other negative arising from a company’s activities, and to influence voices can be shut down if a company is committed to the issue by “changing the course of an issue’s defensive PR “at a sufficient scale over time”. progression”, rather than changing the company. However, such a strategy would entail risks. Companies “don’t want to be seen as going after Dark arts individual bloggers”, and the perception of There are other indications that the PR industry has vindictiveness would be “terribly dangerous”, the some way to go before it can truly claim to be executive says. Ultimately, a degree of negative leveraging better sustainability practice in its clients information might just have to be accepted. n