corporate social responsibility (csr) and the …corporate social responsibility (csr) and the...

(c) Martin Charter & The Centre for Sustainable Design (2004)

Corporate Social Responsibility (CSR) and the electronics sector: issues,

products and supply chainsBCSD - TAIWAN

20th December 2004Taipei, Taiwan

Professor Martin Charter

Director

The Centre for Sustainable Design


N-teirSupplier

1st teirSuppliers

Manufacturer CustomerInterface

Brazil

China

India SalesSupport

Mexico

Philippines

Poland ServiceRepair

UK MarketingDistribution


Sectoral CSR Ratings

Rating CompaniesNet Ratings (“Above Average” Minus “Below Average”) G20 Countries, 2003

Asked of half of sample


2003“Good Job”

Industry Management of Transition to Sustainable Development


2003“Important”

Important Initiatives to Demonstrate Sustainability Leadership for Information Technology Manufacturers


What does Corporate Social Responsibility (C(S)R) mean?“CSR is the continuing commitment by business to behave ethically and to contribute to economic development while improving the ‘quality of life’ of the workforce and their families as well as of the local community and society at large.”Source: World Business Council for Sustainable Development

Combination of sustainability and ethics?

0R

Social component of sustainability?

CSR and the electronics sector



What does C(S)R mean in the Information & Communications Technology (ICT) sector?

• Environment

• Corporate governance

• Business ethics

• Human rights (HR) and equal opportunities

• HR and working practices

• Purchasing, supply chain, procurement

• Products

• Health and safety

• Education

• Community relations



Digital Divide“ …..engaging in these markets is not just the right

thing to do, it’s the smart thing to do. As representatives of an industry whose goods are affordable for just 10% of the world’s population, we have to acknowledge that growth will come from markets that are underserved today. In other words it is entirely in our interests to apply technology to economic development..”

Carly Fiorina, CEO, HP



What is the ICT sector’s view of itself in terms of C(S)R? • An industry that

- enables society to progress

- has a wide spread effect on people’s lives

- touches every part of modern society: medical, travel, etc, etc

- is perceived to be clean

- is used to reducing environmental impacts

BUT

• Globalisation, long supply chains, chemical usage, financial

muscle mean that the ICT sector must take account of its social

responsibilities



Impact of legislation on C(S)R issues

• For ICT sector and electronics industry generally this means

environmental legislation

• This means dealing with waste issues; banning of hazardous

materials; eco-design; chemicals profiles (REACH), etc, etc

• Leading companies developing strategies to exceed compliance

where this meets stakeholder expectations

• At present, the environment is a disproportionately large part of

C(S)R focus in the ICT sector?



Job titles• Director, Corporate Responsibility, Intel Corporation, US• Manager, Corporate Responsibility, Vodafone, UK• Project Manager, Environmental and Social Responsibility

Taskforce Team, Chairman & CEO Office, Wistron Corporation, Taiwan



C(S)R Standards, Codes, Guidelines, Principles, …

1. ISO 14000 Management System Standards2. British Standard 8800 on Occupational Health and Safety Management Systems3. UK SIGMA Project on Sustainability -- Integrated Guidelines for Management4. OHSAS 18001 Occupational Health and Safety Management Systems5. Israeli Draft SII 1000 Standard on Social Responsibility and Community Involvement6. Australian Standard on Corporate Social Responsibility7. Spanish Draft Standard on Ethical Financial Instruments PNE 1650018. Spanish Draft Standard on Management System on Ethics PNE 1650109. French Draft Standard on Corporate Social Responsibility (SD 21000)10. UN Global Compact11. UN International Bill of Human Rights12. UN Universal Declaration of Human Rights13. UN Convention on the Rights of the Child14. UN International Covenant on Civil and Political Rights15. UN International Covenant on Economic, Cultural and Social Rights16. ILO Core Conventions on Labor Standards (No. 29, 87, 98, 100, 105, 111, 131, 138, 155, 182)17. ILO Conventions No. 107 and 169 on Indigenous Peoples18. ILO Declaration on Fundamental Principles and Rights at Work19. ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy20. ILO Guidelines on Occupational Safety and Health Management Systems



C(S)R Standards, Codes, Guidelines, Principles, …21. Asian-Pacific Economic Cooperation Business Code of Conduct22. French Draft Standard on Fair Trading23. Mexican Draft Management System for Social Responsibility and Integrity24. ICFTU Code of Labor Practice25. Quebec Certification Protocol NQ 9700-950 on Corporate Social Responsibility26. Det Norske Veritas (DNV) CSR Management System27. OECD Guidelines for Multinational Enterprises28. OECD Convention on Combating Bribery of Foreign Public Officials 29. UK & US Voluntary Principles on Security and Human Rights (Extractive and Energy Industries)30. U.S. Model Business Practices31. EU Green Paper on Promoting a European Framework for Corporate Social Responsibility32. Eco-Management and Audit Scheme (EMAS)33. European Convention on Human Rights34. EU Eco-Label Scheme35. Global Reporting Initiative (GRI) Sustainability Reporting Guidelines36. Domini 400 Social Responsibility Index37. Dow Jones Sustainability Group Indexes38. Calvert Social Index39. FTSE4Good Index40. Consumer Charter for Global Business



C(S)R Standards, Codes, Guidelines, Principles, …41. Social Accountability 800042. The Business Principles for Countering Bribery43. AccountAbility 100044. Interfaith Center for Corporate Responsibility Bench Marks for Measuring Business Performance45. Global Sullivan Principles of Social Responsibility46. Reitaku University (Japan) Ethics Compliance Management System Standard 200047. The CERES Principles48. Nordic Partnership49. Q-Res project University of Castellanza (Italy)50. Ethos CSR indicators 51. Workers Rights Consortium Model code of conduct52. Fairtrade Labelling Organization53. Fair Labor Association Charter Agreement on Labor Practices54. Ethical Trading Initiative55. Sunshine Standards for Corporate Reporting to Stakeholders56. Amnesty International Human Rights Guidelines for Companies57. Business For Social Responsibility – Designing a CSR Structure58. Confederation of Norwegian Business and Industry – Human Rights Checklist59. Confederation of Norwegian Business and Industry – Corporate Actors in Zones of Conflict60. The Worldwide Responsible Apparel Production (WRAP) program



C(S)R Standards, Codes, Guidelines, Principles, …61. Clean Clothes Campaign Code of Labour Practices for the Apparel Industry Including Sportswear62. Keidanren Charter for Good Corporate Behavior63. American Apparel Manufacturers Association Code64. World Federation of Sporting Goods Industry Model Code of Conduct65. Social Venture Network Standards of Corporate Social Responsibility66. Marine Stewardship Council67. Responsible Care68. ICC Rules of Conduct to Combat Extortion and Bribery69. Innovest – EcoValue environmental/sustainability rating reports70. Trace – Standard for payment facilitating71. Oekom – Quality standard 72. Five Winds International: Sustainability and CSR73. GEMI Sustainability Tool74. Future500 Global Sustainability Models75. U.S. Ethics Officer Association Proposed Business Conduct Management System Standard76. CAUX Roundtable Principles for Business77. ICC Business Charter for Sustainable Development78. ICC Business in Society; Making a Positive and Responsible Contribution79. Forest Stewardship Council80. International Code of Ethics for Canadian Businesses81. Multilateral Environmental Agreements (MEAs)



Proliferation: Cause

• Government shift towards market-based approaches• Proliferation of bodies that can develop standards• Lack of cooperation between “standards users”• Difficult to assess quality of one v another

• Confusion in the marketplace • Dilution of value of individual initiatives• Barriers to market entry• Distraction from regulatory framework

Source: International Institute for Sustainable Development (IISD)

Proliferation: Effect



C(S)R Standardisation in ISO: Background

• ISO will start developing a CSR standard in February 2005 that

will be published in 2007/2008

• General focus will be on guidance to promote general understanding

and implementation of three pillars (environmental, financial, social)

• Strong focus on role of stakeholder engagement

• Links to existing international agreements and instruments

• Guidance document…….no certification – yet…

• Key benefit will be if ISO can provide forum where all stakeholders

are able to work towards consensus


C(S)R Standardisation in ISO: ScopeCSR and the electronics sector

To develop an ISO guidance document that:• Assists organisations in addressing their social responsibilities while

respecting cultural, societal, environmental and legal differences andeconomic development conditions;

• Provides practical guidance related to:• Operationalising social responsibility,• Identifying and engaging with stakeholders, and• Enhancing credibility of reports and claims made about socialresponsibility;

• Emphasises performance results and improvement• Is consistent with and not conflicting with existing documents,

international treaties and conventions and existing ISO standards;• Is not intended to reduce government's authority to address the social

responsibility of organisations; and • Promotes common terminology in the social responsibility field



• Launched 21st October 2004

• Partners

- primary: HP, Dell, IBM (Microsoft, Cisco Systems, Intel)

- secondary: Celestica, Flextronics, Jabil, Sanmina SCI,

Solectron

• Individual codes + multiple audits• Inefficiency + duplication• Leadership

Electronics Industry Code of Conduct (EICC)




Labour• Freely chosen employment• Child labour• Discrimination• Harsh or inhumane treatment• Minimum wages• Working hours• Freedom of associationHealth and safety• Minimum safeguarding• Industrial hygiene• Safety• Emergency preparedness and response• Occupational injury and illness• Physically demanding work• Dormitory and canteen


Electronics Industry Code of Conduct (EICC)Environmental• Product content restrictions• Chemical and hazardous materials• Wastewater and sold waste• Air emissions• Environmental permits and reporting• Pollution prevention and resource reductionManagement system• Company commitment• Management accountability and responsibility• Legal and customer requirements• Risk assessment and risk management• Performance objectives with implementation plan and measures• Training• Communication• Worker feedback and participation• Audits and asssessments• Corrective action processs





Ethics• No corruption, extortion or embezzlement• Disclosure of information• No improper advantage• Fair business, advertising and competition• Whistleblowers• Community engagement• Protection of intellectual property


Source: Silicon Valley Toxics Coalition


Contractor treatment of workforce

“CAFOD's research showed that workers were subjected to invasive and intrusive recruitment processes.”

Source: Catholic Agency for Overseas Development (CAFOD), January 2004

• Low pay – in China, workers are paid well below the minimum wage of £30 a month. They have to do illegal amounts of overtime to live!

• Insecurity – workers are kept on short-term contracts of 28 days. They can be hired and fired easily. They can’t get social security benefits like food vouchers, maternity leave, holidays or pension.

• Humiliation and harassment – to get a job some workers go through intrusive tests and are forced to take a pregnancy test. Workers who are pregnant, belong to a Trade Union or are homosexual might be refused work.

• Exposure to dangerous chemicals and union-busting techniques




ISIS - Responsible Investment• UK Top 10 Investment Manager [£63.3 billion of FuM; June 2004]

• 2nd July F&C and ISIS Boards agreed to merge • Merger expected to be completed in October 2004 under name of

F&C [£120 billion FuM, as at 2nd July 2004].

• Effective management of social and environmental issues essential to long-term performance and business success

• Responsible Engagement Overlay (reo): uses shareholder influence to encourage higher standards where there is a business case to do so

• reo appied to all ISIS equity assets since 2000

• Focus on issues affecting shareholder value e.g. climate change,human rights, bribery and corruption, labour standards


ISIS: Benchmarking Results“The Chasing Pack”

DellElectroluxMotorolaPhilipsSony

CanonElectroluxIBMMotorolaPhilipsSony

“On the Starting Grid”

CanonIBMSharpSiemens

Siemens

“Race Leaders”

HPNokia

DellHPNokiaSharp

Soc

Env



ISIS: Key Findings

• Lagging on Labour Standards• Management of labour issues lags significantly behind

management of environmental issues across all dimensions

• Baby Steps • Most companies have policies with allocated responsibility…..

but systems have yet to be implemented for monitoring/audit etc

• Disclosure • Generally weak, companies moderately happy to talk about

environmental risks in supply chain…. but not ready to discuss risks arising from labour issues



The AccountAbility Rating ™• Seeks to assess accountability, not reporting• Measures key links between strategy, performance and

accountability• Based on AccountAbility frameworks and csrnetwork’s 5 years

of rating• Report “Encoding Accountability” published results of application

to G-100• Key objective is to help companies improve their accountability

• by learning from each other• by understanding their own strengths and weaknesses


Electronics Sector Performance

Performance of the Computers and Electronics Sector in the Accountability Rating

0

20

40

60

80

100

Hewlett-Packard

MatsushitaElectric

Industrial

Toshiba Fujitsu Sony Hitachi GeneralElectric

NEC Intl.BusinessMachines

SamsungElectronics

Siemens TycoInternational

Average Score of the G-100 (24)



CSR and the electronics sectorPerformance of the G-100 versus Computers and

Electronics SectorAverage of the G-100 .v. Average of the Computers and Electronics Sector

0

20

40

60

80

100Stakeholder engagement

Governance

Strategic Intent

Performance Management

Assurance

Public Disclosure

Average of G-100

Average ofElectronics Sector



Stakeholder engagement and governance

Stakeholder engagement scores low• Looking for systematic engagement, linked into core business

decision making • 8% versus 11% G-100 Average• Top 10 G-100 companies scored 34%

Governance near average• Seeking evidence of responsibility for sustainability at Board level

and integration into policy and performance reporting• 28% versus G-100 average 31% and Top 10 60%



Strategic intent

Strategic intent scores near average• Seeking evidence that non-financial performance is integrated into core

business strategy, based on an understanding of impacts and framed bycommitment to key voluntary standards

• Score: 52%• G-100 Average of 49% • Top 10 G-100 87%• HP best in sector, starting to integrate non-financial performance into

strategy



Performance, assurance and disclosure

Performance Management scores good• 64%: G-100 Average 41%, Top 10 73%• Strong integration of sustainability into product and process innovation• Senior staff not incentivised to perform on non-financial issues

Assurance nearly non-existent• 2%: G-100 Average 4%, Top 10 26%• Only Sony had external assurance

Public Disclosure is low* 23%: G-100 Average 20%, Top 10 42%


BT: Risk Analysis3 year time horizon

LIKELIH

OO

D

>80%

61-80%

41-60%

21-40%

1g

1n

7g

2n

5n

5g

13g

13n

14n

14g

15g

15n

16n

16g4n

4g

10n

10g

g = gross risk

n = net risk taking account of mitigationstrategy3g

3n

2g

7n

8g

8n

12g

9n

9g11g

11n

12n

6n

6g

17n

17g

Log (% of cash flow)

Key risks

Breach of integrityClimate changeDiversityGeography of jobsHealth and safetySupply chain

<20%

IMPACT



BT: Sourcing with Human Dignity approachSupplier code based on ILO and UNDHR - Sourcing with Human Dignity



BT: Sourcing with Human Dignity approach



Joint Assessment of thePhilippines factory

• In late 2003, Vodafone and Panasonic began planning for a 3-day CSR assessment of a PMC mobile phone factory in Manila

• Approx 80% of the work for the assessment took place prior to visiting the facility, including research, training, and documentation review

• Information was gathered from organisations such as Amnesty International, International Labour Office (ILO) and CAFOD -and used to narrow the focus to 4 areas:

• Freedom of association• Working hours• Equal opportunities • Remuneration




Selection of the assessment team

• Important to get both the right people and the right skills:• Perceptive and diplomatic interviewing skills • Knowledge and understanding of local social

practices/issues• Ability to earn trust and co-operation of all parties• First rate observation skills




Assessment process • Opening meeting with senior management• Documentation review

Physical Inspection (of factory premises)* Shop Floor Areas (Chip line, assembly and inspection)* Stores and Goods In• Toilets• Canteen• Health care facilities




• Assessment team interviewed more than 20 factory workers

• Mixture of interview techniques were used in an effort to corroborate information provided by senior managers and other sources of information

• The interviews were the most challenging and rewarding part of the entire assessment process

• PMC’s policies and procedures were found to be consistent with the standards in Vodafone’s Code of Ethical Purchasing (CEP)




• Strong on quality, environmental management and health and safety

• Most PMC employees were not familiar with the Vodafone CEP. (however, all were familiar with the PMC Code of Conduct and Basic Business Principles)

• Vodafone recommended PMC develop senior managers’familiarity with Vodafone CEP

• Good results as a joint learning exercise

• Achieved objective to measure implementation of the Vodafone CEP by Panasonic at its manufacturing facility




Key Lessons 1

• Specialised skill set required

• The importance of gaining the trust of management and workers.

• The inclusion of female assessors in the assessment team (particularly where the majority of the workforce is female, as in the Philippines).

• The provision of business cards was a useful tool in providing interviewees with a confidential means to contact the assessors at any time after the site visit




Key Lessons 2

• Many departments need to be involved in the process including environmental, human resources, health and safety, as well as senior management and most importantly the workers

• Local and regional cultures need to be considered at all stages of the process

• Differences in the geographic location of the site will also be important for focussing on different issues



What can electronics learn from the failure of apparel and footwear audits and from emerging research on productivity and workers rights?

• “Standard” labour audits are expensive and unlikely to be a long term sustainable solution – no matter who pays for them

• Brand collaboration is now emerging as the likeliest method of driving desire for sustainable change in contractors and their industry associations and labour suppliers

• Multi-stakeholder partnerships involving NGOs, trade unions, contractors, business partners and even competitors are the way forward.

Source: Ethical Corporation (2004)



Conclusions

• C(S)R needs to be more than repackaging

• Environment is important, but C(S)R is much more

• Avoid spin – ‘motherhood and apple pie’

• C(S)R should be more than PR and brand enhancement

• Transnationals need to develop strategies that link to global issues

• Need to examine impact on societies and cultures

• Need to “see ourselves as others see us”

• New NGO involvement: CAFOD, Christian Aid, etc

• C(S)R will grow in importance

• Integration, systems and structures

• Education of employees - not only “what we are doing” but “why doing it”



Future issues include…………..

• New events e.g. Enron - triggers attention to corporate governance

• Trade is a social activity e.g. fair trade, third world debt, etc

• Raising standards e.g. ISO

• Influence of large corporates on governments (51:49)

• Recognition of the mutuality of business and society

• Responsibility to stakeholders – society is a key stakeholder

• Companies must recognise national cultures and sub-cultures

• Implications of ageing society in North

• ‘Digital divides’ e.g. 3 billion people who live on less than $2 per day

• Wider social issues – SARS; HIV; alcohol; obesity; endocrine

disrupters; education, etc



Action plan• Senior level commitment• Director with responsibility• Project director• Taskforces e.g. supply chain, new business, etc• Define impacts (environmental, social, financial)• Define positioning• Complete pilots• Develop strategy, programmes, responsibilities• Implementation, monitoring and control


Contact Professor Martin CharterDirector

The Centre for Sustainable DesignTel: 00 44 (0)1252 892772Fax: 00 44 (0)1252 892747email: [email protected]: www.cfsd.org.uk

Martin Charter & AssociatesTel: 00 44 (0)1252 722162Fax: 00 44 (0)1252 722162email: [email protected]

mailto:[email protected]

http://www.cfsd.org.uk/

mailto:[email protected]

corporate social responsibility (csr) and the …corporate social responsibility (csr) and the...

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