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US electionsCSR lite

Automotives Ethics benchmarking

Higg indexApparel stripped down

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Ethical Corporation | August 2014???Contents

35 NGOWatch

Global inequality

37 Cheat sheet

All you need to know

Strategy and management

41 Automotives

CSR benchmarking

49 US apparel

Ethics indexed

Review

56 Report: Ikea

58 Report: Tetra Pak

60 Academic news

63 New books

65 People on the move

67 On the web

5 From the editor

EthicsWatch

6 EU corporate tax Closing loopholes

8 UK online retail Age concern

10 US elections CSR trumped

12 PolicyWatch EU reporting rules

Food briefing

14 Man v. food Sustainable consumption

24 Future farming Harnessing technology

33 BrandWatch GMO labelling

14Future growthSustainable food

Ethical Corporation | February 2016

49Higg indexIroning out ethics

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Ethical Corporation | August 2014??? Ethical Corporation | February 2016EthicsWatch: US elections

US primaries

Nobody’s talking sustainabilityBy April StreeterMany eyes internationally are on Donald Trump and the US election process. But will the eventual outcome have any effect on sustainability efforts?

For outsiders, the presidential candidate caucuses held in February in Iowa and New Hamp-shire are a strange, incomprehensible yet fascinating preview of who might be the next US president. This year’s results, in which candidates on the edges of the US political spectrum are receiving a sizeable amount of support, seem stranger and more incom-prehensible than usual.

On the Republican right, two strident, divisive candidates (Ted Cruz and Donald Trump) are battling for supremacy while a third, more establishment choice (Marco Rubio) tries hard to muscle in. The situation on the Democratic left is similar. The favourite, Hilary Clinton, has been dogged by “democratic socialist” Bernie Sanders, who managed to get as much of the vote as Clinton in Iowa and won in New Hampshire.

How would any of these candidates help or hinder sustainability efforts in the US? Trump is considered a business savant and has a laissez-faire approach to the environment. Few people in the US seem to know or care about the UK backlash against him or know of his opposition to a wind farm that spoilt the view to a golf course he built.

In the US, Trump has publicly come out against the US Environmental Protection Agency, calling it a “disgrace”; said he doesn’t believe global warming and climate change are real; and proposed a tax plan that would probably exacerbate social inequality in the country, by giving top earning individuals a tax break from 39.6% to 25% and reducing the business tax to 15%. Conversely, Trump’s plan is supposed to give the middle class relief by lowering taxes and increasing economic output, which he hopes will stimulate job creation as well as increase wages. (This is at the expense of government revenues, expected to fall significantly if he takes office.)

Cruz’s tax plan is even more radical – a 10% flat tax and, instead of a corporate income tax, a 10% value added tax (VAT) that is supposed to greatly increase business incentives to invest but is very regressive, shifting the tax burden to the middle and lower income earners and especially to seniors living on US social security. Rubio’s tax plan includes tax cuts for busi-ness and high-earning individuals, and has been estimated to offer a boost to GDP of 15% and significantly cut government income and social programmes.

Trump has a laissez-faire approach to the environment

ANDY

KATZ

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Ethical Corporation | August 2014??? Ethical Corporation | February 2016

On the democratic side, Sanders would raise taxes if he became president, and the Tax Foundation, a non-partisan research centre based in Washington, DC, expects that Sanders’ plan would raise tax revenues by $9.8tn over a decade, yet lower after-income taxes for all taxpayers and for the wealthy significantly. Since the cost of investment capital would rise, the Tax Foundation said that the US GDP would fall under Sanders.

With Clinton as president, taxes would also increase through a number of different (and complicated) mechanisms, including a higher tax on the very wealthy. Clinton’s tax plan would collect more revenues to be spent on new social programmes, and might reduce the US GDP by about 1% over the long term, according to the Tax Foundation.

Few US voters (just 6%) put climate change as their top priority in deciding on a presidential candidate, so the topic has received little attention from Republican contenders – both Cruz

and Trump deny it – and just a little more on the Democratic side. Clinton has a plan to install 500m solar panels by 2020 (a 70% increase from today’s installations) and expand renewables’ share of the energy mix to 33% by 2027. For his part, Sanders has gained endorsements from Friends of the Earth and Bill McKibben’s 350.org group, and has endorsed a carbon tax; he is also the most vocal candidate on the threats of climate change.

It’s not easy to make sense of how all these positions would affect companies’ sustainability actions, yet it is evident that the Republican

candidates are business-as-usual, and economic vibrancy is still one of the pegs that holds up sustainability’s three-legged stool. On the other hand, it seems the Republicans would drive this change at the expense of both environmental and social progress, which would probably cause the sustainability stool to topple.

Companies that are currently working on sustainability actions might enjoy their unfettered business gains yet still continue their programmes, like Castagra Products, a maker of plant-based coatings in Reno, Nevada.

“If Donald Trump became president we would pursue our CSR and sustainability goals as planned,” says Tats Nakagawa, Castagra’s marketing and strategy vice-president. “Sustaina-bility is the core of our business and outside events do not affect our mission in this area.”

And those companies that have yet to start acting in the sustainability space? If Trump or Cruz became president sustainability laggards would have little incentive to start. If Clinton or Sanders win the presidency, regulations around climate change would press many to begin to measure and mitigate at least one environmental aspect of their operations, and by paying higher taxes these companies would contribute to social equity without (hardly) trying.

Clinton plans to spend more on social programmes

EDST

OCK

EthicsWatch: US elections

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Ethical Corporation | August 2014??? Ethical Corporation | February 2016

Global markets

Forever foodBy Ellen R DelisioPutting food in the world’s mouths has always been difficult, and doing it sustainably is only going to get harder

The need to produce more food with minimal environmental impact has never been more pressing or more challenging. By 2050, the world’s

population is expected to grow to 9.1 billion, a 34% increase over the current figure. Crop yields are increasing at about 1.8% a year for grain farmers globally, but climate change is holding back that increase by about 2.5% each decade, according to a December 2015 report from the US Department of Agriculture (USDA).

The task of feeding those additional people is complicated by changing dietary patterns, water scarcity, declining soil quality, energy price fluctuation and the unpredictability of climate change. “We need an intensification of sustainability,” says Daniel Rosario, European Commission spokesperson for agriculture and rural development. “There is a danger that some farm businesses expand too rapidly and unsustainably.”

Corporations are also eyeing their supply chains in an effort to keep less sustainable foods out of their products and off store shelves. “More companies are setting goals and that is going to continue to grow,” says Suzy Friedman, agriculture sustainability director for the Environmental Defense Fund (EDF). “They are making goals as to how to reduce their footprint and make themselves more resilient to climate change. Companies that are in the food

By 2050 the world’s population is expected to grow to 9.1 billion

PRUDKOV

Food briefing

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Ethical Corporation | August 2014??? Ethical Corporation | February 2016

In 2011 Coke bought its first batch of sugar certified by Bonsucro

supply chain need farmer-facing partners able to provide sustainability advice and programming across their sourcing areas, so they are looking for those advisers farmers trust. We need agricultural retailers to develop programmes across the country that they can roll out to the food companies.”

The Coca-Cola Company is applying corporate social responsibility (CSR) practices worldwide through its Water-Energy-Food strategy, designed to produce its key inputs in a more sustainable way. “The three are closely linked, so we do a risk assessment, using water as a lens,” says Greg Koch, Coke’s senior director, global water stewardship. “Our ultimate aim is close the gap in water, food and energy security. By 2020, our goal is to sustainably source our top 13 agricultural ingredients as well as pulp and paper.” The company’s CSR approach has 15 guiding principles for sustainable agriculture.

Workplace rights has been an established programme – “the human side has been in place for 10 years,” Koch notes – and now the company has expanded into more environmental issues including resource management, crop protection, post-harvest handling, improved food safety and preparing for climate change. For each crop and each growing region there are other criteria, including external validation.

A Supplier Engagement Programme provides guidance to Coke’s suppliers on ways to achieve Sustainable Agriculture Guiding Principles (SAGP) compliance. This programme applies to all areas and includes Coke’s key product commodities and ingredients. In 2011, Coke bought its first batch of sugar certified by Bonsucro, a global non-profit, multi-stakeholder organisation that certifies sustainably grown sugarcane, and by July 2015, the company was working with 40 sugarcane mills in Brazil and Australia that are Bonsucro-certified. Through Project Unnati, the company is working with Jain Irrigation to train farmers in India to increase their yields while growing crops more sustainably.

Coke’s water replenishment programme, a key component of its CSR policies, has resulted in 94% of all water used in finished drinks being replenished

PIXE

LFUS

ION3

DWater, energy and food are closely linked

Food briefing

33

DUCK

YCAR

DS

Campbell Soup to place GMO labels on productsFollowing the announcement that it will be elim-inating artificial ingredients from its products, Campbell Soup says it will now begin placing genetically modified organisms (GMO) labels on product packaging.

While in favour of mandatory labelling, the American canned soup household brand says it will continue to oppose what it calls a “patchwork

of state-by-state labelling laws” – such as the ones proposed by individual states including Vermont, Maine and Connecticut – which Campbell believes to be incomplete, impractical and confusing for customers.

Campbell will focus its efforts on creating a single mandatory labelling standard in the form of federal legislation that would require all foods and drinks regulated by the Food and Drug Adminis-tration and the US Department of Agriculture to be clearly labelled for GMOs.

Lobbying for labels

Saving with purpose

PICK

-UPP

ATH

Ethical Corporation | August 2014???

Sustainability saves Hilton $500mSince the launch of its corporate respon-sibility strategy four years ago, Hilton Worldwide says global partnerships and sustainability programmes have helped it save more than $500m.

The hotel group’s sustainability strategy, “Travel with Purpose”, focuses on creating employment opportuni-ties and community support, as well as diminishing the use of natural resources through which most of Hilton’s savings were generated.

Since 2011, the hotel chain has invested in proprietary technology to track, analyse and improve natural resource management across its port-folio. As a result, it has reduced energy use by 14.5%, carbon output by 21%, waste by 27.6% and water use by 14%, yielding an estimated $550m of cumula-tive savings.

Efforts include upgrading energy efficiency at several UK Hilton hotels via the installation of green controls for doors, windows and heating to ensure intelligent use of energy depending on whether rooms are vacant or let.

BrandWatch

BrandWatchBy Nadine HawaGMO labelling, Hilton resource savings, data centres heat water and Congo child labour accusations

Ethical Corporation | February 2016

Ethical Corporation | August 2014???

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BrandWatch Ethical Corporation | February 2016

SCAN

RAIL

Minerals dispute

FAZO

N1

Apple, Microsoft and Samsung accused of child labourApple, Microsoft, Samsung, Sony and Vodafone are among 16 multinationals being accused of child labour linked to cobalt mining in the Democratic Republic of the Congo (DRC).

In a joint report – This is what we die for: Human rights abuses in the Demo-cratic Republic of the Congo power the

global trade in cobalt – Amnesty Inter-national and African Resources Watch (Afrewatch) trace cobalt used in lithium batteries sold to the companies to mines where artisanal miners, including thou-sands of children as young as seven, mine cobalt in life-threatening conditions.

Of the 16 companies reported as using processed cobalt from Huayou Cobalt, one admitted the connection, four were unable to specify the source of their cobalt, five denied sourcing the mineral from the firm despite being listed as customers in company documents, and two said that they did not source cobalt from DRC.

Russian internet giant using computers to heat waterRussian internet giant Yandex – which operates the largest search engine in Russia – is harnessing the heat generated from one of its data centres in southern Finland to warm water.

The heat recovery plant uses hot air generated by the servers to heat water from the residential water supply system of the town of Mäntsälä.

“We wanted to make full use of the excess ener-gies we produce in order to benefit the community,” says Ari Kurvi, data centre manager. The company says the scheme is set to halve local gas consump-tion of utility providers, reducing CO2 emissions by 40%.

Yandex also argues the method is significantly cheaper than building and operating a typical gas boiler, and predicts it will cut residents’ heating costs by 5% in the coming year as well as electricity costs at the data centre by as much as a third.

Data recovery

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Ethical Corporation | August 2014???Cheat sheet Ethical Corporation | February 2016

Corporate responsibility cheat sheet

UK ethical sales worth £38bnSales of ethical goods in the UK increased by 8% in 2014 thanks in large part to strong sales of solar panels (£716m), electric vehicles and other low-emis-sion (tax band A) cars (£7bn) and bicycles (£956m). The overall value of ethical sales amounts to £38bn,

up from £35bn the previous year, a report by Ethical Consumer and Triodos Bank finds. The definition of “ethical” is relatively broad, including charity shops, organic food and energy efficient lightbulbs. Some of the leading product areas include sustainable fish (up 12%), free range poultry sales (up 8%) and free range egg sales (up 2%). A stricter definition based on Fairtrade sales shows a different picture, with revenues dropping 4% to £1.6bn compared with the previous year – the first time Fairtrade sales have dropped since their launch two decades ago. Ethical Consumer markets report 2015

Millennials: fair-minded, but flightyMore than half of young people in developed and developing economies would rule out working for an employer because the firm’s values do not match their own. And according to a wide-ranging study by professional services firm Deloitte, 44% of young people have actually turned down a job offer because of a values misfit. The personal values of so-called millennials also impact what assignments they are willing to take on once working for a busi-ness, with almost half turning down a task that they felt uncomfortable with. An overwhelming 87% also believe that metrics for business success should include non-financial measures alongside financial performance. It’s little wonder therefore that

a substantial minority is on the look-out for “better fit” employers. More than four in 10 millennials would like to leave their current employers in the next two years. That figure increases to two-thirds when the timeframe is extended to five years. The Deloitte annual survey, now in its fifth year, is based on responses from nearly 7,700 millennials from 29 countries.Deloitte, annual millennial survey 2016

By Oliver BalchWe read all the reports so you don’t have to

44% of young peopleturned down a job because of a values misfit

Fairtrade sales revenues

dropped 4% to £1.6bn

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Ethical Corporation | August 2014???Cheat sheet Ethical Corporation | February 2016

Storming performance for Scotland’s wind sector Wind generation in Scotland increased by 16% during 2015, exceeding domestic demand in six of the year’s 12 months, the environment group WWF Scotland calculates. For the year as a whole, wind facilities generated sufficient power to meet the needs of 97% of Scottish households, equiv-alent to 2.34m homes. The total output from wind reached 10.4 million MWh of electricity for the year. In December alone, output hit 1.4 million MWh, a record for the month (and 48% above domestic demand). In a separate report by WWF Scotland, the environmental charity compares the cost of reaching Scotland’s 2030 decarbonisation target (set at 50g CO2/kWh or lower) via a renew-ables-based power generation system or through an approach based on thermal power plants with carbon capture and storage technology attached. The first option is projected to cost an estimated £663m a year, compared to £1.85bn a year for the second. The cost of a renewables-based system is broadly similar to the cost of generating the same amount of unabated gas-fired electricity, the report concludes. The latest available figures show that Scotland’s grid intensity is approximately 271gCO2/ kWh. WWF Scotland: Pathways to power

Fat Cat TuesdayDread going to work on Monday? Not if you’re chief executive of a major UK company. By Tuesday 5 January, the second day of the working year for most employees, the leaders of the FTSE 100 had already earned more than the annual average for the typical UK worker. The average UK salary in the UK is £27,645 a year (up from £27,200 in 2014), compared to £4.96m for top bosses (equivalent to £1,200 per hour). The figures are published by the High Pay Centre and are based on the Manifest MMK pay survey. High Pay Centre

Climate change to hit south-east Asia hardSouth-east Asia could lose up to 11% of gross domestic product (GDP) by 2100 due to climate change if no action is taken. The warning comes not from an environmental group, but the Asian Development Bank (ADB), a level-headed multi-lateral lender. Greenhouse gas emissions in the

region have increased by about 5% per year over the past two decades, largely driven by deforest-ation and changes in land use. Without explicit mitigation measures, the ADB estimates that the region’s emissions will jump by at least 60% by 2050 (compared with 2010), with energy sector emissions rising by six times that rate. To keep emissions at 500 parts per million would require mitigation policies that would cost in the region of 2.5%-3.5% of the region’s GDP over the 2010-2050 period. These measures, which mostly focus on cleaner energy and less carbon-intensive land use, would bring benefits to health, transport and road safety that would alone offset 40%–50% of the policy costs. Add in the climate-change losses avoided (such as from floods and harvest failures) and the benefits derived from stabilising the climate range from 5 to 11 times the net mitigation costs from 2010 to 2100 (using a 5% discount rate). That said, if the region delays to take action for 10 years, the cost of keeping within a 500ppm scenario by 2050 will increase by 60%.ADB, Southeast Asia and the economics of global climate stabilization

South-east Asia’s GHG emissions have

increased by 5% per year

Stewart WhitneyPresident

Dave StangisVice President, Public Affairs & Corporate Responsibility

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Ethical Corporation | August 2014??? Ethical Corporation | February 2016Industry benchmarking

Automotive sector

Innovate, or pull overBy Stephen Gardner and Christian BraunCar companies are at a junction, with an urgent need to address the pollution their vehicles cause, especially in cities. Some of the huge manufacturers are responding much more effectively than others

The big car companies are in an enviable position. They offer an aspirational product that almost everyone wants. Modern society is, after all, built on

the car. The industry’s success is shown by steadily rising global sales. Figures from the International Organisation of Motor Vehicle Manufacturers show that new passenger car registrations worldwide rose from about 45m in 2005 to 65m in 2014, with only a relatively small downward blip in the economic crisis years of 2008 and 2009.

In the main producing countries, car companies are leviathans with massive power on which whole ecosystems of suppliers and workers depend. Germany, for example, in the second quarter of 2015, produced almost 3m passenger cars. During the same period, 1.6m new cars were registered in Germany, giving a net export figure of 1.4 million – more than the total produc-tion of any other country apart from China, Japan, the United States, South Korea and India. The big car brands “are of national importance for economies and governments,” says Tom de Vleeschauwer, director of long term planning and sustainability at analysts IHS.

But power can of course corrupt. It can also engender complacency and resistance to change. For example, manufacturers have pushed back

Power can corrupt and engender complacency

KIVILCIM PINAR

Ethical Corporation | August 2014??? Ethical Corporation | February 2016

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The growing world population is increasingly living in cities

against tighter environmental standards. Peter Wells, a professor of business and sustainability at Cardiff University, says the car industry “remains highly conservative” and is “an incredibly powerful lobby”.

However, resisting the forces of change does not make them go away. Car manufacturers face an increasingly urgent sustainability challenge. How each company responds will define its prospects in the years ahead.

Mobility without pollutionThe main issue for the industry is that although consumers want the mobility that cars offer, cars remain highly polluting, resource-intensive and damaging to quality of life. The greater the success of the industry in selling new cars, the more pressing these problems become in terms of the overall impact from emissions, congestion, harm to ecosystems and noise.

The industry’s sustainability challenge is made more difficult because the growing world population is increasingly living in cities. The World Health Organization said in January that research showed that the “public health emergency” caused by air pollution in cities had become “dramatic”, with 3.3m premature deaths per year worldwide. Congestion and pollutants from vehicle exhausts are a major cause. “We’re getting close in some of the major cities to it becoming unsustainable,” de Vleeschauwer says.

The cheating by Germany’s Volkswagen on pollutant tests in the US has thrown the issue into sharp relief. VW was caught using a secret “defeat device” in the form of software installed in some diesel models, which detected when cars were being put through tests to establish their emissions of nitrogen

WIN

HORS

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Air pollution in cities causes millions of premature deaths

Industry benchmarking

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Ethical Corporation | August 2014Report reviewReport review Ethical Corporation | February 2016

Ikea Group 2015 sustainability report

Going all-inBy Elaine CohenThe furnishings giant demonstrates sustainability leadership

Having refurnished my office with Ikea products during the past year, I appreciate at a very personal level the Ikea message that it aims to create

a better everyday life for people. Making good-looking products accessible, affordable and easily transportable really does make life easier and greener. At the same time, Ikea is driving sustainability through its supply chain system-atically and transparently. Ikea, with 328 stores in 28 countries, 771 million store visits a year, 155,000 employees and €31.5bn in turnover, has become a leading light in sustainability. The FY2015 Sustainability Report is a testimony to that. Using Ikea’s estab-lished format, it’s clear, well-written, balanced and very interesting.

The “going all-in to tackle climate change” message from Ikea in this report does the job. This year, Ikea has decided to commit big across a range of environmental impacts. Whether this means pledging €1bn in funds to mitigate climate change, promising 100% renewable energy by 2020, achieving a fourfold increase in sustainably manufactured products by 2020, completing the switch of Ikea’s entire lighting range to LED lighting, committing to 100% sustainable cotton sourcing by 2015, with similar commitments for palm oil, wood, seafood and leather, or recycling 90% of waste, there is a step-change in Ikea’s approach.

At the same time, Ikea’s commitment on climate change focuses on a small part of the supply chain impact. Ikea’s direct Scope 1 and 2 emissions (730,000 tonnes of CO2e) are a mere 2% of Ikea’s total all-scopes emissions (38m tonnes CO2e). Scope 3 emissions increased by 5m tonnes in 2015, dwarfing consistent emissions reductions since 2010 normalised by products sold. Despite the massive complexity in this global supply chain, and Ikea’s life-cycle assessment of emissions to focus performance improvement activ-ities, even if Ikea achieves 100% renewable energy in its direct operations as committed, this barely dents the level of Scope 3 emissions reported by the Group. The real opportunity for Ikea to mitigate climate change is Scope 3. While Ikea acknowledges the challenges in this area and describes progress made and planned, tangible commitments of Ikea’s People and Planet Posi-tive strategy sidestep this significant area of impact.

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Ethical Corporation | August 2014???Report review Ethical Corporation | February 2016

Elaine Cohen is a sustainability consultant and reporter at Beyond Business and CSR blogger

Stakeholder voicesA great feature of Ikea’s report is the inclusion of external stakeholder perspec-tives, which put a range of “challenges” to the Ikea team, including decoupling growth from environmental impact, discouraging a throwaway culture and combating child labour deep in the supply chain. Senior Ikea voices respond to these challenges, offering the reader a focused perspec-tive on sustainability dilemmas and demonstrating that Ikea is connected to the burning issues of sustainable business.

On the other hand, the “Why do you work at Ikea?” piece is a little forced. Eight carefully selected “diverse” employees each offers one insight about working at Ikea. It’s nice to see their faces, and hear that they appreciate diversity, opportunity and positive culture. I did wonder, however, if these are all full-time employees. Ikea’s 155,000 workforce includes of 53% part-time employees of whom 36% work less than 34 hours per week, 17% less than 20 hours. Not much is said about the reason for this high level of part-time working (voluntary or obligatory?) or the difference in benefits across these groups. For example, Ikea provides recognition and tangible additional benefits for employees through the One Ikea Bonus programme and loyalty programme – but benefits appear to be for full-time employees only. On the other hand, in a section on “the right to decent work”, Ikea acknowledges the need for consistent standards on minimum hours of work for part-time workers and describes plans to develop these.

Looking to 2030Ikea is an early adopter of the UN Sustainable Development Goals framework and includes an index of its sustainability activities aligned with the 17 goals, hyperlinked to the relevant sections in the report. This is another example of how Ikea has enhanced its global sustainability leadership – quietly moving from an underdog positioning of cheap, consumerist and low-quality to positive and purposeful impact. Ikea’s report does not apply Global Reporting Initiative (GRI) guidelines but uses them to “inform our reporting”, preferring to stay with Ikea’s own strategy and KPI framework while demonstrating consistency in practice against multi-year targets alongside participation in industry initiatives to improve sustainable practice.

Alongside this, while we could always demand more, Ikea is demonstrably leveraging its scale and reach to change consumer behaviour and awareness around sustainability through its core offerings and commitment to transpar-ency, as well as driving its suppliers and suppliers’ suppliers to comply with sustainable standards. n

Snapshot:Follows GRI? NoAssured? NoMateriality analysis? NoGoals? YesTargets? YesStakeholder input? YesSeeks feedback? NoKey strengths? Balanced reporting, includes challenges and missed targetsChief weakness? None worth mentioningPleasant surprise? Sustainable Development Goals Index

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& NE

TWOR

KING