THE LIFEWORTH REVIEW OF 2008

Looking East

May 12, 2009 by  
Filed under Fourth Quarter

Dr Jem Bendell
Adjunct Associate Professor, Griffith Business School, Australia
Chew Ng
Professor of Accounting, Griffith Business School, Australia
Niaz Alam
Board Member, London Pensions Fund Authority/Senior Associate, Lifeworth

As 2008 drew to a close, some of the long-term implications of the financial crisis were beginning to be seen. The shift of economic power from the West to ‘the rest’, which had been chronicled or predicted for some time, appeared now to be inevitable, as Western governments took on huge debts to bail out their struggling banks and companies, and stimulate their economies with public spending. This has implications for the future terrain of corporate social responsibility (CSR) issues, concepts and practice. In this review of the final quarter of 2008, we examine some of dimensions to the underlying shifts in economic power and their implications for corporate citizenship. These shifts include the growing importance of Islamic finance and of state-owned funds as investors and owners of companies worldwide, and the increasing initiatives on corporate responsibility across Asia.

» Islamic finance

(The references are available in the pdf download and hard copy versions of this annual review, available from Lifeworth’s bookstore.)

This section can be referenced as:

Bendell, J., and N. Alam, S. Lin, C. Ng, L. Rimando, C. Veuthey, B. Wettstein (2009) The Eastern Turn in Responsible Enterprise: A Yearly Review of Corporate Responsibility from Lifeworth, Lifeworth: Manila, Philippines. (Page numbers for this section are available in the pdf download and hardcopy.)

From CSR in Asia to Asian CSR

May 9, 2009 by  
Filed under Fourth Quarter

The shift in power from the West to the ‘rest’ indicates a growing role for Asian enterprise, not only within Asia itself but also in the rest of the world. Consequently, the evolution of corporate responsibility concepts, policies, practices and initiatives across the region is important worldwide. In the last quarter of 2008 a flurry of conferences confirmed the growth of corporate responsibility as a topic of business interest in the region. Despite the economic downturn, Singapore hosted a number of these events, beginning in October 2008 with the Asia Pacific Academy of Business in Society (APABIS)30 gathering academics and business people to develop this emerging network. The following month delegates amassed at the Asian Forum on CSR,31 which focused on giving executives a platform to promote their corporate responsibility programmes, and then at the Global Social Innovators Forum,32 which celebrated individuals who are innovating new approaches in both business and charity, to address public challenges.

CSR Asia Executive Director Erin Lyon: ‘companies listed in Hong Kong demonstrate a superior quality of CSR disclosure’

CSR Asia Executive Director Erin Lyon: ‘companies listed in Hong Kong demonstrate a superior quality of CSR disclosure’

The most content-driven event of the conferencing season was the CSR Asia Summit33 in Bangkok, which brought together innovative practitioners from different sectors, chosen by the leading specialist consultants on corporate responsibility in the region, CSR Asia. The very growth of this organisation, now with dozens of staff in five offices, is an indicator of the development of the responsible business agenda. At the summit, Leontien Plugge of the Global Reporting Initiative highlighted that Asia is now the second largest reporting region, although this is mainly due to the high rate of sustainability reporting in Japan. As some Asian governments and stock exchanges had announced during 2008 that they will introduce requirements to report on CSR and sustainability, other countries’ reporting rates are set to increase.34 To gauge the general level of CSR disclosure at present, the ‘CSR Asia Business Barometer 2008’ was launched at the event. This report compares the CSR disclosure of the 20 largest listed companies in Hong Kong, Malaysia, Singapore and Thailand. Commenting on the results, CSR Asia’s Executive Director Erin Lyon said that ‘companies listed in Hong Kong demonstrate a superior quality of CSR disclosure’ although ‘the majority of companies listed in each of the countries have significant room for improved disclosure’. CLP (China Light & Power) came top of their ranking. A potential concern for the United Nations’ efforts in this field emerged from the study, as Ms Lyon noted that Global Compact membership had no measurable impact whatsoever on the level of disclosure of companies in the region.35

Kasit Piromya: a parallel between Buddhist philosophy and CSR

Kasit Piromya: a parallel between Buddhist philosophy and CSR

The discussions at these conferences give some insight into the emerging dimensions of Asian CSR, as a global phenomenon, rather than just CSR in Asia. First, the philosophical bases for corporate responsibility are being discussed. Kasit Piromya, the Director of International Affairs of the Democrat Party of Thailand, and the Thailand representative of the Caux Round Table, spoke at the CSR Asia Summit about a parallel between Buddhist philosophy and CSR, owing to the emphasis on stakeholder interdependence:

Buddhist monks live according to the principle of interconnectivity with the community and the environment; they are one with their stakeholders. Similarly, every individual belongs to an organization, and ultimately to society. So every individual, while working to earn a living and enjoy the rewards, is inter-dependent on the business community and society as a whole. Along with its stakeholders business is a part of a whole and thus the need for social responsibility and good governance. In particular, large multinational corporations have a global responsibility, and not only to their financial stakeholders.36

As Buddhism is one of the many spiritual traditions in the region, there is much to be drawn on in elaborating on concepts and motives for Asian CSR.

The second dimension to the evolution of an Asian CSR is the innovation that is occurring in CSR from within the region that may have a global impact. The conference in Bangkok hosted a workshop exploring a new initiative in reporting—imPACT. This approach brings together dynamic stakeholder engagement with a new approach to communication. Developed jointly by Edelman and CSR Asia, the imPACT philosophy is based on the understanding that many companies face critical societal challenges that they can play a role in addressing through outcome-oriented partnerships. Thus, CSR actions can be mobilised around issues such as climate change, water, human rights, poverty alleviation or health, so that companies become partners in addressing public need, rather than making minor improvements on a diverse set of issues aimed to benefit corporate reputation. Emphasis is placed on shared responsibility and joint accountability with the other organisations and sectors with which a company engages.37

A third dimension to the evolution of Asian CSR is the growing recognition within individual Asian countries of having the potential to play a global role. This was highlighted by the awards given out at the Global Social Innovators Forum (GSIF). The event was hosted by the Singapore-based Social Innovation Park (SIP), and focused on celebrating global leaders in social enterprise. Founder and President of SIP Penny Low said that

SIP Fellow Awards recognize outstanding and high achieving individuals who are creating systemic change in the community that they live and work in. Role models in their own fields, these individuals are action leaders, who are shaping the future in their own way and by doing what they do best. They are the future world leaders of the globe.38

The Distinguished Fellow Award went to Jet Li, the Chinese actor, for his fundraising activities during 2008. One of the Fellow Awards went to Amit Wanchoo, Managing Director of Eaton Laboratories, for his work with the poor in Kashmir. In his acceptance speech Dr Wanchoo explained that ‘in economically challenging times like these, social innovation remains more pertinent and relevant than ever’. He explained that ‘social entrepreneurship brings together everyone’s strengths to create the greatest social impact possible. I believe that collaborative innovations can help in sowing the seeds of positive change in this world for the well being of the whole humanity. We collaborate not as different sectors but as one people with one dream of a better world.’39 In discussions with the lead author of this Review, Penny Low recognised the significance of this growing international outlook: ‘The SIP Fellow Award and the SIP Distinguished Fellow Award are the first Singapore-originated awards given to international recipients who excel in the field of social innovation.’

Although there is great potential for diverse approaches to emerge and impact on the global experience of corporate responsibility, the development of CSR in Asia also poses a number of unique challenges. Currently, many Asian companies’ voluntary engagement with the social and environmental performance of their business has been very influenced by the West. Therefore, at the conferences chronicled above, senior managers and government officials expressed the view that the main motivation for improved corporate responsibility is to achieve better relations with CSR-sensitive export markets. This approach can downplay or even ignore local stakeholder interests in the role and performance of business. The assumption is made that local stakeholder interests in business performance can be articulated through government, and, where that is not the case, that those stakeholder interests are not particularly valid. This view is a result of the dominant role of the state in many Asian countries and the variable, often weak, levels of civil society organising, media independence and political debate. This state of affairs may hamper the emergence of domestic CSR agendas in Asia.

Such an emergence may also be hampered by the imbalance in domestic voices involved in shaping the future of CSR. The evidence from these conferences is that the corporate responsibility debate in Asia is being influenced not by those who are directly impacted within the region, but by business leaders, government officials and high-society elites. This may be why, even now, CSR is most often construed by Asian business leaders as corporate philanthropy. This is highlighted by the fact that all of the 2008 Asian CSR awards went to philanthropic projects, bar the workplace award for Microsoft Philippines (a company that was not facing difficult workplace issues, does not have a trade union nor a systematic approach to checking what international labour standards apply to its operations). Further illustrating an emphasis on philanthropy rather than economic justice, at the GSIF most of the examples of ‘social enterprise’ were actually charitable activities involving some trading, such as the sale of charity-branded goods. The discussion of actions transforming core business practices on issues that have involved significant conflicts with affected stakeholders were conspicuous by their absence.

Although there are signs that at both conceptual and practical levels we are seeing the emergence of Asian CSR rather than simply more CSR in Asia, currently the majority of activities carrying the CSR tag are a mix of Western imposition and preening by local elites. If this subjugated dimension to CSR in Asia dominates practice, rather than a more organic emergence of ideas and innovations from dialogues and contestations of peoples from across the region, the loss will be both Asia’s and the world’s. One implication, therefore, is the need for greater awareness of the levels and nature of endogenous desire across Asia for socially progressive enterprise, and the relative roles of government, business and wider civil society in shaping and responding to that desire.

» Authors

(The references are available in the pdf download and hard copy versions of this annual review, available from Lifeworth’s bookstore.)

This section can be referenced as:

Bendell, J., and N. Alam, S. Lin, C. Ng, L. Rimando, C. Veuthey, B. Wettstein (2009) The Eastern Turn in Responsible Enterprise: A Yearly Review of Corporate Responsibility from Lifeworth, Lifeworth: Manila, Philippines. (Page numbers for this section are available in the pdf download and hardcopy.)

Beyond the Western financial crisis

May 9, 2009 by  
Filed under Third Quarter

‘The credit crunch is creating a new world order in banking and finance . . . It’s a world in which the Chinese state, if it co-ordinated the investments of its cash-rich institutions, could end up owning more-or-less the entire financial system of the US and the UK.’ That was the view of BBC business editor Robert Peston.44 Although the financial crisis seemed global, the origins began in the highly leveraged West, and posed a greater long-term threat to the economic systems of post-industrial economies than to rapidly industrialising ones. Looking forward on how this period of history—what we now refer to as ‘the credit crunch’—will be appraised, the term ‘Western Financial Crisis’ might be a strong candidate. If a New Financial Order is emerging, it is clear that China will play a significant role in how it is formed.

Mark Leonard: China is emerging as an intellectual power.

Mark Leonard: China is emerging as an intellectual power.

Mark Leonard of the European Council for Foreign Relations said, ‘it’s not just economic and military power that’s shifting from west to east. China is emerging as an intellectual power. It’s coming up with its own ideas, which are very influential, which other people are copying.’ He explained that ‘the debate we’re having about managing China’s rise has got a mirror image in China, where they’re having an argument about how to manage the west’s decline. In the US, they’re talking about what mix to have of containment and engagement, to try to get the China that they want. But what’s interesting is that the Chinese are thinking about how they can shape an America that is organised in a way that benefits their interests.’45

Some worry about the growing role of China on the world stage; others welcome it. As expected, the focus of the world’s attention on the Summer Olympic Games in Beijing led to widespread coverage of China’s poor human rights record and its occupation of Tibet, and PetroChina’s oil investments in Sudan, which human rights campaigners have long argued is complicit with genocide occurring in the Darfur region.46

With calls for Olympic boycotts made by some campaigners falling on deaf ears, the London Times (which is owned by News International, a company with significant investments in China) collected together a series of articles on its website examining some weaknesses in anti-China arguments. One Times commentator noted that ‘The lowlife double standards that informed Western views of the vicious Easterner 60 years ago are being rehabilitated in the modern era by human rights activists, who are calling on Western democracies to put pressure on China over its occupation of Tibet and its human rights abuses.’ The logic of this argument about racially motivated fears was somewhat confused when the author added ‘the West has no moral authority to lecture anyone, including China, about rights and democracy. Here in Britain, free speech has been curbed through the creation of new thought crimes (see the Racial and Religious Hatred Act).’47

A more compelling pro-China argument rests on indications that some African nations are increasingly welcoming and voluntarily preferring Chinese state-led investment projects over Western private investment. South African-based commentator Janine Erasmus reported in September 2008 that ‘China has become Africa’s third-largest trade partner, after the US and former colonial power France. According to a report by China’s General Administration of Customs, bilateral trade between China and Africa will exceed R803 billion ($100 billion) in 2008, two years earlier than predicted.48

‘The trend is attributed to escalating shipments of natural resources to China, especially crude oil, mainly from Sudan, Chad, Nigeria, the Republic of Congo and Angola, metals from Ghana, Gabon, the Democratic Republic of Congo, Zambia, and South Africa, as well as cobalt and other minerals. At the same time, goods manufactured in China are increasingly sought after by African consumers. During the first half of 2008, exports to China from Africa rose 92 percent to R240 billion ($30 billion), while the continent imported goods to the value of R184 billion ($23 billion), an increase of 40 percent according to the Chinese customs authority.’

One key advantage for China in what is often viewed as a ‘new scramble for Africa’ has been the ability of its state-controlled banks to finance infrastructure investment as part of its trading arrangements. In the Democratic Republic of Congo, China ‘is estimated to have pumped in $9 million for developing the mines and building roads and hospitals. In exchange it will be allowed to mine in the mineral rich Congo for 22 years. Despite heavy criticism from opposition parties the government has continued to defend the deal. It has described it as the “Marshall plan” it needed, to rebuild the country and ensure it reaches double digit growth levels.’49

When the mines reach full production capacity, China will be extracting 4,000 tons of copper from six mines. Deputy Minister of Mines Victor Kasongo told South African television that ‘It was important for Congo to have infrastructure to sustain. It is not by Congo’s fault [that] others couldn’t give us the money or access the market. So we had to take our own responsibility to bring growth forward. The China deal came to replace the promise we had with western countries.’50

According to the contract, China is expected to build close to 4,000 km of road connecting the country’s major economic hubs, 26 hospitals and improve 250 km of road in Kinshasa alone. Opposition members have criticised the deal, arguing that it favours Chinese firms who receive much of the building work. With China, Brazil and India tying up infrastructure or loan deals in several African countries, often in return for oil, metals and other commodity resources, concerns have been raised among traditional lenders such as the International Monetary Fund (IMF) and World Bank.

Dominique Strauss-Kahn: this new financial help must not destroy the original Bretton Woods policies

Dominique Strauss-Kahn: this new financial help must not destroy the original Bretton Woods policies

In response to these concerns African members of the IMF meeting in August 2008 in Mauritania issued a declaration pledging ‘greater transparency in their dealings with China and other so-called non-traditional sources of finance’.51 IMF Managing Director Dominique Strauss-Kahn told Reuters in August 2008 that ‘It is good news that there are new sources of financing, but we have to be very careful in order that this new financial help does not destroy the original policies of the Bretton Woods institutions’.52 A report released in July 2008 by the World Bank53 states that China, together with India and several Gulf nations, is financing a number of large infrastructure projects, such as hydropower schemes and transport schemes, across sub-Saharan Africa which may have positive impacts in the drive to reduce poverty. World Bank vice president for Africa Obiageli Katryn Ezekwesili has remarked, ‘China’s growing infrastructure commitments in Africa are helping to address the huge infrastructure deficit of the continent.’54

In an era of globalisation, it is natural that Western firms will face increasing competition around the world. What was perhaps unforeseen by Western policy-makers was the scale of the impact of state support for Chinese investment. Rosalind McLymont writing in the New Jersey-based Shipping Digest55 reports that ‘China’s two-way trade with Africa surged past $70 billion in 2007, compared with less than $1 billion in 1980, while US trade with Africa grew to about $85 billion from about $23 billion in the same period . . . Between 1998 and 2006, Africa’s exports to China increased 2,126 percent against 402 percent in exports to the United States. To facilitate those exports, Beijing set up most-preferential-treatment agreements with 20 African countries, including tariff-free treatment on 454 products imported from the least developed nations.’ She also noted that ‘With $1.7 trillion in cash reserves, compared to the United States’ $62 billion, Beijing has much more leverage for deals in Africa than Washington does.’

The scale of growing South–South cooperation and investment led by China represents a new challenge to traditional Western-led North–South investment. While some Western companies have responded to the corporate responsibility agenda by building infrastructure and increasing the transparency of their dealings with developing-country governments (for instance, BP in Angola), the willingness of private international capital to take long-term risks is more constrained than recent state-facilitated Chinese arrangements in Africa. One consequence is that, while Western hydrocarbon companies may have led the oil boom in African nations, as the centre of global economic power shifts ‘eastwards and southwards’ contracts for infrastructure and future development are increasingly going to Southern-based companies, with China, Brazil and India posing a growing challenge to Western dominance in world trade. Along with that will be a reduction in Western influence on the corporate responsibility agenda, as new challenges, views and initiatives emerge among a more diverse field of business activity.

» Rainbows in the storm

(The references are available in the pdf download and hard copy versions of this annual review, available from Lifeworth’s bookstore.)

This section can be referenced as:

Bendell, J., and N. Alam, S. Lin, C. Ng, L. Rimando, C. Veuthey, B. Wettstein (2009) The Eastern Turn in Responsible Enterprise: A Yearly Review of Corporate Responsibility from Lifeworth, Lifeworth: Manila, Philippines. (Page numbers for this section are available in the pdf download and hardcopy.)

Targeting change

May 9, 2009 by  
Filed under First Quarter

In previous years a comprehensive corporate responsibility strategy has typically involved a commitment to continuous improvement, to being near the best in class, and engaging stakeholders. In February 2008, the latest analysis of trends in corporate responsibility from Lifeworth argued this consensus was shifting, as the scale and urgency of social and environmental challenges became more widely understood, along with the risks and opportunities to business. The review chronicled a wave of announcements of specific time-bound environmental targets from companies, concerning actual performance, rather than management processes.29

In just the first month of 2008 dozens more targets were set by companies. For instance, Heinz pledged to provide free micronutrient assistance to 10 million children at risk of iron-deficiency anaemia by 2010; Coca-Cola Hellenic Bottling Company announced plans to reduce CO2 emissions from production by more than 20% by the end of 2009; HP announced a target to reduce PC energy usage by 25% by 2010; and the law firm Freshfields Bruckhaus Deringer planned to increase its pro bono activities by 30% by 2009. Perhaps winning the prize for the most ear-catching target, Renault-Nissan announced plans to sell entirely electric cars in Israel by 2011.

David Grayson: shift to performance targets reflects the urgency of global challenges

David Grayson: shift to performance targets reflects the urgency of global challenges

This shift to performance targets reflects ‘the urgency of the global challenges we now face, such as on water, food, poverty’, argued Professor David Grayson of the Doughty Centre at Cranfield University. That urgency ‘makes the search for better models of sustainable development ever more critical’.30 The Lifeworth review predicted that this focus on the pace of innovation and entrepreneurial activity to addressing societal challenges would lead to a shift in language about ‘corporate social responsibility’, with terms such as ‘sustainable’, ‘social enterprise’ and ‘responsible enterprise’ becoming more common.

We should, however, remember that targets themselves are not the mechanisms of change. It appears that many countries will miss their Kyoto targets, and the first Millennium Development Goals on primary school education have already been missed. In addition, studies have long shown that focusing on meeting targets can have unintended consequences and undermine true progress. The solution may be for wider coalitions of groups to apply themselves to the factors that shape our economy: to explore ways of collaborating to shift whole markets.

» Drinking problem

(The references are available in the pdf download and hard copy versions of this annual review, available from Lifeworth’s bookstore.)

This section can be referenced as:

Bendell, J., and N. Alam, S. Lin, C. Ng, L. Rimando, C. Veuthey, B. Wettstein (2009) The Eastern Turn in Responsible Enterprise: A Yearly Review of Corporate Responsibility from Lifeworth, Lifeworth: Manila, Philippines.
(Page numbers for this section are available in the pdf download and hardcopy.)