Who said what in February 2009

"I can assure you that this matter, including your letters, the communications of the Global Compact Office and this letter, will be fully discussed at the next board meeting of the Global Compact. We will also review the processes described in the integrity measures to see whether greater clarity is needed." - Sir Mark Moody-Stuart, vice chair of the Global Compact Board, in a letter to a group of civil society organizations that submitted a complaint against PetroChina under the Global Compact’s Integrity Measures.

"The Compact has become a tool that institutionalizes CSR mechanisms. It proposes the concept of CSR – originated in North American and European business schools and think tanks – to evade control by the public sector and organized civil society." - Albert Sales i Campos, lecturer at Universitat Pompeu Fabra in Barcelona, in an article about Mr. Ban Ki-moon’s call for a Global Compact 2.0.

"The present functioning is steeped in irregularities and illegalities and against all provisions of the Memorandum of Association & Rules and Regulations." - Suresh Pramar, joint secretary of the Global Compact Society India, in a letter of complaint to the president of this local network of the Global Compact.

"The CEO Water Mandate put forth by the United Nations Global Compact has come under fire […]. Its goal is to ‘assist companies in the development, implementation and disclosure of water sustainability policies and practices,’ but the approach has been protested by 125 organizations, including Sierra Club and Polaris Institute. These organizations contend that the CEO Water Mandate, which is only open to corporate endorsers of the United Nations Global Compact, allows companies with questionable environmental records to gain greater control over water while requiring only voluntary commitments to conservation." - Christina L. Madden, in an article about water management.

© Photo by Ana Cotta.

US pension giant TIAA-CREF attacked over Sudan engagement

By Hugh Wheelan.

Fund says engagement is working and that it is passionate about change in Darfur.

TIAA-CREF, the giant $400bn (€314bn) US pension plan and investment fund group for US teachers and researchers, has come under fire from NGOs who accuse it of increasing its controversial equity holding in PetroChina while simultaneously lobbying the company to use its influence to challenge the Sudanese government over allegations of genocide in Darfur. Investors Against Genocide, which has been involved in similar campaigns against Fidelity, the US mutual fund manager, said TIAA-CREF had spent years in dialogue with PetroChina, which it said was "the worst company" for links to the Sudanese government, with no results to show – yet had recently increased its stake. The NGO said it believed TIAA-CREF should have a policy of engagement based on “escalation” to financial action such as divestment if the lobbying is not working.

PetroChina's signatory status to the UN Global Compact human and labour rights standards is a subject of controversy amongst campaigners who allege that CNPC, PetroChina's parent company, is a major financer of the Sudanese government. Other large pension funds have set limits on the time they will engage for change with PetroChina. Last year, PGGM, the €88bn ($127bn) Dutch pension investment giant, sold $37m of PetroChina shares after its own lobbying campaign failed to produce results. At the time, PGGM said: "CNPC has not taken adequate steps to avoid involvement in these human rights violations or to contribute to resolving human rights issues in that country."

TIAA-CREF owns approximately $18.5m of PetroChina shares. A spokeswoman for TIAA-CREF, one of the most active responsible investors in the US, said: "TIAA-CREF is very passionate about the issues in the Sudan and if the objective is either to divest or to make a difference we have chosen the latter. Our pressuring of these companies occurs regardless of our holdings. While our ownership of shares in the target companies fluctuates over time and may continue to do so, they comprise a very small percentage of our overall investment portfolios."

TIAA-CREF said it also engages with other European and Asian multinational companies with activities in Sudan, including Lundin Petroleum, Oil & Natural Gas Company, PETRONAS, and Sinopec. It said individuals wanting to avoid investing in these companies could do so by investing in the screened CREF Social Choice Account or Social Choice Equity Mutual Fund. The company runs dedicated socially responsible investment across three core parts of its structure: the $9.19bn CREF Social choice account, a defined contribution fund available only to traditional member institutions in the higher-education, medical and social fields, the CREF Social Choice fund, a $500m US mutual fund, and allocations made out of its sizeable in-house insurance assets.

Since 2003, more than 200,000 people are estimated to have died as a result of the conflict in the Darfur region of Sudan where the government is accused of using militia death squads against its non-Arab population.

Source: Responsible Investor (26/2/2009) / © Photo by onthedecline.

Whistleblower blasts Indian Global Compact Society

On January 20, 2009, Suresh Pramar submitted a letter of complaint to the president of the Global Compact Society, the local network of the Global Compact in India. In the letter, Mr. Pramar alleges that the functioning of this organization is “steeped in irregularities and illegalities”. Interestingly, Mr. Pramar is a joint secretary of the society he criticizes. His organization, the Global Gandhian Trusteeship & Corporate Responsibility Foundation, is a participant in the Global Compact. In August 2008, Mr. Pramar first called on the Global Compact Society to "reinvent itself".

According to Mr. Pramar, the Global Compact Society does not abide by its own rules. He points to irregularities in the elections of office bearers and members of the Governing Council, as well as abuse of power by Dr. Uddesh Kohli, the coordinator of the "Focal Point" for the Global Compact in India. Mr. Kohli is also a senior adviser to the Global Compact Office in New York.

Mr. Pramar alleges that Mr. Kohli is "the only person who has benefited from the [Global Compact] Society" and that he disregards the rules and regulations of the initiative. Moreover, Mr. Pramar states that the Society has not fulfilled any of its declared objectives and that it has failed to promote the ideals of the Compact even among those who have adhered to the ten principles of the Compact. Currently there are 180 Global Compact participants from India, but only 52 of those are members of the Global Compact Society. Recently, companies such as Punjab National Bank and Shell India have officially communicated that they do not want to continue being members.

In his letter of complaint, Mr. Pramar asks the president of the Global Compact Society to implement the recommendations from a research report published in 2007 by the German Development Institute (DIE). One of the key recommendations in this report was that the Global Compact Society should open its doors to a variety of stakeholders, including labor organizations and other civil society organizations involved in the CSR agenda.

The full letter is available here.

© Photo by dharmesh.

Managing water well

By Christina L. Madden.

Conflicts in northeast Kenya have been intensifying as drought worsens an already growing problem over access to water and land for pasture. In Pakistan, wheat production is expected to decrease by 40 percent this year due to water scarcity.

Is this evidence of society approaching what the World Economic Forum refers to as water bankruptcy? According to a recently released report by the WEF Water Initiative, under-pricing and inefficiencies in the regulation of water have led to unsustainable "regional water bubbles," which are already beginning to burst in Asia, the Middle East, and parts of the United States.

More than 1 billion people currently lack access to clean water, and that number is predicted to double by mid-century, according to Professor Wong Poh Poh of the National University of Singapore. Less than one percent of the earth's water is available for human consumption, a situation exacerbated by population growth, industrialization, climate change, and poor resource management.

The Pitfalls of Privatization

The WEF report predicts that a number of public-private partnerships will be formed to change the ways in which urban water supplies are managed and financed. However, the private sector role in water provision has been a subject of intense debate for decades.

The CEO Water Mandate put forth by the United Nations Global Compact has come under fire for this very reason. Its goal is to "assist companies in the development, implementation and disclosure of water sustainability policies and practices," but the approach has been protested by 125 organizations, including Sierra Club and Polaris Institute. These organizations contend that the CEO Water Mandate, which is only open to corporate endorsers of the United Nations Global Compact, allows companies with questionable environmental records to gain greater control over water while requiring only voluntary commitments to conservation.

While some argue that private investment helps make the water industry more efficient by introducing new sources of financing, technology, and expertise, others maintain that water is a universal human right and therefore should remain in public control. Currently, more than 90 percent of the world's water supply is publicly owned and operated.

Residents of urban slums rarely have any access to publicly allocated water. Instead they rely on vendors who charge on average 12 times more than the cost of water from municipal pipelines. In some cases, the rates can reach as much as 100 times the price of piped supplies, and water bought from vendors often has to be boiled before it is safe to use, further increasing the cost.

In the 1990s, multilateral institutions such as the World Bank and the International Monetary Fund began conditioning loans on the requirement that countries privatize their water services. Private sector involvement can range from full corporate control of assets and operations to public-private partnerships where governments retain the ability to establish rates.

Over the past two decades, water privatization initiatives have helped millions of people in developing countries obtain access to clean and safe water. But in order to recover costs, companies have generally had to implement rate hikes for those already connected to main water supplies.

Water privatization in South Africa resulted in rate increases of up to 600 percent for some households. According to the Municipal Services Project, 10 million South Africans had their water cut off between 1994 and 2002, and 2 million people were evicted from their homes for not paying utility bills. After turning to polluted rivers for water, more than 120,000 people in the KwaZulu-Natal region were infected with cholera and hundreds died.

The water industry generally produces low rates of return on investment, and risks are even greater in developing countries. Suez subsidiaries eventually pulled out of their contracts in Argentina and the Philippines after going into debt partly due to extreme devaluations of the local currencies. Violent protests in Cochabamba, Bolivia, caused by sudden and severe rate hikes drove the Aguas del Tunari consortium to terminate its contract just months after it took control of the city's water supply system.

Water companies are pulling out of more and more poor countries, and a number of governments at local, regional, and national levels are remunicipalizing water services in the wake of failed privatization attempts. New laws in Uruguay and the Netherlands go so far as to make private sector involvement in the water industry illegal.

Some argue that instead of rejecting private sector involvement entirely, it should be better managed. The water industry has been urged to adapt more competitive bidding procedures, greater reliance on local investors, stronger regulatory provisions, and transparent contract negotiations that include consultations with local residents and nongovernmental organizations. It's also been suggested that when sliding-scale pricing schemes are impractical, governments or lending institutions should be expected to subsidize rates.

New Water Metrics

A number of innovative initiatives have emerged to help individuals, companies, and governments conceptualize and measure water usage.

Mike Tuffrey, director of the UK consultancy Corporate Citizenship, has recommended that companies prioritize lower water use over cutting carbon emissions. He also predicts that "water footprinting" will soon be expected of corporations. The Australian government has already implemented a water efficiency labeling scheme to help the country's consumers reduce water consumption.

The concept of "virtual water" has also been introduced to consider the amount of water that goes into producing tradable goods. For instance, an apple requires 70 liters of water, while a cotton t-shirt needs 2,700 liters. One kilogram of beef can require up to 15,500 liters of water. Virtual water can be used to help water-scarce regions import water-intensive products from places with easier access to water and more efficient production methods.

Beyond improvements in efficiency and allocation, some companies and regions are pursuing technical solutions such as converting seawater and sewage into purified water. Orange County, California's Groundwater Replenishment System unveiled one of the first and largest "toilet-to-tap" systems in the country early last year. Concerns have been raised, however, over the amount of energy these processes consume.

As water scarcity is fast becoming everyone's problem, it will take all parties to the debate working creatively to come up with solutions. The economic stimulus bill signed this week by President Obama includes billions for water projects in the United States. But when compared to the global water problem, some are left wondering whether this is a drop in the bucket, or whether the glass is half full.

Source: Policy Innovations (19/2/2009) / © Photo by Milica.

Global Compact Board agrees to discuss complaint against PetroChina

Yesterday, a group of civil society organizations that had submitted a complaint against PetroChina received a letter from Sir Mark Moody-Stuart, vice chair of the Global Compact Board. In the letter, Mr. Moody-Stuart says that the Board will discuss the matter "fully" at its next meeting and that it will "review the processes described" in the Compact’s Integrity Measures.

Following the refusal by the Global Compact Office to accept and act upon the allegations against PetroChina, a participant in the Compact, the complainants decided to write a letter to all the members of the Board, asking them to reconsider the ill-advised initial response. This approach seems to have had a positive impact.

This is one of the most relevant passages of Mr. Moody-Stuart's letter:

"I have followed this issue with great interest and been involved in many discussions on the subject. I can assure you that this matter, including your letters, the communications of the Global Compact Office and this letter, will be fully discussed at the next board meeting of the Global Compact. We will also review the processes described in the integrity measures to see whether greater clarity is needed. In recognition of what we can and cannot achieve, we have placed much emphasis on our Communication on Progress policy, which is our most robust integrity measure. It affords a way to increase transparency around participants' efforts to implement the United Nations Global Compact principles and it also provides a basis on which dialogue with other stakeholders can take place, taking into account all of a company's activities. In line with the Communication on Progress policy we have delisted over 900 companies to date out of some 6,000 originally registered worldwide, so there are now some 5,000 business participants."

According to the Global Compact website, the next meeting of the Board is scheduled to take place in the second quarter of 2009. Due to the urgency of this and other issues, it may be better to change the schedule and convene a meeting in the first half of this year.

© Photo by Mark Garten.

Global Compact 2.0: multinationals to the rescue!

By Albert Sales i Campos*, translation by Tamara Slowik.

We are saved! In Davos, the heads of the developed world have designed the new strategies to confront the crisis and achieve that this zero-sum game that capitalism is alleged to be continues benefiting humanity and, of course, multinational companies. Heading this avantgarde of messiahs, Ban Ki-moon (Secretary-General of the United Nations) proposes to initiate a new phase of the Global Compact that channels "a new constellation of international cooperation — governments, civil society and the private sector, working together for a collective global good."

During the World Economic Forum’s Annual Meeting in 1999, Kofi Annan launched the Global Compact as a response to multinational companies' willingness to demonstrate their commitment to the values embodied by the United Nations and to become an agent of international development. Since then, companies of all sectors and sizes have adhered to this commitment. They have accepted its principles and account for their progress in the field of corporate social responsibility (CSR) in large, onanistic events sponsored by the most distinguished partners of the Global Compact.

The Compact has become a tool that institutionalizes CSR mechanisms. It proposes the concept of CSR – originated in North American and European business schools and think tanks – to evade control by the public sector and organized civil society. It is not surprising that the champions of CSR are heavily criticized for the environmental devastation they cause, their anti-union practices, their involvement in the exploitation of workers or their oligopolistic behavior. For instance Nike, harshly criticized during the 1990s after Life magazine published photographs of Pakistani children sewing the company’s footballs. The international boycott promoted by activist groups worldwide caused some damage to the brand's image, forcing its managers and marketing experts to seek creative formulas to overcome the situation and prevent new scandals. The new "responsible" policies omitted to consider the problem’s root causes (relocation of production in search of deregulated labor markets, complex supply chains, intense pressure on suppliers for lower prices, and delivery deadlines), as becoming the sports industry's pioneer in CSR was (and will continue to be) more profitable than questioning the business model. In general, all large companies in the global apparel industry have followed Nike, and there is no company today wishing to link its products to a brand image that lacks a CSR plan.

However, workers in the apparel industry are not better off at the start of 2009 than they were in 1999. Most of these 30 million workers globally live and work in conditions of misery as pictured in Dickens' novels. The sector's average salaries in Bangladesh are below 28 euros per month, they hardly reach 40 in India, and in China they are about 60 euros per month (1). Individuals leading a strike or a trade union movement are persecuted, sometimes by the authorities - as in China or Burma - and other times by company hitmen, like in Morocco, Turkey or Colombia (2).

Companies in the apparel industry have built their CSR policies on three tools: sustainability reporting, codes of conduct and social audits. Business schools insist that companies should be transparent about their triple bottom line: people, planet, profit. Sustainability reports represent the basis of transparency and are the annual documents through which the company offers the information it considers relevant to its stakeholders. These reports should clearly explain the ways in which the company accounts for its environmental and social externalities as well as how it deals with conflict. However, most sustainability reports continue to provide the public with a catalogue of good practices in the form of corporate philanthropy, social actions and sponsorship.

Developed and endorsed by companies, codes of conduct are aimed at establishing a framework with their suppliers and all workers involved in the productive process. In general, these codes compel suppliers to comply with domestic labor legislation and occasionally establish higher standards. The two most relevant limitations of corporate codes of conduct are obvious: their unilateralism and the verification of compliance. What is the need for these codes if collective bargaining really exists? The root of the problem lies in the lack of international respect for freedom of association.

When we look at the verification of compliance with corporate codes of conduct, we enter the third pillar of CSR. The need for verification and for credibility have, respectively, generated and fertilized the ground for auditing companies to include environmental and social or labor audits in their business, previously limited to certifying companies' good financial management. These audits consist in visiting suppliers and examining both work environment and documents related to remuneration and working hours, as well as interviewing workers individually to gather their opinions on working conditions. There are diverse labor audit methodologies, and the effectiveness of these methods depend on whether audited companies are previously informed of the auditors' visit, and whether the workers to be interviewed are selected randomly or by the company's directors. Regardless of the procedure in place, the workers of factories and workshops producing for big brands are continuously warned of the risks associated with negative assessments by auditors: complaints result in decreased orders and contracts, and thus in job reductions (3). The consequence is resignation among the legion of individuals who prefer a precarious job to no job at all (4).

The limitations of CSR for companies in the global apparel industry are similar to those for companies in other sectors. There are campaigns, NGOs and social movements that condemn the behavior of multinational companies. Several distinguished Global Compact members with headquarters in Spain face well-founded accusations concerning the exploitation of workers, the violation of indigenous populations' rights, environmental disasters of all kinds, corruption and bribery (5).

CSR has not been a corporate response to criticism by activists groups, but rather a strategy to justify production policies to the larger public and to leave social movements out of the game. In this sense, putting pressure on companies to make them "more responsible" or "to relocate production in a responsible way" is to play the game of the Global Compact and to follow the post-colonial paternalism of those who still believe that the poor are waiting for us to lead them to development. What workers in poor countries need is not more social responsibility, but respect for freedom of association and their right to organize themselves and defend their dignity. Neither do they need multinational companies to defend them against the "cruel boss" that enslaves them; instead, they demand that these companies' policies are not focused on transfering business risks to the supply chain's weakest link. Finally, there is no need for voluntary regulation but rather for international commitment to both enforce the law and generate a normative context that restores the capacity of public authorities, trade unions and organized civil society to negotiate with large corporations.

It should not be surprising that companies seek maximum benefits at any costs. In the end, the capitalist system rewards capital accumulation and demands competitiveness. The vast majority of companies are organizations created to generate profit for their owners. Denouncing companies for making a profit through labor exploitation should go hand in hand with condemning the democratic deficit of international financial institutions and the power of multinational companies to impose the law of the strongest. That is, a "strongest" who is responsible, kind and philanthropic.

In this context, Ban Ki-moon's proposal to "initiate a new era" with the "Global Compact 2.0" seems ironic or a bad taste joke… But no! It is serious! The United Nations will continue to encourage "development" based on responsible multinational companies, as will most rich countries' development agencies, whose strategic planning includes the importance of multinationals for the "development of the countries in the Global South".

(1) http://www.asiafloorwage.org/
(2) http://www.cleanclothes.org/appeals.htm
(3) For a thorough analysis of the deficiencies of social audits in the textile sector, we recommend the report Looking for a quick fix, available at www.cleanclothes.org/publications/quick_fix.htm
(4) Many workers in the apparel industry in recently industrialized countries have been driven out from rural areas by agro export policies driven by rich countries' large corporations and international financial institutions.
(5) Those interested in the impact of Spanish multinationals' activities may find contrasted information and documents in the following websites: http://collectiurets.wordpress.com/, http://www.noetmengiselmon.org/, http://repsolmata.ourproject.org/, http://supermercatsnogracies.wordpress.com/, http://www.unionpenosa.org/, http://www.turismo-responsable.org/, http://www.finanzaseticas.org/

* Albert Sales i Campos is an associate professor at the Department of Political and Social Sciences of Universitat Pompeu Fabra in Barcelona. He is also an activist of the Clean Clothes Campaign.

© Illustration by Miguel Brieva.

Ban Ki-moon calls for a "Global Compact 2.0"

At last week's World Economic Forum, UN Secretary-General Ban Ki-moon cited the UN Global Compact as a prime example of efforts to solve simultaneously multiple problems. He called for a new phase of the program - which he dubbed Global Compact 2.0. The key, according to Mr. Ban, is credibility - which Compact participants would have to earn and maintain through annual Communication on Progress reports. Recent polls - for example the Edelman Trust Barometer - show that only a third of people in the world trust business to do the right thing: "half what it used to be," Mr. Ban said. And not only do Global Compact participants need to nurture credibility, so too does the Compact itself. A recent complaint against PetroChina has demonstrated that the Compact fails to apply its own Integrity Measures correctly.

Later this week, Global Compact Critics will publish the translation of an article written by Albert Sales i Campos, associate professor at the Department of Political and Social Sciences of Universitat Pompeu Fabra in Barcelona. The article titled Global Compact 2.0: multinationals to the rescue! critically analyzes Mr. Ban's call for a new phase of the Global Compact. For now, the article is only available in Catalan and Spanish.

Sources: CSR Wire (4/2/2009), Revista Pueblos (4/2/2009) / © Photo by Evan Schneider.