August / September 2009 edition of CCB, Issue 107.
Several stories this month highlight the difficulty of eliminating the risk of malpractice from complex global supply chains.
Illegal dumping of factory waste or use of leather linked to Amazon destruction seems a million miles away – both literally and figuratively – from the values and commitments held aloft by companies such as Gap or Nike. To their credit, the companies implicated in both incidents have responded positively. Gap and Levi’s immediately began investigations and even terminated contracts with one supplier. The footwear companies have come out in support of Greenpeace’s concerns and have committed to no longer purchase from cattle ranches linked to newly-deforested areas. This in turn has led to large leather exporter, Bertin and beef trader Marfrig making similar commitments.
Some clear signs of progress, but why did it take Greenpeace blowing the whistle on the issue? How can companies ensure they stay ahead of the NGO and media campaigns?
In truth, it is incredibly difficult if not impossible to monitor what is happening in every part of what are often complex, fragmented and globalised supply chains. Companies simply do not have the resources to do this alone. Hence the rise of industry collaborations such as AIM-PROGRESS, a food and beverage industry initiative and SEDEX.
However for a company starting out, our advice is to take a step back before launching forth. Often in the rush to get something done – questionnaires sent out, audits conducted – companies can expend a lot of energy without achieving very much.
Companies need to carefully prioritise their supply chain and in doing this, take a risk-based approach. This means that as well as prioritising by spend and size of supplier, companies should look at the likely inherent risk in various parts of their supply chain, either linked to the type of product they are purchasing or the geographies associated with their raw materials. And this will mean looking further down the supply chain – beyond first-tier suppliers – for the most important purchases. Arguably this is what should have happened for raw materials such as leather, rubber and textiles for footwear manufacturers, rather than an almost exclusive focus on contracted manufacturing sites, which has been the historic approach of companies like Nike.
Another way of looking at it is to understand the complete life-cycle of your products, in addition to the operations and activities most closely associated with your direct business operations. It is this life-cycle perspective that will help companies spot the biggest risks and opportunities in their supply chains.
US Justice Department announces largest health care fraud settlement with Pfizer fine
It was announced on September 2 that Pfizer has been fined $2.3 billion for trying to sell drugs for uses not approved by regulators. Pfizer paid the fines to settle criminal and civil allegations that it illegally sold four drugs for uses not approved by the Food and Drug Administration (FDA). Pfizer was fined $1.3 billion for promoting the sale of Bextra for several uses and dosages that the FDA specifically declined to approve due to safety concerns. In addition, Pfizer has agreed to pay $1 billion to resolve allegations that the company illegally promoted four drugs – Bextra; Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug – and caused false claims to be submitted to government health care programmes for uses that were not medically accepted indications. The civil settlement also resolves allegations that Pfizer paid kickbacks to doctors to induce them to prescribe these, as well as other, drugs. Contact: US Department of Justice www.usdoj.gov
Gap factory danger to African children
A factory that makes jeans for Gap and Levi Strauss was found to be illegally dumping chemical waste in a river and two unsecured tips where it posed a hazard to children. The scandal was uncovered by a Sunday Times investigation published on August 1 into pollution caused by a plant in Lesotho, southern Africa, which supplies denim to the two companies. Dark blue effluent from the factory of Nien Hsing, a Taiwanese firm, was pouring into a river from which people draw water for cooking and bathing. Gap and Levi Strauss said they had ordered immediate investigations. Gap stated “As soon as we were alerted of these issues, we immediately investigated the situation on the ground in Lesotho, commissioned an independent monitoring organization to conduct its own investigation, and placed one of the factories involved on immediate notice until our investigation is complete and all issues are adequately addressed.” Contact: Gap www.gapinc.com Levis Strauss www.levistrauss.com
Leather industry giant moves to end Amazon destruction
Bertin, the world’s largest leather exporter, is backing Greenpeace’s call for a moratorium on buying cattle from farms responsible for Amazon deforestation, Greenpeace announced on August 14. Since the release of Greenpeace’s report, ‘Slaughtering the Amazon’ in June, the campaigners have seen a response from companies fighting to distance themselves from Amazon destruction. Major shoe companies Adidas, Nike, Timberland, Clarks, Geox and Timberland have all committed to stop buying leather from suppliers linked to Amazon destruction, prompting the recent decision by Bertin to commit to stop sourcing cattle from newly deforested areas and implement a traceability system. Bertin’s commitment to end Amazon deforestation comes soon after a similar announcement from Marfrig, one of the world’s largest beef traders. Contact: Greenpeace www.greenpeace.org
Oil industry memo calls for rallies against climate bill
According to Greenpeace, while individual members of the oil industry are divided on the best way to proceed with a US climate bill, the industry at large is encouraging people to attend rallies in opposition of climate legislation. According to Greenpeace on August 19 it obtained a memo from the American Petroleum Institute (API) which revealed its request for members to have employees masquerade as concerned ‘Energy Citizens’ at rallies held across the US during August. Similar to the town hall protests that have created angry exchanges over health care legislation, the climate bill meetings would serve to encourage employees of energy companies to attend up to 22 public meetings on climate change. Contact: Greenpeace www.greenpeace.org
Companies scramble to tackle corruption
The number of businesses launching internal corruption investigations has surged after a drive to encourage staff “whistleblowers” according to a survey published on August 10. The survey about overseas bribery, carried out by Ipsos Mori of over 100 FTSE listed UK companies, and commissioned by KPMG, found that four out of 10 respondents had begun investigations in the past three years. This compares with 27% from a survey conducted by KPMG in 2007. Despite the rise in anti-fraud activity by British business, however, the survey showed that an even greater number – 43% – had no anti-corruption measures in place, the majority of them believing that the issue is not relevant to their business. Contact: KPMG www.kpmg.co.uk
Peru Government investigates reports of illegal logging
Peru’s Indigenous Affairs Department, INDEPA announced on August 14 it will investigate claims that loggers have invaded a reserve created for uncontacted Indians. INDEPA’s announcement was made in direct response to Survival’s press release from August 13 revealing the loggers’ presence in the reserve, which has received wide coverage in Peru. ‘We are going to check the photos that Survival has released,’ said INDEPA’s president, Mayta Cápac Alatrista, before adding that he would ask Survival for further information, coordinate with local authorities, and approach the Brazil government’s Indigenous Affairs Department, called FUNAI. Survival is urging Peru’s government to stop the entry of loggers into the Murunahua Reserve – but not to do anything that could endanger the uncontacted Indians themselves. Contact: Survival International www.survival-international.org
New online resource on Human Rights Impact Assessment and Management
A new website has been launched for companies to engage in the road testing process of the Guide to Human Rights Impact Assessment and Management (HRIA), being developed by IBLF, International Finance Corporation and the UN Global Compact.
Published in draft form in 2007, the Guide aims to provide companies with comprehensive methodology on how to conduct a human rights impact assessment. The Guide is currently under a two-year road-testing process, in order to ascertain its suitability in a business-operating context. The website – www.guidetohria.org – was announced on September 2 and has updates on the road-testing process and online discussion on topical business and human rights issues. It also gives road-testing companies the ability to share tips, exchange good practice, comment on particular aspects of the guide. Contact: IBLF www.iblf.org
Public ‘unaware’ of scale of corporate tax evasion in developing countries
A YouGov survey commissioned by ActionAid has found that most adults in the UK are unaware of the scale of illegal tax evasion by multinational companies operating in poor countries. Most of those questioned were surprised to learn that poor countries lose more money to tax evasion than they receive in aid, according to the report released on September 1. Once they knew this, nearly two-thirds agreed that the UK should help developing countries to clamp down both on illegal tax evasion and on tax avoidance by the use of legal loopholes. More than three out of four people (79%) said that they had been unaware that developing countries lose more money as a result of multinational companies illegally evading tax than they receive in aid. Contact: Action Aid www.actionaid.org.uk
‘No oil drilling without tribes’ consent’, UN tells Peru
The UN has told Peru’s government it should not allow oil and gas drilling on indigenous peoples’ land without their ‘informed consent’. If the government agrees to the UN’s call, it would mean that no drilling could take place in rainforest inhabited by uncontacted Indians, as they are unable to give their consent. This is something that indigenous organisations, including Survival International have long been calling for. The call was made in a statement by the UN’s Committee for the Elimination of Racial Discrimination (CERD), published on August 31. Meanwhile AIDESEP, the umbrella organisation of Peru’s Amazon Indians, has lodged an urgent appeal with the country’s Constitutional Tribunal to halt the project, in a part of the Peruvian Amazon known as ‘Block 67’. The project is owned by Anglo-French company Perenco, who have promised to invest $2 billion in the find. But AIDESEP fears that the project could have catastrophic consequences for the uncontacted tribes living in the area. Contact: Survival International www.survival-international.org
Rupali Patni is an Associate Director at Corporate Citizenship
Email Rupali to discuss sustainability/CSR strategy, reporting, assurance and stakeholder engagement. Rupali.patni@corporate-citizenship.com
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