Industry News Roundup November 2012

November 30, 2012

Finance & Banking

Investors call for action on climate change

The Chancellor, George Osborne, was under mounting pressure in November to cut Britain’s reliance on gas, after a coalition of the world’s biggest investment fund managers made an unprecedented call on governments around the world, including the UK , the US, India and China, to commit to low carbon energy. The alliance of 200 investment institutions includes Scottish Widows, Aviva and HSBC and controls $21trillion (£13trn) of assets worldwide. The alliance’s call represents by far the biggest political intervention staged by financial investors over climate change. “Investors are rightly concerned about the short and long-term economic risks of climate change and understand that ambitious climate and clean energy policies are urgently needed to avoid catastrophic impact,”  said Chris Davis, a member of the alliance, who advises institutions controlling $11trillion (£6.9 trn) on climate change issues. In a letter to the governments, ahead of the international climate negotiations in Doha, the alliance called for “clear, consistent and predictable policies that encourage low carbon investment”.  (Independent, Guardian)

£3bn Green Investment Bank opens for business

The UK's £3bn Green Investment Bank was officially opened in late November, accompanied by government predictions that it will mobilise billions of pounds of investment in the country's low carbon economy. Launching the bank, Business Secretary Vince Cable also confirmed the institution had made its first official investments, ploughing £8m into a new anaerobic digestion plant in Teesside and a further £5m to reduce energy consumption at Kingspan UK's headquarters. Mr Cable said the bank would "place the green economy at the heart of our recovery and position the UK in the forefront of the drive to develop clean energy". The opening comes as the Government prepared to launch its much-debated Energy Bill on Thursday, which Ed Davey, Secretary of State for Energy and Climate Change, said would offer further support to low carbon projects. (Business Green)

Natural Resources

BP agrees $4.5bn Gulf spill settlement

BP has received the biggest criminal fine in US history as part of a $4.5bn (£2.8bn) settlement related to the 2010 ‘Deepwater Horizon’ disaster. As part of the agreement, BP also pleaded guilty to 14 criminal charges. BP will pay an additional $525m to the Securities and Exchange Commission over a period of three years. The $4bn resolution with the US Department of Justice includes a record criminal fine of $1.26bn, as well as $2.4bn to be paid to the National Fish and Wildlife Foundation and $350m to be paid to the National Academy of Sciences, over a period of five years. In addition to the charges filed against BP, a federal grand jury returned charged the two highest-ranking BP supervisors, on board the Deepwater Horizon on the day of the explosion, with 23 criminal counts – including 11 counts of seaman's manslaughter, 11 counts of involuntary manslaughter, and alleged violations of the Clean Water Act. Later on in November, BP was suspended from bidding for government contracts by US federal courts over the disaster. The company will be temporarily banned from seeking new contracts with the US government because of its "lack of business integrity" during the Gulf of Mexico oil spill, the Environmental Protection Agency said. (Financial Times*, BBC, Guardian, Reuters, Guardian, Financial Times*)

US oil industry body sues SEC over disclosure rules

A coalition of US oil and business organisations is suing the Securities & Exchange Commission (SEC) for ‘overstepping’ its authority in requiring companies to disclose payments to foreign governments when seeking to exploit new oil and gas fields. The American Petroleum Institute (API) claimed in a filing to the federal court in Washington DC that the SEC’s implementation of section 1504 of the ‘Dodd-Frank Wall Street Reform & Consumer Protection Act’ is anti-competitive and goes “well beyond what was necessary to support transparency”. But the lawsuit has been condemned as “contemptible” by Global Witness director Simon Taylor, who added: “It shows how out of touch the industry has become”. The Dodd-Frank Act mandates the SEC to issue rules on disclosure for companies listed in the US and is designed to help eradicate corruption and allow citizens in oil rich countries to hold their governments to account. Section 1504 requires companies to disclose payments made to the US or foreign governments to further the commercial development of oil, natural gas or mineral extractions. (Ethical Performance)

Textiles & Apparel

H&M, C&A, Nike top organic cotton users

H&M was the biggest user of organic cotton worldwide for the second consecutive year in 2011, according to Textile Exchange’s latest Organic Cotton Market Report. Dutch retail chain C&A, Nike and fashion retailer Zara, the flagship store of Inditex Group, take the next places on the list. Walmart, the world’s largest retailer, failed to submit data to the report. H&M continued to increase its already world-leading use of organic cotton, as part of its strategic goal to only use sustainable cotton by 2020. Although 81 percent of brands and retailers responding to the 2011 survey said they plan to use more organic cotton, production fell by 37 percent — the first drop in 10 years.  Textile Exchange says this shows a disconnect between supply and demand, and that companies are failing to communicate their increased demand down the supply chain to farmers. (Environmental Leader)

Zara fares badly in toxic chemicals report

High-street clothing brand Zara is considering taking fresh steps to detox its supply chain, after it was highlighted as one of the worst users of hazardous chemicals among 20 retailers assessed by Greenpeace. The research tested 141 clothing items from major brands for nonylphenol ethoxylates (NPEs) and carcinogenic amines. NPEs can break down into hormone-disrupting chemicals when released into the environment and water supplies – in some countries their use has been banned for almost 20 years. Greenpeace said all of the brands had several items containing NPEs, while Zara was the only retailer selling items contaminated with both NPEs and toxic amines. (Business Green)


Samsung reveals Chinese labour breaches

Samsung Electronics has admitted breaches of labour regulations at its plants in China, as well as at those of outside suppliers. A four-week survey of 105 Chinese suppliers to the South Korean electronics manufacturer showed breaches including excessive working hours and the failure to supply labour contracts, Samsung said in November. The internal study followed research compiled by undercover investigators and published in August and September by China Labour Watch, a New York-based group, which alleged labour law breaches at eight factories supplying Samsung, of which six are owned by the company. CLW also alleged repeated use of child labour at HEG, another supplier, but Samsung says it has no evidence of this. In response to the findings, Samsung has said it is conducting a widespread programme of review and corrective actions to deal with the problem. (BBC, Independent, Financial Times*)

Food & Beverage

Chocolate giant’s $400m sustainability push

The world's largest chocolate company, Mondelez International (formerly KRAFT), in November announced plans to invest $400m over the next 10 years to help suppliers enhance productivity and improve sustainability. Called ‘Cocoa Life’, the programme is modelled on subsidiary Cadbury's successful ‘Cocoa Partnership’ initiatives in Ghana, India and the Dominican Republic which has already helped thousands of farmers boost productivity while reducing environmental impacts. Mondelez International said it will increase investment in similar programmes to $400m by 2022. The company said the programme would help boost the livelihoods and living conditions of 200,000 cocoa farmers globally, while also accelerating the adoption of sustainability practices to reduce biodiversity loss and soil erosion and enhance water efficiency and yields.

  Another large confectionary company, Hershey, also announced similar plans, committing itself to sourcing all of its cocoa according to certified international labour, environmental and farming standards by 2020. Included in this move is the expansion of ‘CocoaLink’, a farmer outreach programme that uses mobile voice and SMS text messages to send cocoa farmers important information about improving farming practices, safety, child labour, health, crop disease prevention, post-harvest production and crop marketing. (Business Green; Ethical Performance)

Consumer Goods (FMCG)

Walmart suspends employees in India

In November Walmart suspended several employees in India as it pursued an internal investigation into whether its local joint venture, Bharti Enterprises, violated US anti-corruption laws. The suspensions were related to the company’s probe into allegations that employees in several emerging markets bribed government officials. Walmart said its investigations had been widened to other emerging markets including India, China and Brazil.  The probe into possible violations of the US Foreign Corrupt Practices Act, which prohibits bribery outside of the US, is another headache for Walmart in India. The retailer hopes to scale up its business following New Delhi's long-awaited decision to allow foreign direct investment in front-end retail business. Walmart is also being examined by the Reserve Bank of India, which is looking at whether the retail giant covertly invested in a chain of 220 convenience stores and hypermarkets in 2010 in contravention of a ban on foreign companies owning any stake in retail businesses. (Financial Times*, CNN, BBC)