Ethical Competition: time to get real

Type ‘email’ into Google and what do you think comes up first in the search engine’s listings? Why, ‘Gmail’ of course. What’s wrong with promoting your own products? If you’re a search engine, quite a lot, as it turns out. Services like Kayak and Microsoft are complaining that Google’s is routing user inquiries unfairly to its own services. Now the Federal Trade Commission is investigating the anti-trust claims. If found guilty of abusing its dominant market position, Google could find itself facing its largest legal challenge yet.

In a way, it’s rich that Microsoft should be among those wagging the finger. (The US software pre-empted this latest spat with an anti-trust suit against Google in Europe back in April). For years, Microsoft used its near monopolistic position in the software market to browbeat and bully computer manufacturers into using its operating platform. It waded through endless lawsuits to carve out its place at the top. Now it’s behind the curve. The big fights are no longer over operating systems, but the interface between users and the internet. Microsoft’s own search engine, Bing, has been clinging to Google’s coattails ever since it launched. So could this be seen as a case of sour grapes? Of an underhand jab at a competitor? perhaps. But is that necessarily wrong? In our dog-eat-dog world, could it not just be described as ‘fair play’?

It is a question Mallen Baker considers in Ethical Corporation’s latest issue. Yet, interestingly, not in the context of Microsoft (and the rest) v’s Google. Instead, it’s another of today’s teutonic battles: Facebook v’s Google. A few months back, Mr Zukerberg’s  social media site was found to have hired a PR agency to push negative stories about Google privacy policies (internet freedom is a separate issue altogether, and one recently addressed by Rebecca MacKinnon in an Ethical Corporation podcast). On the face of it, what Facebook did smells wrong. But how wrong? Not legally wrong. No subpoena papers have arrived at the company’s shiny new Menlo Park headquarters. Wrong in the sense of its public image? Sure, but how many Facebook users have delisted as a result? Precious few, I suspect. Ethically wrong then? The questions get to the nub of Baker’s piece.   

“What Facebook did wasn’t nice. But then Google aiming to move into Facebook’s social networking area of dominance isn’t “nice”.

Ethics isn’t about ‘niceness’. If it were, it would have gone out of business a long time ago. It’s about principles and values. Those should certainly include a commitment to compete within the law. By that marker, Facebook and its PR agency are (as I understand it) within bounds. It should include provisions against spreading falsehood as well. Again, it’s not entirely clear if Facebook is guilty here or not. The whole affair still feels wrong, though. Which shows just how difficult it is to define ‘ethical competition’ in a competitive world. Companies should draw their own boundaries based on personal and professional conviction  – and then, within those parameters, go at it cats and dogs.

n.b. the opening statement of this post was correct at the time of writing. Rechecking now, ‘Hotmail’ comes out top. A change in algorithms in Menlo Park or are those Federal Trade Commissioners getting to work already? 

Natural Disasters: resilient response required

Resource Nationalism: re-slicing the pie

Peruvians went to the polls today. Multinational extractive companies such as Newmont, AngloAmerican. Xstrata and Occidental Petroleum will be watching the results with apprehension. On the ballot list is Col Ollanta Humala, an ex-army officer who once led a military revolt (against President Fujimori, the father of the other candidate in today’s polls). Humala came to the fore in 2006, when he ran unsuccessfully against out-going president Alan Garcia.

Back then, fears that Humala was in the pocket of Hugo Chávez, the socialist president of oil-rich Venezuela played a critical role in his defeat. Just a week before Peruvians went to the polls five years ago, Mr Chávez took a 60% controlling stake in Venezuela’s huge Orinoco fields, hitting Exxon, Conoco, Chevron, Total and Statoil. Fellow ‘Chavistas’ in Bolivia and Ecuador were undertaking similar moves to wrest back control of their country’s national assets from foreign companies.

It’s not just Latin America where resource nationalism has been on the rise in recent years. As a special briefing in the latest issue of Ethical Corporation reveals, resource-rich countries in Africa and Asia are following suit. As global commodity prices soar, emerging economies (justifiably, it could be argued) want a bigger piece of the pie. It’s their pie after all. The implications for foreign investors companies are worrying. Around 80% of oil produced by Opec countries is in state hands. Foreign oil companies are now being pushed to develop oil sands, a costly and high-risk enterprise. Not because they want to, Ethical Corporation writer Eric Marx points out. But because the choices open to them are becoming increasingly limited.

So what’s the responsible company to do? In Venezuela, Exxon just walked away. That’s one option. But only if you have very deep pockets, and options elsewhere. These are multi-billion dollar investments in the main. Choosing to renegotiate tax arrangements is another option that’s buying companies time. Good environmental and social investment track-records are proving ever more vital too. Even Chinese companies, which have been pouring money into Africa’s mining sector over recent years, are facing local demands to ‘give something back’. Companies would be well advised to take the likes of Unilever and Standard Bank in undetaking full economic impact studies, which capture their indirect,as well as their direct, contributions to the economies where they invest. 

Marx looks specifically at India, where demands for greater resource nationalism have led to calls for mandatory social investments by foreign companies. In reference to the proposed measure, Indian prime minister Manmohan Singh told industry to see community investment as being in their own long-term interest. “Companies undertaking greenfield projects cannot see their factories and units as oases, cut off from the needs and interests of the community around them,” he warned.

Citing a range of experts from both industry and civil society, Marx builds a convincing case for companies to increase the social returns derived from their investments overseas.  Either that or face ever greater pressure from host governments.

In Peru, Humala has tried to distance himself from Mr Chavez and his brand of radical, nationalistic socialism. It might help him get elected (exit polls have him out ahead). It won’t, however, reduce popular pressure for foreign investors to share a larger slice of the pie. 

[6 June 2011: eds. Humala won the election by a narrow margin. Lima's stock exchange fell 8.7%, in apparent reaction to the socialist candidate's win] 

GMOs: are we in for a 'Spud Wars' summer?

The season for potato planting is upon us. Big deal. Spuds don’t usually justify a news item (or even a blog post). Nor would they now were it not for those provocative three letters, ‘GMO’ (Genetically Modified Organism). In northern Sweden, the controversial acronym has sent Greenpeace activists into a tizz. This week, they’ve been camped out at the gates of a warehouse stocking Amflora, a genetically modified variety of the humble tuber. The GM potato contains a gene that is resistant to antibiotics and should, the protestors say, be banned. The European Union, which legalised the creation of German chemicals group BASF last year, thinks otherwise.

 
A visit to GM Watch will reveal a catalogue of similar protests over recent weeks, months and years. Here's just a recent sample of headlines: ‘No Improvement in EU’s GMO risk assessment’, ‘Unlabelled clone meat allowed on shop shelves’, ‘Industrial poultry, GM feed and the RTRS’. The mainstream press may have wearied somewhat from their ‘Frankenstein Food’ stories of old. But passions among a large sub-set of consumers still run high.

Recent years have seen huge advances in GM technology. Who could have imagined filling your grocery basket with ‘pluots’ (a hybrid of plums and apricots), ‘lematos’ (lemons and tomatos) or ‘grapples’ (grapes and apples)? Or heading down to your local pet store and buying a GloFish (a modified florescent zebrafish)? Gimmicks aside, GM goods now proliferate in our food chain. American dairy farmers, for instance, are now saying the days of non-GM organic milk are numbered. (The warning follows the decision by the US Department of Agriculture earlier this year to legalise GM alfalfa, an essential feed for dairy cows).

Yet the fundamental arguments are much the same as when GMOs first burst onto the commercial scene. In the one corner, you have a vocal consumer lobby - perturbed about the technology’s potential health and environmental impacts. In the other, you have the biotech industry – rich, powerful and intent on arguing that GM is the future for a resource-stretched planet. The result has been a heated and often vitriolic clash. None more so than Monsanto’s head-on collision with European regulators and the general public back in the late 1990s.

As part of Ethical Corporation’s collection of landmark events for the corporate responsibility movement, Ben Schiller examines this mother of all battles. Some of the lessons are particular to the time and the industry. Playing with science – particularly when it’s linked to something as fundamental as the food we eat – is, and always be, an emotive subject.

Other lessons, however, are more generic. Most revolve around communications. Sat in St. Louis, Missouri, six hours behind London, Monsanto’s PR team were always one step behind the news agenda. The US company's advertising wasn't always the wisest either. (An early set of ads were rules as misleading by the UK watchdog). Schiller examines the PR battle in depth. The ultimate lesson? Regretable as it sounds, good news will never trump bad. Companies just have to hope journalists will eventually grow bored and move on. For GMOs, that strategy seems to have worked of late. But the coming potato harvest could see the horror headlines return. Does a ‘Spud Wars’ summer lie ahead?   

CR professionals as 'master storytellers'

Sustainability professionals are used to being called names. ‘The company’s conscience’, on a good day. ‘Corporate cost centre’, on a bad one. Yet how many have had the term ‘master storyteller’ thrown at them? Few, I’d wager. More’s the pity. So research by the Doughty Centre for Corporate Responsibility suggests, at least.

Narratives comprise an intrinsic part of every company’s identity. No one narrative is the same. A company’s history, its sector, its values, its culture and, above all, its people craft what such a narrative is and how it is told. Composed within this narrative is a separate yet significant sub-narrative: namely, a company’s sustainability ‘story’. Unpicking that story marks a critical part of persuading employees to buy into the whole sustainability agenda. Which is where the story-telling skills of in-house sustainability experts come in. By working with employees to understand why and how their organisations support sustainability objectives, those employees become inspired to start taking action. So the theory goes. But how to go about putting it into action?  

In a guest essay in the latest issue of Ethical Corporation, Doughty scholars David Grayson and Melody McLaren propose three straightforward steps. First, talk to key stakeholders inside and outside your company to assess your current sustainability ‘story’. Second, engage and support individual employees to act as sustainability change agents in order to improve that story. And third, tell your revised sustainability story through use of the company’s formal communication channels as well as through informal social networks.

All sounds like a curious fiction? Then ask the consumer communications gurus at Saatchi & Saatchi. Few understand the influence of a good story better than they. Which is exactly why Wal-Mart turned to them. Working with Saatchi& Saatchi S (the PR firm’s new corporate responsibility outfit), the global retailer hit on its ‘Power of One’ concept. The idea? To help its two million employees develop personal sustainability plans. That gave birth to a second, even more ambitious initiative: its Connect the Dots (Do One Thing) campaign. The campaign aims to engage one billion people as ‘change agents’. Their small, consistent actions will – Wal-Mart tells them – combine to deliver large-scale sustainability solutions. Now these are powerful narratives – even if neither example, as yet, has an ending.

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Adam Werbach, global CEO, Saatchi & Saatchi S
“Some companies are already realising profits by putting sustainability at the core of their business. Not with top-down directives from executives, but from dozens, even hundreds of small steps taken by people at every level of their companies.”

The M&S Effect: bin bags, business sense and Barry

Who wouldn’t agree to give old clothes to charity rather than see them end up in landfill? Few of us, right. Yet, the rubbish tip is where most of it goes: 80% in the case of Marks and Spencer. So for the last three years the UK high street retailer has been engaged in an intriguing experiment. It’s been effectively paying people to recycle. Anyone who heads down to an Oxfam store with a bag of unwanted clothes gets a £5 shopping voucher. The idea has been a roaring success with us, the consuming public. Oxfam has collected over seven million garments – that's an item from almost one in every eight UK residents. 

There are two conditions to the scheme. First, at least one of the recycled items must be an M&S product. Second, the £5 can only be used against purchases in M&S of £35 or over. Both make eminent sense. M&S wants to cut down its environmental footprint. By including its own clothes in the deal, the retailer can justifiably say it’s doing its bit (3,500 tonnes of it). As for the £35 requirement, the business rationale is self-evident. Oxfam is in the business of reducing poverty. More clothing donations means more funds to do just that. M&S is in the business of making profits. Persuading people to come into its stores and spend is therefore fundamental. A voucher helps towards that. Consumers feel happy (they’ve collectively pocketed vouchers worth over £7.5 million so far), as does M&S (whose tills are busier).

This kind of alliance is just one of a growing number of savvy corporate-charity tie-ups. Kingfisher provides another example. The home improvements retailer has joined up with an environmental non-profit to promote its ‘eco-products’ range. Again, the benefit is mutual: sales are higher, and the planet’s resources safer. Hard landscaping company Marshalls, meanwhile, joined with a local charity in India to provide educational alternatives for child quarry workers (the programme was singled out for praise at Ethical Corporation’s recent annual Awards). The examples are a world away from the days of cheque-book philanthropy and tree-planting CEOs. Ethical Corporation’s new Briefing on NGO Partnerships describes the latest best practice in strategic, outcome-orientated alliances. (It also highlights the pitfalls to partnership and how to avoid them).

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The M&S/Oxfam case is interesting for another reason too. The UK retailer is working to meet a raft of sustainability targets, announced back in 2007 under its Plan A (“There’s no Plan B") programme. Much of the ‘heavy lifting’ – cutting waste, making factories more resource-efficient, minimising transport-related emissions, etcetera –can be done by the company itself. But for M&S to achieve its most ambitious sustainability goals, it must get others on board: suppliers, business partners, government and – yes, us - the consumer. 

Influencing public behavioural patterns is no easy task. A small ‘eco warrior’ contingent will do the right thing regardless. Equally, a renegade minority won’t, however many vouchers you give them. But most of us sit somewhere in between – needing a gentle nudge or the knowledge that ‘everyone else is doing it’ (what Mike Barry, head of sustainable business at M&S, calls “consumer tribalism”). 

The Oxfam recycling project is genius because it makes choosing the sustainable option both easy and attractive. Like buying fertiliser-free food (who prefers chemicals on their plate when given the choice?), or purchasing ethically sourced coffee (ditto, who’d rather their coffee promoted worker abuses?). Companies can’t force us to ‘do the right thing’. But they can present us with options that take the hassle out of doing what – in our more principled moments – we know to be right. So, about that clear-out . . . 

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Note: Working hard in the trenches for years, Mike Barry has done more than anyone to integrate sustainability policies and processes into M&S's day-today operations. Here’s a link to an interview Ethical Corporation did with him nearly a decade ago. Those efforts crystallized three years ago in the company’s ambitious ‘Plan A’. His task since has been to start turning M&S sustainability goals into practice. That work has come to the attention of The Guardian, which has shortlisted him as its Corporate Sustainability Innovator of the Year. The winner will be decided by public vote. Click here to see the other nominees and have your say.  

Companies & development: not-so-strange bedfellows

Businesses are not development agencies. That much is clear. But, like it or not, they are in the business of development. How so? Through the jobs they create, the supplies they procure, the taxes they pay, and products they sell. All these activities have economic and social implications beyond the factory gates.

That much isn’t new. What is new is that companies are getting better at gauging the size and nature of their overall socio-economic footprints. Progressive corporations have been good in try to capture their immediate impacts. A prime example is AngloAmerica's SEAT assessment tool, which focuses at a local community level. But 'cradle-to-grave' impacts, from sourcing to product disposal - that represents a whole different order of magnitude. Yet companies such as Unilever are giving it a go. The Anglo-Dutch consumer goods giant has calculated that it provides almost 1% of all South Africa’s tax revenues. As for the national labour pool, for every South African on the company’s employee payroll, there are 22 others in its ‘value chain’. So too Standard Chartered. The economic activity – both directly and indirectly – generated by the $65.5bn UK-based bank was found to equal 2.6% of Ghana’s total gross domestic product. 

  

Such calculations are by no means easy. Relevant data (especially in developing countries) is not always available, nor are accounting frameworks always in place. Yet early some early measurement models are emerging. Efforts by the likes of Prof. Ethan Kapstein at INSEAD (to whom both Unilever and Standard Chartered turned) and the World Council for Sustainable Development (which published the ‘Measuring Impact Framework’, together with the International Finance Corporation) are helping navigate the way forward.

Interesting though these early studies might be in their own right, the numbers are just a small part of the picture. How will managers use this information? That’s the key question, says Peter Davis, Ethical Corporation’s politics editor and author of a recent report on socio-economic impact. His answer is refreshingly simple: use it to make better decisions. The example he gives is Heineken. The beer maker mapped some of its African operations and saw an opportunity to swap imported malted barley and maize (which is shipped in a great cost) for sorghum, a local equivalent (which was cheaper and resulted in jobs for domestic farmers). ‘The end goal is not just to optimise social economic impacts, but business operations themselves’, he clarified during Ethical Corporation's two-day Responsible Business Summit, which concludes today.

Companies may feel uncomfortable with the label of ‘development actors’. Don’t be. Not only is it a fact (and therefore unavoidable), but a better understanding of your relationship to society at large will stand you in better stead for the future. Standard Chartered, for example, is now increasing its investment in SME services in Ghana as a direct result of the impact “gap” (read: opportunity) highlighted by its value chain assessment. 

In the desire to be ‘business-like’, however, don’t ignore what the development community can teach. Not about programmes so much (leave that rightly to the NGO experts), but about assessment. Davis points to the ‘results chain’ approach used by large donors. Such an approach accepts the complexity of the development process and frequent disjunctions between cause and effect. In so doing, impact measurement standards employed by the likes of the Donor Committee on Enterprise Development move away from producing isolated data and focus instead on the “consequential effects” of development interventions. That helps development actors tell the broader story of their role in, and impact on, society. It works for NGOs. It would for companies too.