Top 10 corporate responsibility stories of 2013

Plus ça change in corporate responsibility. If nothing else, 2013 provided ample evidence that, contrary to popular belief, corporate responsibility issues, even the huge stories that dominate the media, do not exactly come out of nowhere. So many of the top CR stories of the year, like the Rana Plaza disaster, Apple's tax problems, and JP Morgan's huge fine, were already prefaced by the big stories of the previous year. Among our top 10 of 2012 were a Bangladesh factory fire, corporate tax avoidance, criticism of tech companies, and prosecutions in the financial sector. So the writing was already on the wall for most of the big stories of 2013. It would appear, as Ethical Corporation editor Toby Webb said recently, that with all the excitement about new opportunities and win-wins, companies are underestimating the importance of sound ethical risk management in the corporate responsibility equation. So, if you want to know what CR risks lie ahead for 2014, you could do worse than checking through our list of the big stories of 2013.

1. Rana Plaza building collapse
Back in April 2013, more than 1100 people, mostly garment workers, died when the Rana Plaza building collapsed near Dhaka in Bangladesh. It was probably the single worst garment factory disaster yet, in an industry that has suffered more than its fair share of needless fatalities. But Bangladesh had already seen a series of major industrial accidents leading up to Rana Plaza, which had been met with little tangible response from business and government leaders. Rana Plaza looks to have at last changed that. The Accord on Fire and Building Safety in Bangladesh, signed by nearly 100 global retailers, as well as labour unions and NGOs is a legally binding agreement to ensure worker safety through independent factory inspections, mandatory repairs, financial support, and sanctions for noncompliance. More than 2m vulnerable Bangladeshi garment workers are already covered by the Accord. A competing agreement, signed by Walmart, Gap, Target and other North American companies was criticized for having weaker enforcement and failing to involve labor unions. Nonetheless, both pacts are evidence that factory safety in Bangladesh is finally getting the concerted attention it deserves.

2. Apple's tax avoidance
Corporate tax avoidance had been a growing story in the UK and elsewhere prior to 2013, as evidenced by our top stories listing of 2012. But the issue exploded onto the public consciousness when Apple's CEO Tim Cook was forced to testify to a Senate committee in Washington back in May of this year. The company had avoided paying literally billions of dollars in tax by exploiting various loopholes in international tax treaties and funnelling its European profits through a shell company in Ireland. All completely legal, of course, but hardly what the public expects of a good corporate citizen. Now that attention to corporate tax avoidance has gone global, and with inequality and government debt the two biggest global risks today, the obvious questions are which country will be next in taking aim and which company will be in the firing line? Corporate tax reform is also undoubtedly going to loom even larger in the coming year.

3. NSA spying
Without doubt, Edward Snowden's whistleblowing on the US National Security Agency's (NSA) mass surveillance programs was the story of 2013. Nothing else even got close. However, the corporate responsibility dimensions still remain somewhat murky, which is why it doesn't quite make it to the top of our list. We do know, however, that telecoms companies like Verizon are required to hand over all call records  (or "metadata") to the NSA about cell phone calls made in the US. We also know that none of these companies ever sought to challenge the legality of the action. Another revelation was that the secret PRISM spying program allows the NSA to tap into the servers of internet companies like Google and Microsoft to access customer data. We also know that NSA pays millions of dollars to these same companies. We do not yet know exactly how complicit tech companies have been in the whole mess but one thing for sure is that they now realize that the NSA spying story is undermining their customers' trust and are calling for government reform. Expect much more to come in 2014.

4. JP Morgan's $13bn misconduct settlement
Our annual list of major corporate responsibility stories would not be complete without an entry from the finance industry. As we predicted at the beginning of the year, 2013 was marked by the return of government and some major financial sector scalps. None of these was bigger than the whopping $13bn fine landed on JP Morgan for misleading investors in the same of mortgage backed securities in the lead-up to the financial crisis. To date, it is the settlement ever between the US government and a corporation, and will come as some (though probably not enough) relief to those who have viewed most of the finance sector giants as getting away with the crisis relatively unscathed. On the other hand, JP Morgan is probably pretty sore about catching the flack for misconduct that was less about their own practices and more down to firms like Bear Stearns that they were encouraged by the US government to acquire at the height of the meltdown. No one comes out of this looking good.

5. Europe's horse meat scandal
At the beginning of the year, the big news was all about horse meat turning up in products it wasn't supposed to be in. Like those clearly labelled as "beef". The scandal started in the UK, quickly spread to a suspect supplier in Ireland, and soon rocked much of Europe. Customer trust rapidly evaporated as it became clear that effective oversight of the food industry was sorely lacking. Companies acted quickly to withdraw potentially contaminated products and shore up confidence but further revelations of large scale criminal activity in the food supply chain will do little to restore trust in a thoroughly compromised industry.

6. India's new CSR law
The world's largest democracy now has the world's most extensive CSR legislation. But that is not necessarily a good thing. Under the new Companies Act, passed by the Indian Parliament in August 2013, large Indian companies must spend at least 2 per cent of their net profits on CSR each year from 2014 onwards. It also requires firms to set up a CSR board committee and institute a CSR policy. The new CSR legislation has met with a mixed reaction, especially as it seems to institutionalize a somewhat backward looking approach to CSR which emphasizes philanthropic giving whilst ignoring the core strategic business of the firm. It will also be incredibly hard to enforce in a country already hamstrung by an overburdened legal system. On the plus side, the legislation does force many of India's laggard companies to finally take some responsibility for the various social problems faced by the country's citizens. For better or worse, CSR is no longer something that can be ignored in India.

7. Chevron's Ecuador pollution case
It has been a big year for Chevron and Ecuador in their long-running, aggressively-fought pollution case. In November, the Ecuadorean high court made its long-awaited appeal decision which upheld the original 2011 judgement requiring Chevron to pay $9bn to compensate for contaminating the rainforest during crude oil extraction over two decades ago. Chevron has never operated in Ecuador but inherited the lawsuit and its toxic legacy when it took over Texaco, the original operator, in 2001. For its part Chevron continues to dispute the legality of the ruling and has refused to pay. The appeal was at least partially successful for Chevron by halving the original $18bn damages bill, but not in overturning the decision. Chevron is now awaiting the outcome of a counter-suit heard last month in the US against the plaintiff's main lawyer, who the company claims engaged in bribery and fraud to secure the conviction. Meanwhile, attempts by the plaintiffs to seize Chevron's assets overseas to pay the fine also had their ups and downs in 2013. For example, Canada first denied them the rights of enforcement in May, only for a judge to overturn the decision on appeal in December. Other actions are underway in Brazil and Argentina. This has fast turned into a test not only of the Ecuadorean legal system, but of the global legal system's appetite to prosecute international legacy corporate responsibility issues.

8. Rosia Montana mining protests 
2013 saw major protests against mining operations all over the world, including Australia, Canada, Columbia, Greece, Niger, Peru, even Tibet. But the biggest of the lot was probably in Romania, which saw a mass protest movement arise in response to plans to mine around the town of Rosia Montana. If approved, it would be Europe's largest gold mine but critics claim that it would inflict untold social, environmental and cultural damage. Mass street protests erupted after the government proposed a new law that would enable the Rosia Montana Gold Corporation (majority owned by the Canadian mining company Gabriel Resources) to finally start operations after years of failing to acquire the necessary environmental permits. At stake here then is not just the proposed mine but the legitimacy of the democratic process, which protesters feel has been fatally undermined by the hastily forced through legislation. As one protester put it: "People today confront a corrupted political class backed up by a corporation and a sold out media; and they ask for an improved democratic process, for adding a participatory democracy dimension to traditional democratic mechanisms."

 9. New UN Global Compact 100 Index
There were several entrants to the new corporate responsibility standards and guidelines category in 2013, with the G4 guidelines of the Global Reporting Initiative probably being the most talked about. But September's launch of the Global Compact's new stock market index, the Global Compact 100, for us represented the most significant development. First, as John Entine noted, it offered a welcome new development in a social investing field "hungry for innovation and dogged by ideological correctness". But more than that it showed just how far the UN was willing to push the needle on its voluntary approach to corporate responsibility that heavily prioritizes incentives rather than enforcement. While many are still criticizing the Global Compact for not having sharp enough teeth to weed out laggards and green washers, the new index makes it abundantly clear that the UNGC is moving in a very different direction. Ten years ago it would still have been unthinkable, but the reality is that the UN is no longer just in the business of accords, declarations, and principles but is now also firmly in the finance industry.

10. South Korea's nuclear corruption scandal
GSK's corruption scandal in China may have got most of the headlines, but in our book, the corruption scandal that has engulfed South Korea's nuclear industry this year tops it for potential impact. Two short years after Japan's Fukishima disaster, neighbouring South Korea is also facing a devastating loss of confidence in its nuclear industry which supplies about a third of the country's energy needs. The scandal has centred on a swathe of faked safety certificates that have been issued for critical nuclear reactor parts over the years, and the bribes that have allegedly been paid to look the other way. Most commentators pin the blame on the closed structure of the nuclear industry in South Korea with only a single national operator and close ties between the operator, suppliers and testing companies. The prime minister has likened the industry to the mafia. A number of reactors have been shut down, trust in the industry has plummeted, a national energy shortage is underway, and now some 100 officials have been indicted for their part in the scandal. Corruption that compromises the safety of the nuclear industry is probably about as bad as it gets. And its unclear yet whether South Korea can really turn this one around.

Photo by rijans. Reproduced under Creative Commons licence

Why India’s Novartis ruling is good for innovation

Today’s news that the Indian supreme court has effectively denied the Swiss multinational pharmaceutical company Novartis the patent protection for its ‘new’ blood cancer drug Glivec (Gleevec in North America) has been discussed controversially in the media. On the one hand, commentators sympathetic to the industry have pointed out that without patent protection a publicly owned company loses its incentive to develop new drugs. Pharmaceutical innovation, so the argument goes, is driven by the hope of future returns. Since development of new drugs is very costly, time consuming and competitive, companies can hardly justify investments when rulings such as today's kill their hopes of recouping the costs through future sales. In short, the Indian ruling "will hinder medical progress" (Novartis press release) and thus kills innovation.

On the other hand, activists and other voices critical of the industry argue that this is a win for all those that have the interest of poor people and their access to affordable drugs in mind. After all, a year’s supply for Glivec for a leukemia patient currently comes at a whopping $70,000, while Indian generics can do the same job for about $2,500! (Generics btw. are drugs, that use the same chemical recipe as the original and can be sold much cheaper as the generics company does not have to cover the R&D costs)  For India, which has the biggest generics industry in the world, this ruling of course has also a very national commercial interest...

What most commentators are missing though in their evaluation of the case is a somewhat minute detail, which however has huge ethical implications. The crucial point here is whether the version of Glivec for which Novartis was claiming patent protection, is actually a ‘new’ drug. What the Indian supreme court in fact ruled was not that Novartis should not enjoy patent protection on their new drugs; they mainly concluded that the new edition of Glivec, for which the company applied for protection, was in fact not sufficiently ‘new’, not different enough from the old version of Glivec, for which the patent had expired.

This points to a well know strategy of the pharmaceutical industry. Rather than fighting generic companies, ‘originator’ companies such as Novartis just marginally change the chemical formula of an existing drug whose patent is about to expire and then pretend to having come up with an entirely new one, for which of course they should enjoy full patent protection.

This, however, is just one trick pharmaceutical companies use in fighting generic companies. The EU Commission on Competition has had an eye on the practices of the industry in circumventing patent law for a long time. Their 2009 report is an inspiring read which sheds an interesting light on the claim, that it is the generics companies that stifle innovation (as rehearsed today on BBC, CNN and the likes).

Basically, companies such as Novartis and other ‘originators’ are using a whole host of ‘defensive patenting strategies’ and the use of ‘second generation products’ ruled out today in India is just one of them. Others include the filing of numerous patent applications for the same medicine (forming so called 'patent clusters' or 'patent thickets'). This is an important tool to prevent competitors in advance to develop new medicine as the potential new drug would already be covered by the patent right filed in advance by another competitor.

All in all, the EU Commission identified a host of industry strategies all of which resulted in numerous "situations where innovation was effectively blocked” (p. 19). So in reality, what Novartis was stopped doing – at least in India – is not so much about innovating for new drugs, but rather one element of a rich toolbox of strategies to stifle and prevent innovation while protecting patents and thus the profits of the company.

After all then, today’s ruling may indeed result in more real innovation. Rather than focusing their R&D teams on insignificant changes in existing drugs which may satisfy the legal team of the company to file a new patent application, Novartis and other pharmaceuticals might take this event as an incentive to actually develop new drugs that address hitherto unaddressed and untreatable diseases. One of the reasons the Bill and Melinda Gates foundation is so active in developing new drugs for the diseases of the poor (such as malaria) has to do with the fact that pharmaceutical innovation is too much driven by potential economic benefits of future drugs. And of course the diseases of the poor are bad for the business case of a drug.

This problem now hits a company whose outgoing CEO just had to turn down a $78m severance package - reacting to public outrage in Switzerland. After all, a company that can afford such golden handshakes for their CEO in the first place can’t be ailing too badly from all those third world generics producers...

(An edited version of this blog was published as an Op-Ed in the Globe and Mail, April 2, 2013).

Photo by Images_of_Money, reproduced under the Creative Commons License.

Who will be the business ethics winners and losers at the London Olympics?

Corporate involvement in the Olympic Games continues to expand in size and significance. This year, the 2012 London Olympics will boast sponsorship on hundreds of millions of dollars in corporate sponsorship and tie-ins. But as the corporate money flooding into the Games increases, so too do the attendant ethical risks. For all the advantages of being associated with one of the world's greatest and most watched sporting events, it also puts you at the mercy of activists and other critics ready to use the Games' huge pulling power to target big brands. Adidas, BP, Dow Chemical, McDonald's and Rio Tinto are all currently in the firing line regarding their involvement in the London Games. So the big question for the companies is: come closing ceremony time, who are going to be seen as the ethics winners and who will be the ethics losers?

 Four years ago, the 2008 Beijing Olympics also brought to the fore some major ethical risks for the Games' sponsors, mainly because of the potential for being tarnished with the human rights and environmental pollution problems facing hosts China. This time around, it is less the hosts than the companies themselves, accused of anything from using their sponsorship to greenwash their more unsavory practices (BP, Dow), to corrupting the ideals of the Games (McDonald's), and exploiting sweatshop labor to produce official Games sportswear (adidas).

The most tangible of these criticisms regards the sweatshop allegations. Over the years, adidas has worked hard on its ethical supply chain practices, and was one of the forces behind the Sustainable Apparel Coalition initiative. But having already dropped off one list of the most ethical companies this year, the accusations of poor labor practice in the factories producing the official kit for the Great Britain Olympic team will no doubt strike a significant reputational blow to the company.

Let's be clear here. It's unlikely that adidas is actually an outlier amongst apparel companies. A decent investigation into pretty much any global brand's supply chain could probably surface some major failures to live up to their impressive sounding codes. Not because they don't want to meet their commitments, but because there are always going to be suppliers that cut corners given the low cost, high flexibility model of production foisted onto them by the big brands. Adidas becomes a useful target though because of it's high profile in the Olympics. That's the risk that comes with the territory these days. Nike got it right 4 years ago when they published their special report on their Chinese operations months before the Olympics took place thereby taking any sting out of any likely exposé.

As for the so-called green washers, they also shouldn't be too surprised about the controversy they have sparked. BP as an official "sustainability partner" for the Olympics? Wouldn't it make sense to get your sustainability reputation back before wrapping yourself in such a cloak? Maybe they think that at rock bottom the only way you can go is up. But public trust needs careful nurturing if you are going to restore it after a major catastrophe. Not symbolic gestures.

If anybody should know how hard it is to rebuild public trust, it's one of the other Olympics sponsors currently in at the losing end of the PR battle, Dow Chemical. The beef with Dow goes back to 1984, and to a company that they didn't even acquire until 2001, Union Carbide. That the compensation question for Union Carbide's role in the Bhopal tragedy should still be rumbling on is testament to the importance of dealing effectively with legacy ethics issues. Here we are nearly 30 years later with Dow's banner role in the Games being the subject of front page news in India, the UK and elsewhere.

There's already been a high profile resignation from the watchdog supposed to monitor the sustainability of the 2012 Games as a result of the company's sponsorship deal, whilst over in India, the Government itself has now launched a diplomatic offensive against the company after it failed to persuade the London Olympics Committee to drop the firm as a sponsor. There has even been talk of a national boycott of the Games by India, but this currently looks unlikely. 

Let's get this one clear too though. Dow is no evil corporate monster, and has been doing some fine work in the sustainability space. But it does have a legacy problem still to deal with. And until it reaches a more easy relationship with key opinion formers in India (which, frankly seems unlikely in the near future given all that has happened ..... and when the response of the CEO to the current troubles is that any opposition to their sponsorship is "beyond belief"), it should just steer clear of huge global events like the Olympics. Any PR firm worth it's salt should know that. The $10m sponsorship money could have been spent in much more effective ways. Why take the risk of stirring up old problems - and more than that, give them a global airing - when you don't need to? Hubris, insensitivity, poor research, or just bad PR? It would be interesting to find out.

The bottom line is that the Olympics offers great opportunities for corporations to connect with a global audience. But those opportunities do not come risk free. Companies need to have their reputations in their best possible condition before they take such a plunge. And they need to have the PR department, the CSR team, risk management, and the senior leadership working together from the get go to minimize any damage.  Just ask any Olympic athlete. Winning at the Games is all about preparation, dedication, commitment, and having the right team in place to get you there. Business should be no different.

Photo by the|G|™. Reproduced under Creative Commons Licence

I selected this post to be featured on Ethics Blogs. Please visit the site and vote for my blog!

Ethical slum tourism

"Money good, working bad." Our guide, Ishaq has no shortage of aphorisms to capture the light and dark of life in Dharavi, one of Asia's largest slums. He points to the clouds of noxious fumes rising from the aluminium recycling unit where battered old containers are melted down and turned back into usable product. There are few if any environmental standards adhered to here, and health and safety is a concept seemingly irrelevant to the wage laborers whose safety boots are flip flops. But although the dangers are many, there is regular paid work. And for Mumbai's slum dwellers, that is what matters most. And besides, who else is going to do the dirty work of recycling the city's discarded junk and refuge, and returning it into productive use?

The life of a business ethics professor takes you to some pretty interesting places. It is not too often though that we find ourselves in the middle of a huge urban slum. Not that we've been short of opportunities having spent time in cities such as Rio, Cape Town, and Mumbai over the last few years. But there is always a profound sense of unease about stepping into the life of the city's poorest residents. Of course, in some cases it's just plain dangerous, such  in the favelas of Rio. But even when it isn't, or when there's a local guide at hand to provide security, there are significant ethical doubts too. Knowing that you can just saunter back into the air conditioned hotel at the end of your trip to the slum means that you're little more than a slum tourist exploring the underbelly of society for your own voyeuristic pleasure. However much you may claim it to be educational to see how other sections of society live, slum tourism can't but help to raise moral uncertainty. This New York Times op ed from last year summarizes these concerns pretty succinctly. As a result, we've stayed away from the dubious attractions of slum tourism. Until now.

On the advice of a colleague, we decided to investigate a so-called 'ethical' slum tour provider. Whilst in Mumbai teaching at our school's MBA program in India we hooked up with Reality Tours and Travel, which offers tours of Dharavi, the city's largest and most well known slum. Dharavi is pretty much slap bang in the middle of modern metropolitan area of Mumbai, and just a short ride away from the 5-star luxury hotel where our school puts up its itinerant professors. The contrast, as with much of modern Mumbai, couldn't be more stark. Air-conditioned comfort is immediately replaced by a sweltering cacophony of noise and dirt. And discreet service is replaced by perilous, unrelenting industry.

It's clear that this is not just any old slum tour. There is a strict 'no cameras' policy, and the focus of the tour is not so much the corrugated iron shacks of the residential quarters of Dharavi, but the remarkable commercial activity that powers the slum's economy. It is said that some 5000 businesses operate in the tightly packed lanes of Dharavi, accounting for an incredible $600m of turnover annually - much of it in the illegal or informal economy. Recycling, leather and pottery make us the largest proportion of this, and so it is these that provide the focus of Reality's slum tour. Ishaq leads us first to a fragrant bakery and then onto a micro plastics recycling business where piles upon piles of multicoloured plastics are dried and then painstakingly sorted on the roof, before being melted down and then formed into pellets for resale in the cramped concrete rooms below. A sink and a few rolled mats is the only evidence that this is also where the workers live and sleep once the days' work is done. After that we move on to other recycling businesses, before passing the leather cutting, tanning and treating area and then onto the more peaceful environs of the potters colony which called Dharavi home since the 1930s. Along the way, we also take in a popadom bakery to see how the cross legged women shape and bake the traditional Indian appetisers, and briefly pass through (but do not stop at) some residential lanes.

According to Reality, the aim of the tour is "to show the positive side of the slums and break down negative stereotypes about its people and residents". Our trusty guide certainly doesn't fail to offer a positive spin on what might otherwise simply turn into a grim picture of India's unrelenting filth and poverty. He engages amiably with local residents, and he shows us a local health centre, an English language middle school, thriving businesses - this is no sob story meant to induce pity but an encouraging (if realistic) glimpse into Dharavi's struggle to sustain and prosper against the odds. As if to reinforce this, the tour finishes at the community centre run by Reality's sister organization (the NGO Reality Gives) which provides English, computing and skills training to disadvantaged young people.

It's a nice touch, but the real kicker is that this is not just some minor charitable add-on to 'put something back'. When Reality talks about changing the image of the slum, it goes beyond simply refocusing the optics. The company is putting its money where its mouth is. Since setting up in 2006, Reality has pledged that a full 80% of the profits from the slum tours would go to local charities. They even publish a summary of their accounts on the web to prove it. The establishment of their sister NGO Reality Gives in 2009 has provided a focus for these efforts, and along with the community centre, has now opened a kindergarden to provide quality education for preschoolers in the slum.

'Ethical' or 'responsible' tourism of all stripes, is a work in progress. Ethical slum tourism, in particular, poses all kinds of moral challenges. In our opinion, Reality is doing a fine job in walking that tightrope. Whilst it doesn't appear to have yet addressed the critical questions of scale - the more it succeeds, the more it risks overwhelming the slum with tourists - it does tackle both the content of its tours, and what it puts back into the community. Training and employing disadvantaged young people as guides, focusing on slum businesses rather than people's private lives, and banning cameras all help remove some of the moral tensions that can give slum tourism a bad name. And making investments that help educate slum residents and give them a chance to improve their lives helps balance the one-sided equation a little. Just ask the Dharavi resident who reveled in taking snaps of our small band of tourists whilst our own cameras stayed firmly in our backpacks.

Photo by Meanest Indian. Reproduced under Creative Commons License.

Can India hit corruption for six?

India, a country of cricket fanatics, has been in serious celebration mode since the national team's thrilling victory in the cricket world cup last weekend. News and media outlets here have covered little else for days. It's been front page news in the national press and all the rolling news programmes have been swamped with wall-to-wall coverage. Now though, as the euphoria starts to die down after Sunday's big victory, attention is beginning to turn to another major issue facing the country - corruption. The big question is though, will India be as victorious in fighting corruption as it has been at fighting its cricketing rivals. And the answer, we fear, is almost certainly no.

Corruption has been a serious problem in India for longer than anyone cares to remember. At 87th, it currently ranks about half way up the Corruption Perception Index from Transparency International. A score of 3.3 (out of a possible 10) suggests a major corruption problem. But recent events, such as the 2G bandwidth auction scandal, and investigations of widespread corruption at last year's Commonwealth Games in Delhi, have suggested a growing willingness by the media to investigate and report on corruption issues, and there is discontent with the practice amongst ordinary Indian people.

Much of the attention has understandably focused on public sector corruption, but few cases exclude companies as alleged bribe payers too. Late in 2010 Telecommunications Minister Andimuthu Raja was forced to resign over allegations that he lost the Indian Government some $38 billion in revenues by offering 2G telecom spectrum licences to favoured companies on beneficial terms. This week, struggling for media attention amongst the cricket hullabaloo, Raja, eight other individuals, and three companies were formally charged with criminal conspiracy, forgery, cheating and corruption in relation to the case. Meanwhile a parliamentary committee investigating the scandal this week quizzed Ratan Tata the head of the Tata Group about his role in the scandal, although unlike some of its rivals, there is no suggestion that Tata is likely to be subject to any charges.

The 2G scandal is gradually gathering momentum, and is putting significant pressure on the Indian government to do something serious about the escalating corruption problems. As yet, though, little tangible action is on the cards. One significant piece of legislation, the Jan Lokpal Bill, proposes to introduce an independent corruption ombudsman body at both national and state levels, but has been held up in protracted redrafting. The country was first promised such a law some 40 years ago. Now, with a view to preventing the government from procrastinating further and watering down the bill, social activist Anna Hazare from India Against Corruption, has pledged to go on an indefinite hunger strike to force the authorities to act. His demand is that they allow civil participation in the bill's review rather than let the government simply force through a toothless version that will do little to address the country's endemic corruption problems. Hazare's promise to fast until death is garnering huge attention and hundreds of people are now planning to join the fast.

Whether the Indian government will see this perfect storm around corruption reform as an opportunity to address a problem that drags down growth and hampers social equity remains to be seen. We certainly hope so. As Rahm Emanuel said at the time of the financial crisis in 2009, "you never want a serious crisis to go to waste."So far though, Prime Minister Singh's Government looks set to do exactly that - waste a perfectly good crisis. India, the country of world champions, deserves better.

Top 10 Corporate Responsibility Stories of 2010

Mermaids protesting the BP oil spill. Photo by Johnathaneric.

 It's been a big year for corporate responsiblity. A huge oil spill, continued ructions in the financial sector, landmark decisions in the courts, and a new dawn for online companies around human rights issues. It is never easy to pick the most important stories of the year. Some get huge coverage simply because they feature big brand companies. Some hardly even scratch the public consciousness despite having major implications. In other cases, it can be difficult to determine accurately what their long-run significance will be.

But here in the Crane and Matten control room, we've put our heads together to come up with what we regards as the top 10 corporate responsibility stories of the year. These are the events that we think will have the most lasting impact on the field. But it was a hard choice - narrowly missing the cut were the 10 year anniversary of the Global Compact, the FIFA World Cup corruption scandal, Unilever's "Sustainable Living" plan, Apple's labour violations, Wal-Mart's latest announcements on sustainable agriculture, Jerome Kerviel's massive fine, and American Apparel's rollercoaster ride through 2010, among others.

But, hey, not everyone can be a "winner". So if you think we're worng, or if we've missed off your biggest story of the year, do let us know. And while you're at it, take a moment to complete our poll on the right to help us find the top stories according to our readers.Here, though, is our top 10.

1. BP's oil spill in the Gulf of Mexico
Deepwater Horizon was one of the world's largest ever oil spills, and understandably this story absolutely dominated 2010. Not only did it put a final nail in the coffin for BP's once vaunted sustainability reputation, but it heralded a major rethink about the viability of deep sea drilling. BP didn't cover itself in glory by failing to come up with a realistic remedy until far too late - and ended up picking up most of the tab, thereby putting paid to the usual assumption that pollution is simply an 'externality' of business. Really, this was the mother of all corporate responsibility crises in 2010.  

2. Google's battle for free speech
Google's withdrawal from China at the beginning of the year was a landmark decision in the battle for free speech on the web. A real clash of titans, no other story this year illustrated better the clash between government and big business around human rights issues. But Google's subsequent legal problems in Italy, where senior executives were convicted of privacy violations, demonstrated just how complicated this battle is going to be. 

3. WikiLeaks publication of the embassy cables
Who knows where this one will end up, or just what its long term significance will be for corporate responsibility? But it's hard to deny its significance as a major turning point in the fight for greater government transparency, and the contested role of the media and NGOs in bringing confidential information into the public realm. Heralded by some as the first great cyber war, the WikiLeaks maelstrom inevitably catapaulted online companies into the fray with predictably unpredictable results.   

4. Citizens United decision
The only court case to make it into the Top 10,  but according to President Obama the 5-4 decision by the US Supreme Court in Citizen's United vs Federal Election Committee "reversed a century of law" and "opened the floodgates" for corporations to play an ever greater role in US politics. According to the ruling, companies and other special interests can now spend as much as they like on influencing the outcome of elections. And why? Because despite their vast resources, companies should have rights to free speech on political matters the same as any other citizen. An historic ruling.

5. Toyota’s product safety recall
This case grabbed a lot of headlines in 2010, mostly because of the very scale of the recall and Toyota's previously unblemished safety reputation. This was a huge embarrasment for the Japanese car maker and showed up serious problems in the firm's management culture.

6. Bank bonuses 
Bank bonuses stayed in the headlines during 2010. Despite continued economic problems, huge public bailouts in Greece and Ireland, persistent unemployment, and widespread austerity measures, some banks managed to award bigger bonuses in 2010 than ever before.  No surprise that the public stayed angry with a bonus culture apparently so far removed from their day-to-day problems. But European regulators finally seemed to get the message with new guidelines released at the end of the year that looked set to dramatically change the bonus landscape across the entire continent.

Butcher in Haiti with food vouchers used to stimulate trade. Photo by DFID

7. Corporate response to the Haiti earthquake 
Few stories better illustrated the precarious role of business in international development than the corporate response to the Haiti earthquake back in January. The arrival of cruise ships full of vacationers represented for many the unacceptable face of corporate insensitivity and amoral consumerism. Yet, few denied that business had to be an essential ingredient in getting the stricken country back on its feet again. 

8. Greenpeace campaign against Sinar Mas palm oil 
Greenpeace won Ethical Corporation's campaigner of the year in 2010 for its work in combating deforestation. This was exemplified in the NGO's campaign against Indonesian palm oil producer Sinar Mas which saw them force Unilever, Nestle and others to cease buying from the company during the year. Greenpeace's spoof ad on YouTube for the Nestle chocolate bar Kit Kat went viral demonstrating how campaigners were effectively harnessing social media for anti-corporate protest. 

9. HP's termination of CEO Mark Hurd
Hewlett Packard has had its ethical ups and downs over the years, but few expected the company to follow through quite so severely when CEO Mark Hurd was found to have made fraudulent expense claims to cover up a relationship with a female contractor. Rejecting Hurd's offer to pay back the $20,000 he'd received for the claims, the highly regarded leader was ousted by the board for failing to live up to the company's code of conduct. This was an impressive commitment to ethical rules by anyone's standards. However, it angered many who thought the company was shooting itself in the foot. A tumbling stock price and Hurd's instatement at competitior Oracle showed how much pain there could be in doing the right thing.

10. India's 2G licence scandal
OK, so actually this happened in 2008, but it was only in the closing months of 2010 that the full extent of the 2G telecom spectrum licences scandal began to be revealed. In what some have called India's biggest scandal since independence, Telecommunications Minister Andimuthu Raja was forced to resign over allegations that he lost the Indian Government some $38 billion in revenues using an opaque permit system that was riven with corruption. Leaked tapes of secret phone calls with corporate lobbyists have poured oil on the fire. This could yet become India's Enron moment.

So that's our Top 10 for 2010. Doesn't make for particularly edifying reading, but it hasn't been all bad. In amongst the scandals and corruption there have been some genuine cases of ethical leadership in 2010, where companies like Google and HP have had to make some hard ethical choices that have cost them dear. No ne said corporate responsibility was easy.

Ratan Tata: corporations in the developing world have to be more paternalistic

In the last decade, the business case for CSR (i.e. that attention to social issues needs to make sound business sense) has become something of a mantra for corporate responsibility advocates. Deviation from this script is rare. So it was refreshing to hear Ratan N. Tata, the leader of India's largest conglomerate, Tata Sons Ltd, mark his first public engagement in Canada by speaking eloquently last night of his commitment to a different approach to responsible business.

Speaking as the guest of honour at the inaugural event of the Thomas J. Bata Lecture Series in Responsible Capitalism , hosted by our own Schulich School of Business here in downtown Toronto, Tata make it clear that in his view, the developing world presented a different type of challenge for corporate responsibility. "Building schools and hospitals," he argued, "is something you have to do" in countries like India that lack basic government provisions. For corporations, he suggested, this meant that they have had to adopt a "more paternalistic" approach than that required in the developed world.

His own company, the Tata group, has become something of an icon in the responsible business world. Sure, they've had their run-ins with environmentalists, unions, and community groups over the years, most recently with the launch of the Tata Nano. But few could deny the contribution the company has made to social and economic development in India. And despite a rapid global expansion over the past two decades that Ratan Tata has been at the helm, the company has managed to combine its business success with an impressive commitment to business integrity and community service. Last night, as he reeled off a string of successful community engagement projects pioneered by the company, Tata claimed that, "with all of this, there's been no business gain for us. Yes, it creates goodwill that no advertising campaign will ever achieve, but it's not why we do it".

Tata's emphasis on the moral case for CSR perhaps makes sense when considered in the context of his particular company, which is 66% owned by philanthropic trusts. However, his comments were also echoed by his fellow business leaders on the responsible capitalism panel, Ed Clark the CEO of TD Bank and Jacques Lamarre, the former CEO of the global engineering firm SNC Lavalin. Clark, for instance, was keen to emphasise the importance of a values-based approach to responsibility. Citing his company's sponsorship of Toronto Pride, the annual gay and lesbian festival, Clark suggested the bank had lost business from customers upset about the advocacy of LGBT issues. But, he insisted, the bank was committed to diversity and "had to stick to its values".

Of course, all this talk of corporate responsibility beyond the business case could just be only so much hot air from corporate leaders keen to spin the image of capitalism away from its "greed is good" reputation. But in a world where, as Doug Miller, the chair of Globescan commented from the audience, the public had increasingly lost faith in capitalism, it was good to see that a new way of talking about "responsible capitalism" might at least be possible.

‘Responsible Luxury’

If one takes a taxi from the airport in Bangalore, India, into the city, the first billboard you will see boasts the words: ‘Responsible Luxury!’ It's an ad for a hotel chain, presumably one of those that recently opened another 7-star hotel in the business processing outsourcing capital of the world.

Whatever this phrase means - it pretty much uncovers the enormous contrasts and ambiguities of the economic wonder in India, much of which are epitomized in the 8m population of Bangalore. On the one hand there are the shiny, super stylish office buildings – or ‘campuses’ – of many western and Indian MNCs which have made the city the world’s leading place for IT services and software development. Being on the premises of these companies feels a lot like being in an office environment somewhere in North America or Europe.

On the other hand, Bangalore is a typical ‘third world city’ with constantly jammed up streets, poverty, pollution and shanty towns. The difference between the luxuries of the ‘first’ and the plights of the ‘third’ world could be nowhere more visible.

Now, there are two ways of going about this gap. One option would be to just hermetically isolate those two worlds against each other. We mentioned this approach – referred to as ‘brazilianization’ - in another blog. By the looks of it though, this is not the way things are going in India. India is a long standing democracy, has a vibrant media scene and fairly strong civil society organizations. So what we see here is more an ongoing struggle between these two worlds.

It is interesting to see the role of business in this. For sure, there is a long tradition of business engagement for social needs in India. Companies such as Tata and others have a long legacy of philanthropy and many of the new IT ‘stars’ such as Infosys have followed their example. Talking to business people here one can see a sincere commitment to not just indulge in the luxuries brought along by a booming IT industry but rather make it trickle down to wider parts of society. Responsible Luxury, as it were. How good a proposition that is and if it works ... well, we'll just have to keep you posted.

Business ethics at the Toronto International Film Festival

At the moment, here in Toronto, we are in the midst of the 2008 Toronto International Film Festival (TIFF), which is one of the world's premiere festivals , up there with Cannes, Venice and others. The city is alive with movie folk, big name actors and directors, and excited film fanatics. It's a fun place to be.

Regular readers of the blog and some of our other work will know that we are enthusiastic advocates of the role of movies in enlightening us about various aspects of business ethics. And TIFF 08 is no exception, with a bunch of exciting new films that get to grips with some of the social, ethical and environmental challenges facing contemporary business across the globe. We'll talk about some of these movies in a moment.

But it's not just the movies that are putting corporate responsibility in the limelight at TIFF this year. With increasing commercialisation and corporate sponsorship of the festival, some critics are complaining that the one time "people's festival" has been taken over by big business interests. With priority entry at some venues for sponsors, just flashing your Visa card (Visa is one of the main sponsors) can get you early seating and a place in the special lounge with drinks and refreshments while everyone else has to queue outside. Understandably, not everyone is over-enamoured with the implications of these acts of "good citizenship" by corporations - or at least not when there are such strings attached.

But it's tough balancing act for arts organizations when governments such as the incumbent Canadian Conservative Government, make cuts to arts funding leaving the private sector as the next obvious port of call. If arts organizations go in this direction, the challenge is obviously to work out a relationship that creates meaningful value for both partners - and takes account of the various stakeholders of each institution. It's a difficult proposition, but an important one to get right if these partnerships are to be sustainable. TIFF has clearly had the first warning shot fired across its bows and festivals around the world would do well to make sure they systematically incorporate these concerns into their subsequent planning.

But onto the films...

This year's line up has a few hot new documentaries that look worth checking out, including these (for more details check out the full program at http://www.tiff08.ca/:

Food, Inc. directed by Robert Kenner explores how modern developments in food production pose risks to our health and the environment. According the TIFF 08 programme:

Food, Inc. carefully dissects the cozy relationships between business and government in both political parties. In opposition to these powerful interests, we meet people from all walks of life, from a Republican mother who lost her two-year-old son to E. coli poisoning to the founder of Stonyfield Farm Organic Yogurt, who flouts conventional left-wing dogma by seeing a positive side to Wal-Mart.

Upstream Battle, directed by Ben Kempas, about Pacific salman, Native Americans, hydro-electric dams, and water rights in Northern California and Oregon (see the trailer here):

"Upstream Battle is wonderfully nuanced, acknowledging the complexity of the situation. The other stakeholders in this ecosystem include farmers who rely on the water for irrigation; the neighbouring tribes of Yurok, Karuk and Klamath; and commercial fishermen who catch the salmon at sea. The film manages to humanize those on all sides, including the corporate employees whose own livelihoods are in flux over changing owners."

And for a dose of individual resistance to organizational corruption, Yes Madam, Sir, directed by Megan Doneman tells the story of Kiran Bedi, the first woman to join the Indian Police Service, former head of Tihar Jail, Asia's largest, and notoriously corrupt and overcrowded prison, and latterly resident at the UN in New York.

"Kiran Bedi is arguably India's most controversial daughter, both revered by her supporters and reviled as a self-centred publicity seeker by her critics. In this captivating examination of her life, Australian documentarian Megan Doneman shows that whatever people may think of Bedi personally, there is no disputing her professional achievements. "

We'll try and catch one or two during the festival, but anyone that has seen these or who has more details, do drop us a comment. And if you're not in Toronto, keep an eye open for local release announcements ... and fof course or other new films that might be of interest. We're always keen to hear about new movies to feature. But let us know who you're being sponsored by first!!