Sunday, November 30, 2008

World Guide to CSR - Call for Contributors

Could you write an authoritative summary on the State of CSR in your country? Would you like to be positioned internationally as an expert on CSR for your country? If so, I would encourage you to respond to this Call for Contributors by CSR International.

Following the tremendous success of “The A to Z of Corporate Social Responsibility”, I am editing a new book called “The World Guide to Corporate Social Responsibility”. We will be including country and regional profiles on CSR, with key information about the history, issues, trends, research and organisations.

If you are interested in being the contributor for a particular country/region, please apply by sending o wayne@csrinternational.orgt: 1) A motivation statement (no more than 1-page); 2) a sample of your writing (an extract of no more than 2 pages); and 3) your CV. Please include the country/region you are applying for in the title of your email. Selections will be made during December. A writing template will be provided and the deadline for final text is 31 March 2009.

CSR Master Classes

Professor Wayne Visser, author of The A to Z of Corporate Social Responsibility, Founder and CEO of CSR International, will teach a series of three Master Classes in London in 2009.
23rd, 24th  January 2009 (1 day, repeated on Friday and Saturday)
You will learn about CSR past, present and future, focusing on business cases and standards.
27th, 28th February 2009 (1 day, repeated on Friday and Saturday)
You will learn international models and trends, study regional perspectives continent by continent and get an insight into Bottom of the Pyramid markets.
27th, 28th March 2009 (1 day, repeated on Friday and Saturday)
You will learn how CSR can convey change and make a difference at an individual, organizational and societal level.
Participants who complete Master Classes I, II and III will receive a CSR International Level 1 Certificate
To book or make an enquiry, please contact
Best regards,

Clémence Viel


Wayne Visser is Founder and CEO of CSR International and the author/editor of six books, including five on the role of business in society, the most recent of which are Making A Difference and The A to Z of Corporate Social Responsibility. In addition, Wayne is Visiting Professor in CSR at Manheim University (Germany) and Senior Associate and Internal Examiner at the University of Cambridge Programme for Industry (UK), where he previously held positions as Research Director and External Examiner. Before getting his PhD in Corporate Social Responsibility (Nottingham University, UK), Wayne was Director of Sustainability Services for KPMG and Strategy Analyst for Cap Gemini in South Africa.

Wednesday, November 26, 2008

Who Are Your Top 10 CSR Leaders?

CSR International is putting together a Top 100 CSR Leaders List - including both thought-leaders and leaders-in-practice. 

To start with we are asking for your Top 10s, from which we will compile a master list. We will then open it to a public vote, based on which we will create a ranking.

To get the process going, here is my Top 10 list (in no particular order):

* John Elkington
* Stuart Hart
* Muhammad Yunus
* Simon Zadek
* Michael Braungart
* Jeffrey Immelt
* Jeffrey Hollander
* Anita Roddick
* Ricardo Semler
* Stephan Schmidheiny

Who would you add to your list of corporate sustainability and responsibility leaders?

Tuesday, November 18, 2008

Can CSR Make Us Happy?

In the face of unprecedented global challenges like financial market instability, persistent poverty and climate change, can individuals make a difference? This blog looks at what motivates people to devote their time and energies to addressing social, environmental and ethical issues.

In particular, it shows how CSR or corporate sustainability and responsibility can provide a powerful way to address what I have called the “existential gap” (Ethical Corporation, July 2004), or lack of a deeper sense of personal meaning and job satisfaction felt by many employees today.

A survey a few years ago by London PR firm Fish Can Sing hinted at the extent of the problem. It found that 66% all 18-35 year-olds were unhappy at work. The proportion rose to 83% among 30-35 year-olds. One in 15 respondents had already quit the rat race and 45% were seriously contemplating a career change.

Someone in this latter group was described as being TIRED, or a Thirty-something Independent Radical Educated Drop-out. These otherwise highly successful and motivated professionals were found to be lacking something in their working lives. They wanted less work-related stress and shorter working hours, and more job satisfaction, and higher quality of life.

What’s more, the existential crisis does not appear to be confined either to the thirty-something age group, or to the UK. According to the Worldwatch Institute, today the same number of Americans – about a third – report being “very happy” as did in 1957, even though they are as a group twice as wealthy as they were 50 years ago. And in Japan, there is even a word for “death from overwork” – “karoshi”.

The industrialised world in general fares much worse than expected on some measures of wellbeing. For example, in the New Economics Foundation’s 2006 Happy Planet Index, which measures the relative efficiency with which nations convert the planet’s natural resources into long and happy lives for their citizens, Italy is 66th, Germany 81st and Japan 95th. The UK comes in at 108th, Canada 111th, France 129th, and the US 150th. 

So what is going on here? So what is going on here? Victor Frankl, author of Man’s Search for Meaning and a personal survivor of four Nazi concentration camps, suggests that the western pursuit of economic growth may be to blame: “Consider today’s society,” he says, “It gratifies and satisfies virtually every need – except for one, the need for meaning. This spreading meaning vacuum is especially evident in affluent industrial countries. People have the means for living, but not the meanings.”

Management thinker Charles Handy puts it another way: “We seem to be saying that life is about economics, that money is the measure of things. My hunch is that most of us don't believe any of this, and that it won’t work, but we are trapped in our own rhetoric and have, as yet, nothing else to offer, not even a different way to talk about it.”

Handy may be right. Then again, surely one “different way to talk about it” is through the language of sustainability and responsibility? After all, these are matters which run deep. They are matters of values and beliefs, of higher aspirations and noble causes. And yet, even here, we find the prevailing rhetoric of corporate responsibility is mostly about the business case. Talk of the “moral case” or the “personal case” for corporate responsibility is taboo – as if stripping human emotion and personal motivation from the debate on what companies should behave somehow makes it more credible, if not more effective.

My research suggests that this corporatised, depersonalised approach to corporate responsibility is failing to tap the massive source of energy for constructive change that exists in companies and the world. The reason is that the “CSR-zombie” view of the world – reflected in the mantra, “I only do corporate responsibility because it’s good for business” – completely fails to appreciate why people choose to work in corporate responsibility, what satisfaction they derive from this work, and what motivates them to keep trying to make a positive difference, despite huge obstacles and frustrations. 

To read the full article, published in Ethical Corporation, go to:

Thursday, November 13, 2008

Responsabilidad Social en tiempos de crisis financiera

Responsabilidad Social, Ano 2, Numero 16, Noviembre del 2008

Por Wayne Visser

No hay nada pequeño o trivial acerca de esta crisis financiera. Y es probable que la crisis financiera tenga un impacto sustancial en materia de Responsabilidad Social Empresarial (RSE). La pregunta es, ¿Cuál será el impacto? ¿Quién ganará y quién perderá?

Según un sondeo ejecutado en el blog de CSR Internacional durante el mes de octubre, 44% de los ejecutivos relacionados con la responsabilidad social creen que la RSE se incrementará como consecuencia de la crisis. Otro 26% cree que va a cambiar, mientras que el 22% piensa que se debilitará.

Se trata de un resultado poco sorprendente y tal vez oculta una respuesta más compleja. En mi opinión, el impacto de la crisis variará dependiendo del tipo de RSE que se practique.

Diferentes impactos

Filantropía. RSE enfocada en acciones filantrópicas será la más afectada. 
Tengo pocas dudas de que quienes han adoptado esta versión inmadura de la RSE, van a sufrir importantes recortes en su presupuesto durante la próxima recesión.

Independientemente del hecho de que los más necesitados de la caridad serán más afectados por la crisis, las empresas de todo el mundo se verán obligadas a la reducción de costos, y los presupuestos de la filantropía será uno de los primeros en ser recortados. 

RSE estratégica.  Ésta será la menos afectada

Es probable el concepto estratégico de la RSE de Michael Porter y Mark Kramer pagará dividendos a sus seguidores a raíz de la crisis financiera.

Ambos expertos sostienen que "entre más estrechamente vinculada está la cuestión social al modelo de negocios, mayor será la oportunidad de apalancamiento de la empresa para sus recursos y para beneficiar a la sociedad". 
Por ejemplo, el compromiso de Coca-Cola por convertirse en una empresa neutral en agua está tan estrechamente vinculado a su actividad principal, que no pueden permitirse el lujo de abandonar este programa estratégico de responsabilidad social. 

Ellos saben que si no son percibidos como usuarios responsables de los escasos recursos hídricos de las comunidades en que operan, sus negocios, en última instancia, fracasarán.

RSE Integrada. La RSE sólo puede ser resistente si es parte del ADN de una organización.

En otras palabras, la RSE sólo sobrevivirá los caprichos de los volubles mercados, la fluctuación de las utilidades, las crisis financieras y los caprichos de liderazgo si está totalmente arraigada en la cultura corporativa, la estrategia y los sistemas de gobernanza.

La inminente recesión será la última prueba de ADN para las empresas. En un año tendremos una idea mucho mejor de quién ha impulsado la responsabilidad social en el corazón de su negocio y quién lo lleva como una máscara.

RSE 2.0.  Para aquellas empresas que están atentas a las oportunidades de la revolución de la RSE 2.0, incluso la recesión presentará grandes oportunidades para el crecimiento de los negocios, así como beneficios financieros.

Esto se debe a que la RSE 2.0 se refiere a  la creación de soluciones para los más urgentes y difíciles problemas del mundo, tales como el estrés hídrico y el cambio climático.

A diferencia de la a RSE del pasado, la RSE 2,0 se impulsa con la ola de sustentabilidad de los mercados. 

Por ejemplo, la demanda de fuentes de energía renovables y tecnologías bajas en carbono ahora supera con creces la oferta.

Y dado el aumento de los costos del cambio climático, los altos precios del petróleo y ambiciosos objetivos políticos, de hasta 80% de reducción en las emisiones de gases de efecto invernadero hasta 2050, las empresas que se han posicionado estratégicamente como proveedores de tecnologías limpias seguirán beneficiándose de este mercado de 284 millones de dólares, que se espera que crezca a más de 1.3 billones para 2017.

Prueba de fuego

Por lo tanto, la respuesta a la pregunta, ¿Cuál es la relación entre la crisis financiera y la responsabilidad social de las empresas? es que depende.

Del mismo modo, la respuesta a la pregunta ¿Cómo va a ser responsabilidad social de las empresas afectada por la crisis financiera? depende de cuán profunda es la RSE dentro de la organización.

Es decir, si es filantrópica, estratégica o integrada, o incluso la responsabilidad social de las empresas en su más revolucionaria versión 2.0.

De cualquier manera, la recesión que se avecina no sólo será una prueba de fuego para el compromiso de las empresas con la RSE, sino para la RSE.

Puede ser que ha llegado el momento de la RSE para adaptarse o morir.

El autor es Director y Fundador de CSR Internacional, con base en Cambridge, Inglaterra.


Monday, November 10, 2008

The State of CSR Reporting in Asia

CSR Asia has just launched their inuagural Business Barometer, which measures CSR disclosure among the top 20 listed companies in Hong Kong, Malaysia, Singapore and Thailand. 

The ranking is based on 62 indicators across the following categories:
1. Company (codes and policies)
2. CSR strategy and communications
3. Marketplace and supply chain
4. Workplace and people
5. The environment
6. Community investment and development.

The findings make interesting reading:

TOP ISSUES - Company (codes and policies) are the most reported CSR issue (scoring 59%), compared with workplace and people scoring only 19%. This seems to imply a continued lack of transparency on Asia's thorniest CSR issue, namely labour conditions.

TOP COUNTRIES - The companies' overall score remains low (30%), but there is some national variation, with Hong Kong scoring best (42%), as compared with Malaysia (29%), Thailand (25%) and Singapore 24%).

TOP COMPANIES - The top companies - China Light and Power and HSBC, both listed in Hong Kong - scored 93%, as compared with the poorest performer - Hong Kong Land - scoring only 3%. The top company in Malaysia was, somewhat controversially, BAT (British American Tobacco) Malaysia; in Thailand, it was Siam Cement, and in Singapore, City Developments.

What can we understand about CSR in Asia from these findings? 

1. LAG EFFECT - Transparency and reporting is not a strong tradition in the East (some would even argue that it is contrary to many cultural norms), so companies are playing catch-up on the overall trend. It remains, by and large, an expectation imposed by the West.

2. LARGE SPECTRUM - The huge variation between the best and worst performers, as well as the overall poor performance, suggests that there is a general lack of awareness, expectation and standards on CSR reporting in Asia.

3. SIZE DOES NOT MATTER - An analysis of the findings showed that there was no correlation between company size and CSR reporting performance. Hence, we need to take other factors into account - international aspirations and strength of leadership for example.

4. IMPLICIT CSR - We should remember that CSR reporting does not necessarily equate to CSR performance. It is quite possible that many Asian companies, much like in Europe, engage in what Matten & Moon call "implicit" CSR (as compared with "explicit CSR" in America).

5. GLOBALISATION MATTERS - However, any Asian company now engaged internationally, either through the supply chain or foreign direct investment, will increasingly need to meet minimum standards for transparency (such as the Global Reporting Initiative) and for CSR (such as the Global Compact). Only 5 of the 80 companies were Global Compact signatories.

My expectation is that we will see overall performace in the Barometer leap up over the coming year or two, as a combination of domestic awareness and international pressure raises CSR further up the politcal and economic agenda in Asia.

For more information, see

Tuesday, November 4, 2008

CSR and the Financial Crisis: Taking Stock

The scale of the crisis

There is nothing small or trivial about this financial crisis. According to the Bank of England’s recent Financial Stability Report, governments worldwide have already pledged more than $7 trillion in loans, guarantees, capital injections, and other assistance in their coordinated effort to prop up the global financial system. And the ILO estimates the crisis will cost 20 million jobs by next year.

This is not the first financial crisis the world has seen over the past century. The worst, of course, resulted in the Great Depression in the 1930s. But there have been numerous others, all of which carried painful economic and human costs. For example, the crises in Argentina (1981-1990), South Korea (1997-1999) and Thailand (1997-2000) all cost more than 30% of those countries’ GDPs.

But even by historical standards, the 2008 crisis is BIG. In what’s been dubbed “Wall Street’s Red October”, the S&P 500 plunged 16.9%, or 198 points, for the month. That's the worst-ever monthly point decline for the S&P 500. The Dow similarly dropped 14.1%, or 1,526 points. And the ILO estimates that the crisis will bring the total unemployed to more than 210 million for the first time in history.

The key difference is that, unlike the Asian and Latin American crises in the 1980s, this crisis is truly global. Some countries, like Iceland and Pakistan, are threatened by bankruptcy. Others, like Japan, have been hit by huge volatility in the markets. And even the cash-rich, high-flyers like China are seeing their growth suffering as a result. But what does any of this have to do with corporate social responsibility (CSR)?

The links to CSR

Irresponsible banking

I’d like to suggest a multi-level approach to this. At the first and most obvious level, we can say the financial crisis is a direct result of irresponsible banking. According to the Mortgage Bankers Association, the number of sub-prime loans offered to risky borrowers increased more than 15 times since 1998. Essentially, the banks got greedy and compromised good banking practices of credit risk assessment.

Irresponsible financial markets

At another level, the crisis is the predictable consequence of irresponsible financial markets. Since the deregulation of the 1980s, the derivatives market has grown to around $600 trillion dollars, almost 10 times the value of global GDP. This speculative trading (which some call the "casino economy") is meant to hedge risk, but it also increases the volatility and systemic risk of financial markets.

We would do well to recall economist John Maynard Keynes’ warning: “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

Irresponsible corporations

Others argue that the crisis is the inevitable consequence of irresponsible corporations. This is linked to the short-termism of shareholder value driven public companies. At the extreme, authors like Joel Bakan suggest that corporations have “a legally defined mandate to relentlessly pursue—without exception—its own self-interest regardless of the often harmful consequences it might cause to others.” This behaviour in humans, he notes, would be characterized as pathological.

Irresponsible executives

The financial crisis has been further inflamed, some claim, by irresponsible executives, as evidenced by their outrageous pay packages. In 2007, the CEO of a Standard & Poor’s 500 company received, on average, $14.2 million in total compensation, according to The Corporate Library. United for a Fair Economy reports that, in 2006, CEOs received more than 364 times the pay of the average U.S. worker (up from 42 times in 1980).

More specifically, it seems the leaders of Wall Street’s top banks are still in line to receive pay deals in 2008 worth more than $70bn, a substantial proportion of which is expected to be paid in discretionary bonuses. “Many critics of investment banks,” reports The Guardian, “have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions.”

Irresponsible capitalism

Some would even go so far as to say that the current financial crisis represents a systemic failure of shareholder-driven, free market capitalism. Among such critics is European Central Bank President Jean-Claude Trichet, who argues that the current financial crisis is partly a result of the demise of the original Bretton Woods’ agreement, after deregulation since the 1970s.

Trichet’s conclusion is unequivocal: “It’s absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline.” British Prime Minister Gordon Brown and French President Nicolas Sarkozy agree, stating that the turmoil has shown the world's post-Second World War financial architecture is not fit for the task of controlling today’s global financial system.

The impacts on CSR

Irrespective of its causes, it is likely that the financial crisis will have a substantial impact on CSR. The question is, how will this impact play out? Who will win and who will lose? According to a poll run on the CSR International blog during October, 44% of CSR professionals believe that CSR will increase as a result of the crisis. A further 26% believe it will change, while 22% think it will weaken. This is a slightly surprising result and perhaps masks a more complex answer. In my opinion, the impact on CSR will vary depending on the type of CSR being practiced.

Philanthropic CSR will be worst hit

I have little doubt that those who have adopted an immature version of CSR, in which CSR is primarily about philanthropy (sponsorship, donations, charity and employee volunteering), will suffer substantial cut backs during the coming recession. Irrespective of the fact that those most in need of charity will be worst hit by the crisis, companies around the world will be forced into cost-cutting and philanthropy budgets will be among the first to be trimmed.

Strategic CSR will be less affected

It is likely that Michael Porter and Mark Kramer’s concept of strategic CSR will pay dividends for its followers in the aftermath of the financial crisis. They argue that “the more closely tied a social issue is to a company’s business, the greater the opportunity to leverage the firm’s resources—and benefit society.” Hence, companies that have aligned their philanthropic and broader CSR efforts with their core business are more likely to protect these initiatives, even during the recession.

For example, the commitment Coca-Cola has made to become a water neutral company is so closely tied to its core business (which is, after all, mostly about selling huge volumes of sugar water), that they cannot afford to abandon this as a superfluous CSR programme. They know that if they are not perceived to be responsibly managing the scarce water resources of the communities in which they operate, their business will ultimately fail (as they have already found to their detriment in India).

Embedded CSR will be largely unaffected

CSR can only be resilient if it is part of the DNA of an organisation. In other words, CSR will only survive the vagaries of fickle markets, fluctuating profits, financial crises and leadership whims if it is totally embedded in the corporate culture, strategy and governance systems. The impending recession will be the ultimate DNA-test for companies. A year from now, we will have a much better idea of who has driven CSR deep into the heart of their business and who has simply been wearing it as a mask.

One example may be the UK’s Co-operative Bank. Although it will not emerge from the financial crisis completely unscathed, its deeply ingrained ethical approach to banking – introduced in 1992 – is unlikely to change and may even have contributed to its robustness over the past 12 months. As Jonathan Porritt, Chairman of the UK’s Sustainable Development Commission says, “at the very least, the relative resilience of this business model should prompt both Treasury and the sector’s regulators to think again about alternative ownership and governance structures in the financial services sector.”

CSR 2.0 will continue to strengthen

For those companies that are alive to the opportunities of the CSR 2.0 revolution, even the recession will present large opportunities for business growth and financial profits. This is because CSR 2.0 is all about the creation of scalable solutions to the world’s most urgent and intractable problems, such as water stress and climate change. Unlike the defensive, incremental, risk-based CSR of the past (CSR 1.0), CSR 2.0 rides the wave of emerging responsible and sustainable markets.

For example, the demand for renewable energy and low-carbon technologies now far exceeds the supply. And given the escalating costs of climate change, the high oil price and ambitious political targets (of up to an 80% reduction in greenhouse gas emissions by 2050), companies that have strategically positioned themselves as clean technology solutions providers will continue to benefit from this $284 billion market, which is expected to grow to over $1.3 trillion by 2017.


Hence, the answer to the question, “What is the relationship between the financial crisis and CSR?” is that it depends. It depends on your beliefs about how deep the irresponsibility behind the economic meltdown runs – is it banks simply overextending themselves, or a far more systemic failure in the corporate, financial and capitalist models?

Similarly, the answer to “How will CSR be affected by the financial crisis?” depends on how deep CSR runs within the organisation – is it superficial philanthropic CSR, something more strategic or embedded, or even the more revolutionary CSR 2.0 version? Either way, the recession ahead will not only be an acid test for companies’ CSR commitment, but for CSR itself. It may very well be that the time has come for CSR to adapt or die.

Monday, November 3, 2008

CSR Lessons from China's Milk Scandal

This is a guest column by Professor Richard Welford, Chairman of CSR Asia.

The scandal that has already claimed the lives of four babies and sickened some 60,000 after they were fed the powder, made by the once-prestigious Sanlu Group, has huge implications for corporate social responsibility. The milk, which had been laced with the industrial chemical melamine, used in plastics and glue, gave children kidney stones.

The Chinese government has said that officials in Shijiazhuang, where Sanlu is based, had covered up the extent of the problem for more than a month while China was hosting the Olympic Games. There, a local government spokesman, revealed that Sanlu (43 percent owned by New Zealand’s Fronterra Group) had approached them for help in managing the media response on August 2nd, six days before the games opened.

In fact, local media had known that problems were being reported by parents of babies across China who had been fed Sanlu formula. However, the reporters were unable to publish their findings because of strict media controls imposed by the government during the games.

Industrial experts are now predicting the bankruptcy of Sanlu. It is unlikely a single company will be able to take over Sanlu as its debts total more than 700 million yuan, not counting massive compensation claims.

But as well as highlighting yet another cover up, the scandal has also revealed, once again, the deficiencies of industry oversight and the weakness of regulatory bodies and ongoing problems associated with corruption. Despite orders from China’s central authorities to recall all milk produced before September 14th, banned milk from two of China’s biggest dairies was still being sold this week at a discount to students in the southern city of Guangzhou through stores and milk dealers. The incidents call into question whether China’s central government can deliver on its promise to clean up the country’s dairy industry after contaminated infant formula sickened tens of thousands of children.

The government has now admitted that although contamination of milk had occurred at dairy companies, the government was responsible for monitoring the industry at the heart of the crisis. The important steps in the dairy industry, including production of raw milk, collection, transportation, processing, formulation and manufactured goods, will all need to have better standards and testing requirements, according to the government.

A nationwide check has now found melamine in 31 milk powder products. Large brand name companies including Cadbury’s, Heinz, Nestle and Unilever have had to recall products where milk was watered down by farmers who then added melamine to raise the protein levels.

But milk contamination, it seems, is nothing new in China. In 2004, the China Dairy Product Quality Inspection Report found that adulteration was very widespread and found urea, soap powder and starch being added to milk. It also found high levels of antibiotic residues in milk.

Just who is responsible for the mess we are now seeing is still far from clear. At first, milk processors such as Sanlu were in the spotlight for spiking the milk. It now seems that much of the adulteration was being done by farmers. But a number of media reports have pointed out that much of the problem might be associated with the fact that Sanlu had lowered the prices being paid to farmers at the same time as the price of animal feed was going up substantially.

China’s President Hu has called for lessons to be learned from the scandal. So in keeping with his request, here are my top ten lessons and forecasts from the perspective of CSR:


Those who contaminated the milk may not have known what the risks were when they added melamine to increase protein levels to pass tests. There was probably no malicious intent but rather a practice was adopted to enable a little more money to be squeezed out of milk processors by poor farmers. So what are the supply chain risks associated with cutting corners, cheating a little bit here and there and trying to extract just a little bit more money when prices are rising and incomes falling? If people’s incomes are squeezed in an inflationary environment so much that they cannot longer make a living, don’t be surprised if they start finding ways to recoup some of their losses. If large brands continue to want cheaper and cheaper products, when costs are rising, something has to give somewhere. It did, and this time had disastrous consequences. Wake up to the inevitability of having to pay higher prices for goods.


For years, people in China have put up with rising levels of pollution and impacts on their health as a trade-off for higher incomes, better housing and access to more products. But making adults sick is one issue, making people’s (one child policy) babies sick is something altogether different. The outrage coming from the Chinese public is probably unsurpassed by any other recent event and that is not going to go away any time soon. And as one father of a sick baby said, “this is now just too much to tolerate.” Some journalists have even gone so far as to argue that this could be a tipping point in terms of public dissatisfaction because this is one case where the public panicked and did not receive the information they needed to take action. Engaging the Chinese public has probably never before been as important. In fact, I would argue that you no longer have a choice. Engage your stakeholders or face the consequences: The parents of a Chinese infant allegedly sickened by tainted baby formula have launched what could be the first (but not the last) lawsuit in the nation’s escalating milk scandal. Product liability lawsuits have become more common in recent years and look set to increase.


Many mainstream Chinese websites are being questioned about the manner in which they are handling the keywords related to companies in trouble in the Sanlu milk scandal. Among the doubts, the biggest one is about Baidu, the search engine with the largest market share in China. Ever since the Sanlu milk powder affair broke, some think that the number of pages found on Baidu is far less than its competitor Google. A document released online by one blogger claimed that Sanlu had promised 3 million yuan (in advertising) to get Baidu to filter out all negative news about the scandal. In the end, Baidu admitted that a public relations company acting for milk producer Sanlu asked it to screen out negative news about the contaminated milk scandal. Attempts to control online sources of information do have a habit of backfiring. Honesty and transparency is the name of the game and some public relations companies would do well to remember that.


Whether it is milk products, toys, dog food, toothpaste or whatever, the China brand is once again looking tainted. Many countries have decided to suspend imports of Chinese milk products or to withdraw them from their market. Consumers are now increasingly scrutinising the sources of products on the shelves of supermarkets (and that does not only include milk products). The China brand may have rebounded quickly after lead paint was found in toys but many more scandals on this level are going to have longer-term repercussions - and the government knows it. But more damaging, in the longer term, than the tainting of dairy products with melamine is the cover-up of the scandal by Chinese authorities, a number of journalists have argued. If there is no confidence in the governance of the regulatory system, how can there be any confidence in Chinese supply chains?


The milk problem shows how big food companies struggle to impose food-safety standards on suppliers in the developing markets they increasingly rely on for sales growth. A lot of attention has now switched from manufacturing processes that might be described as sweatshops, to processes (and the products themselves) that can cause harm to human health. This is going to require increased attention by brands not only to first-tier, supply-chain processes but also those further down the supply chain where, in the case of both milk products and toys, the problems occurred. One might now ask whether only conducting first-tier audits will be sufficient to manage product responsibility risks in the future. And ensuring product responsibility in poorly regulated environments is going to be expensive.


Spare a thought for people trying to run responsible businesses. Some farmers may have spiked their milk but many did not. Yet many dairy companies and farmers are now facing bankruptcy because of the scandal. Media reports are saying that many farmers can no longer sell their milk and are simply tipping it down drains. Others are said to be contemplating slaughtering their cows. It seems that the government is willing to step in to help, but what obligations do the makers of products have to those suppliers unwittingly embroiled in the scandal and possibly facing financial ruin?


It is clear from what has already been said by the central government that the regulatory environment is set to become tougher. Laws are often good but not enforced for various reasons, including a lack of regulators, inept regulators and corrupt regulators. But if government is to be believed, much of that may now change and companies may face a stricter enforcement of the law. The milk industry could actually emerge much stronger, mirroring recent advances in the toy industry. Many brands may well welcome increased enforcement of regulations, but it still poses a threat where that brand’s products are made in facilities that also produce for the domestic market or non-branded goods. If a facility is closed for an infringement in its non-brand lines, where is the brand going to find the capacity to continue production? The likelihood of that happening has just become greater.


New Zealand’s Fonterra Corporation, the world’s largest trader in dairy products, has undoubtedly learned much from its 43 per cent ownership of a China venture which has created a financial disaster. This latest food tragedy may make some foreign investors conclude that the risks of manufacturing in China outweigh the potential rewards. Yet, such is the allure of the China market, most multinational firms will probably want to maintain their interest. The challenge is how to do it better. But ensuring that investments are safe might be even more problematic than ensuring products are safe in the sorts of joint venture arrangements we have see in the Sanlu case. Shareholders might be increasingly asking whether China is a safe haven for their money.


It is increasingly looking like many suppliers simply cannot be trusted to put the systems in place to ensure product safety, or if they do, fail to properly manage those systems. The inevitable consequence of this is that we are likely to see a return to more testing. That comes expensive and the inevitable question is who is going to pay and what will that do to product prices?


This week the Wall Street Journal noted that the Chinese milk-safety scandal exposes one of the pitfalls of a key strategy of the world’s big multinational food companies: relying on local suppliers in emerging markets. Add to the scandal, the reality of increasing raw materials costs, increasing labour costs, increasing fuel and transportation costs and an increasingly worried consumer base and, all together, the future for the outsourcing model might not be looking so clear.

Become a CSR International blogger

I have been thinking about how there are vast depths of experience and wisdom in the CSR International network. At the same time, I have been impressed with the quality of many of the comments on my blog postings thus far. 

Hence, I have decided to experiment with opening up the CSR International blog to fellow CSRi colleagues. If you would like to add your voice and become a CSRi blogger, send me a request on and I will give you the necessary permissions.

Sunday, November 2, 2008

CSR Asia Summit in Bangkok

I am currently attending the CSR Asia Summit in Bangkok and I thought I'd share a few initial impressions:

1. GROWTH - The rise of CSR up the agenda in Asia is reflected in the Summit's attendence. There are over 300 participants this year, up from 220 last year and around 150 the previous year. CSR Asia itself reflects this growing interest in CSR, now with 25 staff in offices in Hong Kong, Singapore, Shenzhen, Beijing, Kuala Lumpur, Dhaka and Ho Chi Minh City.

2. DIVERSITY - It is very encouraging looking through the speaker and delegate lists to see how diverse the organisational representation is - not only corporate CSR types, like the head of water for Coca Cola and supply chain for Hewlett-Packard - but also NGOs and consultants focusing on corruption, HIV/AIDS, climate change and labour justice, to mention but a few. 

3. PRIORITIES - Until fairly recently, CSR in Asia was largely equated with philanthropy and supply chain issues, specifically labour conditions. Now, there is a marked shift to environmental issues, specifically water, but also deforestation and climate change, as well as product responsibility (not surprising, in the wake the Mattel and contaminated milk scandals in China).

4. CRISIS LINKS - The relationship between the financial crisis and CSR has already emerged as a hot topic, with Mr Kasit Piromya, Director of Internaitonal of the Democratic Party in Thailand, stating that governments will have to tackle the systemic greed of the financial markets and overpaid CEOs if CSR is to be at all effective in future.

I will listen to the debates and discussions over the next two days with interest. For more information about CSR Asia, go to