Now we need permission to be ethical!

The European Court of Justice ruled recently that it is lawful for the public sector to procure on ethical grounds. Given that the public sector is about 40% of the economy, that is a relief. The FairTrade Foundation has welcomed the ruling.

But they also said that organic or fairtrade labels couldn’t be used directly as the basis for decisions. The underlying social and enviornmental criteria need to be spelt out. That could cause a problem for smaller public bodies.

The underlying directives are being revised in any case. Hopefully the ruling enables simpler and more sensible directives to be drawn up, including enabling social criteria to be used in the more straightforward way that environmental criteria can currently.

But what was the European Commission doing in the first place bringing this action against a Dutch authority that was trying to buy fairtrade products?


When win-win turns into win-lose

Bilateral Investment Treaties are complex, technical, boring – and dangerous. They turn the win-win of CSR into ‘heads I win, tails you lose’.

These treaties specify the conditions under which a company will invest in a country. They’re typically used by large companies making major infrastructural investments in relatively unstable countries. From the companies’ point of view, their intention is to provide certainty around their investment. For example if a developing country improves its health and safety regulations, the company would be entitled to compensation for its increased costs. so it’s a way for a company to off-load risk. From the countries’ point of view, they have no choice. The investment, even with such conditions, is an offer they can’t refuse.

According to UNCTAD, there have been hundreds of such cases. When companies sue countries, money is sucked out of the country. It also acts as a break on the improvement of social and environmental conditions.

According to an IPS report, the companies involved include Chevron and Philip Morris – amongst many, many others.

announcements commentary

Would changing the rules make business more ethical?

Corruption. Poverty wages. Labour relations and strikes. Regulation for the public interest. Lobbying.  Vanishingly low effective rates of corporate tax.  Fat cat pay. Issues like these seem suddenly to have thrust themselves onto the corporate agenda. So what does this mean for “sustainable business”? (And whatever happened to CSR?)

Time for a reality check – see the full article on the Guardian website.


Taxing codes

The Code of Practice that banks have signed up to – which is meant to stop tax avoidance – has a glaring loophole. The main provision says that banks “should not engage in tax planning other than that which supports genuine commercial activity”. But financial engineering (including tax planning) is a commercial activity. So there should be no problem in banks undertaking tax planning for schemes specifically designed to avoid tax.

It would appear that the activities of banks, and the complexities of the codes designed to govern them, are too byzantine to be understood and managed by anyone. Hence the appeal to the ‘spirit’ of the law. I fear that the only spirits to co-operate will be those at the bar.


Will 2012 be about regulation?

Guardian Sustainable Business website blog on my predictions for 2012 – regulation will move centre stage.


Shredding Reputations

How should the media be regulated?

The painful accounts of intrusion into private lives by the newspapers that the Leveson Inquiry has revealed should provoke some government reaction. Is there a danger that ‘good’ journalism will be regulated away in some fashion in the name of protecting privacy? Will some instances of bad behaviour by those who should know better be missed if privacy is protected? Probably. But it seems a price worth paying. And of course most ‘good journalism’ does not involve exposing salacious details of people’s lives.

I believe transparency is a good thing – but only until it does harm. The harrassment that goes with exposing private lives to the public very rarely has any justification, except to those who profit from it.

The key to any useful regulation of the media is to distinguish properly between what the public is interested in and what is in the public interest. The former should always be trumped by privacy; sometimes the latter should not.


Should Rio+20 focus on accountability?

The Stakeholder Forum has called for accountability to be central to Rio+20. We definitely need a Framework Convention on Accountability. That’s the easy part.

And I think it could draw from the consensus, established by ISO 26000, on the crucial issues that any responsible organisation should face – the core subjects and the underlying issues.

But Rio will be an inter-governmental affair, and as Halina Ward has pointed out, ISO does not have that kind of global legitimacy.

Yet the establishment of truly global consensus must be achieved through a process of dialogue. ISO 26000 should be a voice in that process.


Protecting the public or protecting the banks?

The Vickers Report recommends ring-fencing the retail banks. The point being not to constrain retail banking, but to keep the other, risky stuff away from that part of banking that the economy, and the public,  relies upon.

The CBI response comes out against the idea and talks a lot about costs, but doesn’t seem to mention any actual figures at all. Could this be because the costs of bailing out the banks after a crisis absolutely dwarf any marginal cost to ring-fenced banks of doing business?


UK Banking review turns its gaze within

The new ‘Independent Commission on Banking’ will be an insider job. Its task is to ensure that the financial crisis, which has had such huge effects on the UK, does not happen again.

But who is set to do the review? A series of insiders: they are very worthy, very knowledgeable and most impressive. But they are insiders all the same. We have bankers and more bankers, people who regulated banks and people who have written about those who regulate banks. But there is no consumer representative, no representative of manufacturing industry and no labour representative.

This is the governance of the insider. It may produce inner peace for the British Bankers Association, which has already welcomed it, but it is hard to see how it can deliver a banking system fit for society.


Has the Companies Act made a difference?

My recent research shows that the Companies Act seems to have made little difference to what companies actually report.

Companies are supposed to have a business review and that should contain reference to non-financial information. But the key findings are that for the FTSE100:

  • 8% have no clearly identifiable business review, leading to confusion for shareholders and stakeholders alike.
  • 17% made no reference to environmental issues, despite wide acceptance that climate change is a business risk.
  • 8% completely failed to include any social issues in their business review; 14% failed to include any social issues other than labour.