Thursday, December 31, 2009

Monday, December 28, 2009

Ethics and politics of sourcing from Sri Lanka

Three weeks ago I wrote on this blog how the apparel manufacturers in Sri Lanka have embraced social and environmental responsibility and have benefited from it by way of increased productivity and peaceful industrial relations. I also mentioned how high-street retailers are failing to recognize the Sri Lankan garment industry's leadership in social responsibility.

Now a political action by the European Commission threatens the very existence of the garment industry in Sri Lanka. The Commission recently recommended temporary suspension of preferential trade terms for Sri Lanka because of the country's "poor human rights record." If approved by the Member Council, Sri Lankan garment industry's duty-free access to Europe will come to an end, a benefit the country has enjoyed since 2005. The Council has two months to decide by way of voting. If the Council accepts the recommendation, the suspension of benefits will become effective after six months.

The withdrawal of Generalised System of Preference benefits would mean garments exported from Sri Lanka will attract 9.6 percent duty in Europe, making made-in-Sri Lanka garments comparatively more expensive.

European retailers are maintaining a silence on the matter. Will they continue to source from Sri Lanka even if it means the products will cost 9.6 percent more? Or, will they move their orders to other low cost countries ignoring the excellent work Sri Lankan factories have done to improve working conditions?

European Commission's reference to "poor record of human rights" relates to the government's handling of ethnic violence in the northern part of the Island. But the industry has a clean record of human rights. Garment industry in Sri Lanka, like many other apparel producing nations, is the largest employer. European Commission's action could mean hundreds of thousands of innocent workers will lose their livelihood.

While politics has its own dynamics, it will be interesting to see how retailers view the situation and whether they do the right thing.

Thursday, December 24, 2009

Tuesday, December 22, 2009

Taiwan's unhealthy food tax

Taiwan may become the first country to impose "unhealthy food tax," to discourage consumption of junk food. Taiwan's Bureau of Health Promotion says it is drafting a bill that will tax unhealthy food including canned beverages, fast food, biscuits, cakes, alcoholic products, confectionery etc. The revenue raised will be invested in health promotion campaigns. It plans to introduce the bill next year. The finance minister has already said he would support the bill.

The bureau says it will begin by targeting the packaged food which is easier to monitor and control. The bureau officials believe some of the top health problems in Taiwan such as cancer, diabetes, heart conditions and obesity can be tackled by changing food habits of people.

It's estimated that 30 percent children in Taiwan are obese, a trend blamed on the growing habit of eating junk food, largely sold by western multinational companies.

Health activists have long targeted multinational fast food chains and packaged food manufactures for dishing out unhealthy high calorie food which is fast becoming popular in Asia. Some companies have responded by introducing low-calorie variants of their popular products or by introducing labels that mention the calories in the product. But their actions have varied from country to country, depending on the intensity of regulatory or stakeholder pressures.

If Taiwan succeeds in passing the bill to tax junk food, similar demand can erupt in other countries. A copy cat regulation in other countries could spell a big trouble for food and beverages companies.

There could be serious legal implications of such legislation for companies. Once a particular food product, for example a certain burger, gets legally classified as unhealthy to slap a tax, the company can potentially be dragged to court by existing and past consumers seeking compensation for alleged health damage.

I wrote a feature in Ethical Corporation magazine's Nov 2008 issue on junk food marketing in Asia after a report from UK pressure group Consumers International, published in September 2008, claimed that multinational brands were taking advantage of lax laws in Asian countries to promote calorie-dense and nutrition-poor foods to children.

The Ethical Corporation magazine feature concluded that "fast-food brands in Asia face the quandary of having to meet the rising demands of non-governmental organisations to address healthy-eating concerns, while catering to Asian customers’ known preferences for salty, spicy and oily food. Companies will be more inclined to offer healthier choices,and market them, when more customers demand these options. For now at least, Asian customers seem less aware of the adverse health effects of a high intake of salt, sugar and fat than activists feel they should be."

Taiwan's intended regulation aims to educate consumers using the tax proceeds. If consumers get the message right and start shunning junk food, companies will be forced to offer healthy alternatives.

Monday, December 21, 2009

Sustainable palm oil: A pipe dream

So where is sustainable palm oil? The Roundtable on Sustainable Palm Oil, a multi-stakeholder initiative, was founded in 2003 with a promise to establish a mechanism for sustainable palm oil production. An impressive number of multinational companies and NGOs signed up to the initiative to work together to find ways to produce palm oil sustainably.

The RSPO finally came up with a certification scheme to certify sustainable palm oil in 2008 generating hopes that soon sustainable palm oil will start flowing.

But WWF, a key NGO in RSPO, lamented in May that only one percent of the total sustainable palm oil produced was actually bought. It said out of 1.3 million tonnes of certified sustainable palm oil produced, only 15,000 tonnes was sold. By the way, the world produces 43 million tonnes of palm oil annually. Only 1.3 million tonnes of this was certified sustainable palm oil.

A media report recently pointed out that only three palm oil producers have managed to obtain the RSPO certification so far. And seems they are now stuck with unsold stock of sustainable palm oil which no one wants to buy. Why should other producers make the mistake of going through the trouble of RSPO certification?

Surprisingly, when I visited the RSPO website today, I could not find any list of certified palm oil producers. Rather, I found several isolated announcements mentioning names of companies which have been given interim approval, based on self-assessment, to claim compliance with the certification criteria of RSPO. Now this is scary that a RSPO member can be allowed to claim its palm oil from sustainable sources based on self-assessment.
The actual certification though is given only after a third party audit which, it appears, only three producers have managed to get so far.

I wrote about the RSPO initiative in Ethical Corporation magazine in the July 2008 issue. The report mentioned Unilever’s lead (after they were embarrassed by a high-pitch campaign by Greenpeace) by committing to the tough goal of buying all palm oil from certified sustainable sources by 2015. I concluded the feature by saying “Though Unilever has taken the lead, the rest of the industry will have to act as well in order to make any real impact. A public commitment by large companies to purchase palm oil only from certified sources will send a clear signal to producers on the ground. Failing to act may turn sustainable palm oil into a pipe dream.” And sadly, a pipe dream it remains.

Saturday, December 19, 2009

Waking the dead for Disneyland

This one is for those of you who live in the more privileged part of the world such as the US or the UK or France or other developed European nations. How would you react to the idea of digging up your family graves in order to make way for a Disneyland? And getting paid $60 per grave you dig up to move the remains of your deceased family member to some other place? No, you will not be given a choice of staying put. There will be a deadline by which you must move the dead to a new abode- heavenly or not. If you don't, you are a dead duck. You lose $60. And may lose the last remains of your beloved as the government clears the grave.

Well, this is exactly what is happening in China. Chinese authorities want to move 1200 tombs from a cemetery in Shanghai which is part of the site where China's first Disneyland is to be built. The government wants the cemetery cleaned up before the construction begins. The local municipal authorities are offering $60 compensation for relocating each tomb elsewhere.

The family members are not happy. There dead may already be turning in their graves. After all, the Chinese don't like to disturb their sleeping ancestors. I don't know who does. The Chinese belief is that if you don't ensure your ancestors are resting in peace, their ghosts will bring misfortune on the generations to come.

The question is: how is Disney viewing the issue? Do they think this is a grave matter?

Monday, December 14, 2009

Otto raises the bar for retailers

A new model for producing clothing responsibly is taking shape in Bangladesh. Germany's Otto Group, the world's largest mail order company, has partnered with Nobel Laureate Muhammad Yunus' Grameen Trust to set-up "the factory of the future."

Otto and Grameen have formed a joint-venture to establish Otto Grameen Textile Company in Dhaka, Bangladesh. The factory will produce clothing for export under socially and ecologically sustainable conditions, according to Otto.

Otto is providing interest-free loan for the project to cover the cost of setting up and running the factory. The loan will be paid back in 10-15 years from the profits of the factory. The factory will initially hire 500-700 workers with plans to expand in phase-two.

The company says that the profits will not be distributed to shareholders. The profits will serve to expand and modernise the company, and to pursue social objectives locally. The earnings will be used to offer healthy lunch for workers, set-up daycare centres for workers' children, and launch educational and health care initiatives for workers and their families.

On the environmental front, the factory will be carbon neutral. The company says that the ecologically-optimised, CO2 neutral building will be fitted with the most up-to-date insulation, energy-saving lighting and optimised air-conditioning systems, paying special attention to the use of renewable energies.

Dr. Michael Otto, Chairman of the Supervisory Board of the Otto Group says: "The Grameen Otto Textile Company will show that it really is possible to reconcile ecological and social criteria with economic goals. It should become a model for textile production in Bangladesh and for similar factories all around the world."

The plan includes expanding the number of factories across Bangladesh over time and even spread to other countries.

What Otto has committed to do is revolutionary and sets a new benchmark for retail brands who often don't do more than lip service when it comes to the welfare of workers and their families. The big question is: will socially conscious customers flock to stand behind Otto?

Wednesday, December 09, 2009

Kraft Foods transportation sustainability initiative

Kraft Foods is one of those companies which pursues ambitious sustainability goals rather quietly. As a result, the company's path-breaking initiatives often go unnoticed by the CSR media. I therefore decided to write a bit about their sustainability programme on this blog.

In one of the key initiatives, the company has eliminated more than 50 million truck miles since 2005 through transportation sustainability efforts.

Here are some of the things the company has done:

  • In North America, the company saved more than 1.5 million km, replaced 10,000 truck shipments and reduced 2,000 tons of CO2 emissions by shipping wheat via waterways to its Toledo, Ohio, flour mill. Now, ships make bigger deliveries less frequently.
  • In Brazil, employees saved nearly 390,000 miles and reduced 300 tons of CO2 emissions by using boats to send products to distribution centers. In just six months, the change saved more than 125 truck shipments.
  • In Germany, the company transports coffee beans from Bremen to its Berlin roasting plant, saving about 2.8 million km and eliminating 2,300 tons of CO2 emissions. And the project took 7,000 trucks off the road.
  • In Austria, it saved more than nearly 250,000 km by sending products in refrigerated containers on rail cars, eliminating 400 truck shipments and reducing 250tons of CO2 emissions.
  • In the United Kingdom, the company now sends products to one of its key customers by train instead of truck, saving more than 70,000 km and eliminating 120 truck shipments.
  • In Europe, the company is modernizing its transportation network by establishing a single hub in Bratislava, Slovakia to make 20 percent fewer trips between its European plants and distribution centers. And in the Philippines, the company now uses a national distribution center so customers receive shipments 20 percent faster than before, saving miles and fuel.
  • In North America, it has purchased 11 hybrid direct store delivery vehicles for frozen products. The hybrid power train and electric refrigeration technology use up to 30 percent less fuel than a traditional truck.
  • And in Mexico, the company has pioneered a double-decker transport system that allows trucks to safely carry up to 56 pallets in one load – twice as many as before.

More on Kraft Foods sustainability initiatives here.

Source: Kraft Foods

Monday, December 07, 2009

Amazing Disg-Race

I was appalled to see the contestants of the current season of the Amazing Race, a reality TV show, sitting in the middle of mountains of electronic waste in a tiny scrap shop in Vietnam and using bare hands to dismantle electronic waste items looking for the clue which was hidden inside one of the waste items. Once they found the clue, they hurried out of the shop to their next destination, leaving behind heaps of torn apart pieces of electronics on the uncemented dusty floor. The shopkeeper, obviously dazzled by being under the spotlight, proudly watching over with the family which included children!

Showing electronic waste piles in dingy shops in the narrow lanes of Vietnam must have sounded a sexy idea to the producers of the show. After all, they can't find such exotic locations in western Europe or the US where electronic waste is strictly regulated!

Developing and poor countries, including many in Asia, are being used as dump yards for the developed nations' electronic waste. We all know that. Unsuspecting communities in the host nations are becoming victims of toxins released from electronic waste. Some of these toxins are deadly such as lead, cadmium, beryllium and mercury.

The toxic materials are released when local operators exploit valuable metals from the electronics scrap using crude methods. These include burning in the open, disassembling electronic gadgets with bare hands to extract precious metals, and dumping the left-overs on public lands which then may be sent to landfills with the rest of the city garbage. This lays ground for the poisoning of water and soil for future generations as well.

Wondering if the folks behind The Amazing Race show have any clue to sustainability or basic environmental responsibility.

Friday, December 04, 2009

Garments Without Guilt don't fit in with retailers' conscience

Sri Lanka is a small island nation in the Indian sub-continent. The country's economy heavily relies on apparel exports. Sri Lanka has done well in the apparel sector even though it has to mostly rely on imported input including fabrics, machinery and other raw material. Good quality, cheap and disciplined workforce is the only significant resource available within the country. Then how the nation managed to do well?

To begin with, the government worked with the industry to ensure decent working conditions in garment factories. The industry itself paid early attention to improve productivity to off-set higher input costs resulting from the need to import almost everything to sew a garment. Sri Lanka has the highest productivity levels among Asian garment producing nations due to heavy investments in training over the years.

Early on, Sri Lankan factory owners realized that decent and comfortable working conditions contribute to increase in worker productivity. So, it's not uncommon to find centrally air-conditioned production floors in garment factories, something unheard of in other countries where only the owners or top managers have the privilege to sit in an airconditioned office.

Sri Lanka was also the first country where the garment industry openly embraced sustainability. So, the world's first eco-factory came up in Sri Lanka last year with support from Marks & Spencer. The success has inspired other factory owners to set-up green-factories and many are in the pipe-line.

In the same spirit, three years ago, Sri Lankan apparel industry came up with a great-looking idea to differentiate itself from other garment producing nations. It launched a path breaking scheme: Garments Without Guilt. The idea was to reassure retailers and consumers in the western markets that clothing in Sri Lanka was made in factories with decent working conditions and not in sweatshops. The local apparel industry wanted to position the country as a destination for ethical production; free from child labour and other abuses so common in several other garment producing countries.

A brilliant idea. Usually retailers drive the labour compliance programme through a social responsibility code of conduct and repetitive factory audits and monitoring. They often complain that the suppliers are slow to take the ownership. But Sri Lankan manufactures decided to change that and take the lead.

Over 130 factories -about 90% of all factories in the nation - agreed to participate in Garments Without Guilt scheme. They submitted themselves to an independent audit, to be conducted by SGS, of their factories for working conditions.

Then the industry approached multinational brands with a request to allow the participating factories to attach a Garments Without Guilt hand tag on the garments. Guess what? All retailers have turned down the request though they refuse to confess it publicly. Privately, they say that the scheme is problematic. If they allow such hand tag for garments from Sri Lanka, then what will consumers think of garments produced in other countries such as China but stocked in the same store? Since factory owners in other countries cannot guarantee guilt free garments, Sri Lanka cannot be allowed to claim guilt free products, is their logic. Ill conceived? Well, I will be happy to hear what you think.

A must read speech text by the Coke president

I stumbled across this wonderful speech by Muhtar Kent, the president of the Coca Cola Company, on sustainability and what companies can do to lead the world to a sustainable path. Though over a year old, the speech is worth reading (yes, text is available). Here.