NGOs ask IFC to improve standard of its standards

A group of 94 civil society organisations from 38 countries are demanding that the International Finance Corporation should strengthen its environment and social performance standards for loans given to private sector.

IFC, which is under pressure to improve its environmental and social performance standards for project financing, is currently reviewing the standards.

In a joint submission early this month, the civil society organisations describes that IFC's lack of transparency and supervision, failure to recognize human rights, and inadequate climate change policies, undermine IFC's ability to achieve its poverty alleviation mission.

The civil society letter points to a number of cases in which IFC-investments have had devastating impacts on local populations.

"IFC is becoming more like a commercial bank, but failing to incorporate lessons learned from the financial crisis in its lending practices. Standards for its clients are less clear, monitoring and supervision is reduced, and benefits to local communities and countries questionable. This is not how public money should be spent," Anne Perrault of the Center for International Environmental Law, a Washington D.C.-based legal advocacy organization, says.

The letter says that the recent financial crisis underscores the need to provide clear expectations and standards for private sector actors, as well as adequate transparency, due diligence, and oversight procedures to ensure that risks are assessed and addressed fully.

The letter then adds that the approach assumed by IFC in 2006, prior to the crisis, to introduce greater flexibility in IFC standards and to shift monitoring and supervision responsibilities to private sector clients, is clearly inconsistent with new hard-learned lessons about how to deal with financial risks and poses problems for securing strong development outcomes.

The NGOs have also slammed the IFC for approaching only the private sector for feedback on the effectiveness of the IFC environmental and social performance standards.

"The failure of IFC management to interview a single community for the report, despite the opportunity to do so provided by the 182 projects that have been under IFC’s supervision for over a year, is a strong indication that IFC is not, in practice, committed to ensuring that the Policy and Performance Standards are implemented effectively to protect communities and the environment, as intended," the letter says.

Key concerns raised by the organizations include those related to environmental and social due diligence and oversight; accountability; development outcomes; human rights; biodiversity; climate change; financial intermediaries; and disclosure of information.

I wrote a feature on responsible project finance in Ethical Corporation's current issue which investigates the project finance practices, including that of IFC, commercial banks and export credit organisations, and gaps in responsibility.

IFC's own credibility is at stake. It has a good opportunity, while it's reviewing the standards, to honestly consult the civil society organisations and carry out independent impact assessments of current and past IFC funded projects in order to realign the performance standards that truly meet its stated objectives; benefiting the local communities and the environment.

If your are interested in reading more about responsible finance, here is a good resource.

A new break for printer speeds

If you have to choose between Printer A which promises 16 ppm and Printer B that offers 24 ppm and both have the same price, which one will you buy assuming both are equally respectable brands? If you said "B", you may end up with a printer which actually has a ppm lower than 16.

Many consumers were not even aware that several printer manufacturers were fooling them all this while using the ppm trick.

An average printer customer, I include myself in that category, would generally look at the ppm or Page Per Minute speed of the printer for comparison between two makes. Common sense would dictate buying the one which offers the highest ppm so that you can print faster. And how did customers came to know about the term ppm?

Well, ppm was the term that all companies were, and are, using to advertise their printers. And there was a competition to outspeed the rivals by promising relatively higher speed. The trick was to state the "maximum ppm". How did they do this?

Simple. They defined their own page. So, if a manufacturer defined his "page" included only 15 lines and no images, his ppm would appear relatively higher. If another manufacurer decided to act more ethical and assumed that a typical real world A4 page would have a text of 25 lines and would include at least one chart or a graphic, their resulting ppm speed would appear lower. That would be a competitive disadvantage. This is how a ppm-war started among the printer brands.

But now there is a speedbreaker in the form of a new ISO standard on printing speed. The ISO/IEC 24734 standard defines the ppm and ipm (image per minute) for back and colour prints in a default single sided mode. The ISO standard allows customers to do an apple to apple comparison.

Cannon, Epson, Kodak, HP and Lexmark were the companies that worked with the International Standards Organisation to develop the standard. ISO ppm was finalized last year.

So, when you buy a printer next time, find out if the brand has signed up to ISO ppm and follows ISO ppm guidelines to state the real ppm.

Will Nestle budge?

A Greenpeace campaign is in full swing against Nestle on palm oil sourcing. Greenpeace has released a report "Caught Red-Handed: How Nestlé's Use of Palm Oil is Having a Devastating Impact on Rainforest, The Climate and Orang-utans," which says "Nestlé is using palm oil from destroyed Indonesian rainforests and peatlands in products like PowerBar, Nestlé Crunch Crisp, and Coffee Mate, pushing already endangered orangutans to the brink of extinction and accelerating climate change."

Will Greenpeace succeed in extracting a commitment from Nestle on sourcing sustainable palm oil the way they did against Unilever two years ago?

In early 2008, environmental campaigner Greenpeace targeted Unilever over unsustainable sourcing practices of palm oil. The dramatic campaign, in true Greenpeace style, saw activists dressed as Orangutans and making jungle noises descended on the offices of consumer goods giant Unilever. The campaign coincided with Greenpeace releasing a damning report "How Unilever suppliers are burning up Borneo.”

The campaign brought Unilever on their knees within days. A deal was stuck. And Unilever committed buying all its palm oil from certified sustainable sources by 2015. The consumer goods giant also promised to have all palm oil it uses in Europe from certified sustainable sources by 2012. See the complete report here that I wrote for Ethical Corporation magazine then.

Unilever has since taken a leadership role on moving toward sustainable palm oil. Nestle, another company named in the Greenpeace report then, watched from the fence. Until then, Nestle had not even joined the Roundtable on Sustainable Palm Oil, a multistakeholder forum to develop a certification scheme for sustainable palm oil.

After securing a commitment from Unilever, Greenpeace then said they would turn their attention to other companies, one by one. So now it is Nestle' turn, it seems. This time, Greenpeace is using the power of social media to attack Nestle.

While Unilever responded to the crisis with a certain grace, Nestle has adopted a hostile approach. Within hours, Nestle got YouTube to remove the video that Greenpeace had uploaded as part of the campaign. Greenpeace now accuses Nestle of censoring the campaign advertisement.

Nestle' actions will be closely watched in the coming days and weeks. Will they act by committing to sustainable palm oil? or will they create a reputation mess and offer new lessons in mismanaging a crisis?

A word with Prakash Sethi

"Prakash is one of those slightly hidden gems in corporate responsibility," wrote Toby Webb, the founding editor of Ethical Corporation magazine, on his blog last week, referring to Prakash Sethi.

Prakash is president of non-profit think-tank Sethi International Center for Corporate Accountability, Inc. and University Distinguished Professor at Zicklin School of Business, Baruch College/CUNY, New York. He is also advisor to a large number of international organisations and companies.

Toby says he recently spent almost a day with Prakash discussing corporate responsibility, taped a podcast on 'the business case for NGO accountability' and asked him to talk to the class he teaches.

A couple of months ago I had the opportunity to speak with Prakash over the phone for my feature on ethics of takeovers for Ethical Corporation. It was a lengthy conversation, mostly listening to his beautifully articulated and passionate views on the ethical issues involved in takeovers (Kraft's takeover bid for Cadbury was the trigger).

But the conversation left me frustrated. I had a limit of 2,000 words for the feature. I was tempted to include every word Prakash said in response to my questions- what he said was so powerful. But couldn't. If I did, I would have ended up writing a mini-book on takeovers. So I had to reluctantly settle to using only some of his quotes, something that space-constrained mag writers often are forced to do. I haven't apologized to him yet. What a pity!

So, don't miss this podcast with Prakash Sethi. He is a rare thought leader on responsible business.

Indian companies should act on gender diversity

The upper house of Indian parliament has passed the historic Women's Bill which aims to reserve 33% of the seats in the parliament and state legislatures for women. People with any sanity should welcome this. And those who tried to stop the bill should be condemned.

It has taken over 10 years for the bill to reach this landmark no thanks to protests by male-dominated political parties. Now the bill needs to be passed by the lower house before it is sent to the president for signing into a law.

Ruling Congress party and the main opposition party BJP as well as the leftist parties supported the bill. Most likely the bill will see through the lower house.

India already has such quota for women in village councils which has improved the governance of these councils. But women in India face severe discrimination in other spheres of life. Last year, India ranked the 114th among the 134 countries in The Global Gender Gap Index computed by the World Economic Forum.

What it means for businesses?

While politicians have taken the step to bring more women in the mainstream of governing the country, what are companies doing to improve gender equality? Women remain largely unrepresented in the middle and senior management in businesses in India, except, perhaps, in the IT outsourcing industry. Women are rarely included in the governing boards of Indian companies.

Once the Women's Bill becomes law, the focus will be on businesses to introduce policies to ensure gender diversity. With 33% of lawmakers being women, businesses will have to rethink their attitude toward women. Business groups will also need to develop new skills and managers for effectively lobbying with female lawmakers.

If companies don't take proactive measures to enhance gender equality and diversity across organisation and supply chains and vigorously protect women's rights, new women lawmakers may push for a regulation for a similar reservation for women in private employment.

Should companies wait for the government to pass a bill to ensure women are fairly represented in companies' management? Or should they voluntarily, and sincerely, start promoting gender equality and gender diversity at all levels in the company? The choice is theirs. We all know voluntary action is the smart thing to do.

Asia's economy rising but women falling behind

Asia Pacific is rapidly turning into an economic powerhouse with a vibrant growth story in spite of the global recession which has crippled the conventional economic powers in the west. But when it comes to the development of women and protecting their rights, Asia Pacific continues to be at the bottom of the pile, according to a new report by the UNDP.

The report titled Power Voice and Rights: A Turning Point for Gender Equality in Asia and the Pacific , says that discrimination and neglect are threatening women’s very survival in the Asia-Pacific region, where women suffer from some of the world’s lowest rates of political representation, employment and property ownership. Their lack of participation is also depressing economic growth.

The Report focuses on three key areas —economic power, political decision-making and legal rights— to analyse what holds women back, and how policies and attitudes can be changed to foster a climb toward gender equality. Asia, the Report asserts, is standing at a cross-road and by putting the right policies in place now, countries in the region can achieve positive change.

Some of the major challenges women face include lower pay than men for the same work, forced to accept lowly paid jobs that men don't want to undertake, widespread illiteracy, poor representation in politics and legislatures, shorter life expectancy, female infanticide, domestic violence, low ownership of property and inadequate laws to protect their rights.

The report recommends removing barriers to women’s ownership of assets, such as land; expanding paid employment; making migration safe and investing in high-quality education and health to address the problems women face in the region.

While the local governments have to accept much of the responsibility to actively promote the well-being of women and protect their rights, businesses too can play a significant role in the development of women.

Non-discrimination in employment, ensuring gender diversity, protection from sexual harassment, protecting rights of migrant women workers, reasonable maternity benefits, work-life balance policies, training and career growth opportunities and developing women managers are some of the things companies can do to contribute to the development of women.

At the community level, companies can consider actively investing in women education which in turn will ensure more number of educated women are available for jobs.

Apple Computers find labour violations in supply chain; sets new benchmark for disclosure

In its 2010 Supplier Responsibility Progress Report, Apple Computers has disclosed that their auditors continued to find serious labour violations in supplier factories around the world last year.

Apple audited 102 suppliers in 2009, up from 83 in 2008. Eighty of these were audited for the first time while the remaining 22 were repeat audits. The computer giant requires its suppliers to comply with the Apple Supplier Code of Conduct.

The report says: "In 2009, our audits identified 17 core violations: eight violations involving excessive recruitment fees; three cases where underage workers had been hired; three cases where our supplier contracted with noncertified vendors for hazardous waste disposal; and three cases of falsified records provided during the audit."

Then the report goes on to inform what remedial actions Apple has taken to correct these violations. For example, audit findings led to reimbursement of $2.2 million to foreign migrant workers who had paid the sum to middlemen in illegal recruitment fee over the past two years.

Apple's simple to read, and understand, annual report sets a new benchmark for reporting on supply chain responsibility. Something that fashion retailers have failed to do. And other electronics peers have not bothered to match.

Apple started paying attention to supply chain responsibility after several high profile cases were reported highlighting labour and human rights violations in its supplier factories in Asia. Though the electronics industry has introduced Electronics Industry Code of Conduct, a voluntary initiative, the uptake has been frustratingly slow.

While the mainstream media has taken interest in exposing bad working conditions in fashion retailers' supplier factories, electronics supply chain has generally remained off their radar. But Apple's report, as well as several other reports by activists, indicate that electronics supply chain potentially poses serious social and environmental risks which must be managed effectively by the brands to prevent reputational damage.

Here is an interesting report "Silicon Sweatshops" which alleges poor working conditions in supplier factories of some of the largest electronics brands.

Happy Holi!

To all my Indian readers, a VERY HAPPY AND COLORFUL HOLI! But please play with eco-friendly colors. Here is the environmental side of Holi.

To non-Indian readers, just in case you want to know more about Holi- the festival of colors-here is the link.