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Oil, Transparency and Accountability

 

Over the last few weeks’ dramatic revolutionary movements have risen up across Northern Africa challenging and overthrowing their dictatorial leaders. First in Tunisia, Egypt and now taking place in Libya and Bahrain, citizens have turned to the streets demanding an end to the corruption, mismanagement and poor living standards in their country.

Critical in this process are the wider political and economic reforms that will improve transparency and accountability. For too long, leaders within these and many other countries have been able to use the wealth generated by natural resources as a private piggy bank instead of investing in the development of their country.

As we wrote recently, a quarter of Egyptians continue to live in poverty while their ex-leader, Hosni Mubarak amassed a personal fortune estimated at $70 billion. And it’s the same story in Libya with it being estimated that one third of the population continue to live in poverty.

It doesn’t have to be like this.

We can play a significant role in increasing the information available to citizens in countries rich in natural resources empowering them to hold their governments to account.

This year real momentum is building around a push towards greater transparency standards for oil, gas and mining companies. In fact, last year the US passed landmark new legislation requiring that all companies involved in extractive activities had to publish what they pay in taxes, fees and royalties to governments for the right to operate in their territory.
Now it’s time for the UK and Europe to do the same.

Indeed, just last week, Transparency International released its latest report rating 44 oil and gas companies on their levels of transparency representing 60 per cent of global oil and gas production. The report evaluated the companies in three areas:

  • Reporting on anti-corruption programmes
  • Organisational disclosure
  • Country-level disclosure

By disclosing data in these three fields, the information released makes it harder for corrupt leaders and officials to steal the profits enabling citizens to hold their governments to account.
The good news is in the three years since their last report transparency standards have improved significantly with only 8 of the 44 companies scored zero for reporting on anti-corruption programmes. This is down from 21 of 42 in 2008.

However whilst, standards of disclosure are getting better there is still much to be done. Huguette Labelle, Chair of TI said;
“It is good news that transparency is improving, but too few companies publish what they pay governments in each country where they operate. Two thirds of the world’s poor live in resource rich countries. They have a right to know how much money their governments get from companies to exploit these resources.’

And here’s where we can play a part.

The report pointed out that EU oil and gas companies have a poor track record of transparency and accountability in their operations in Egypt and Libya. Of the 8 companies included none reveal the payments they make to these countries. By revealing their payments the information released makes it easier to prevent the misappropriation of these funds.

That’s why we’re supporting Anas Sarwar’s 10 Min Rule Bill and pushing for a law to be passed in the UK requiring oil, gas and mining companies to publish what they pay.

As we wrote at the time, Anas Sarwar has recently spoken at length in the House of Commons about the need for greater transparency for oil and gas companies and the potential this has for helping citizens in resource rich countries demand better services from their governments and lift themselves out of poverty.

If you’d like to get involved and learn more about this issue sign up to our movement for Justice.

Social Development is Good for Business

 

An article in the latest issue of Harvard Business Review introduces the crazy idea that for-profit companies can actually best address society’s needs and challenges and drive social progress…and I happen to agree with them.

The innovative idea behind this article is called creating shared value (CSV) and suggests that by “creating economic value in a way that also creates value for society by addressing its needs and challenges,” businesses can not only contribute to social progress but actually increase profits. Sound too good to be true? Well it’s not.

According to the article, many businesses have already created or changed their business models to incorporate shared value and have seen impressive results. By adjusting their business practices to address social needs related to issues such as health, safety, and the environment, companies have been able to save money and increase profits while actually improving their communities.

Below are two interesting examples of how for-profit companies have made this work.

Revolution Foods provides 60,000 fresh, healthful, and nutritious meals to students daily at a higher gross margin than traditional competitors. Meanwhile, 3% of the net revenue of their box lunch sales goes to their School Lunch Program that helps feed kids in underserved schools across the US, further promoting better nutrition.

Marks & Spencer has overhauled its supply chain to reduce carbon emissions by taking steps such as stopping the purchase of supplies from one hemisphere to ship to another and is expected to save £175 million annually by fiscal 2016. This is part of their eco and ethical programme to become the world’s most sustainable local retailer by 2015.
 

Corporate Social Responsibility vs. Creating Shared Value
The article contends that based on these and many other examples of success, creating shared value (CSV) needs to replace corporate social responsibility (CSR) for the benefit of society as well as businesses. Currently, CSR is a separate component of a businesses’ core model and is a voluntary action they take to address societal interests, such as holding a yearly food drive or making a large contribution to a local charity.

Although this involvement is generous and commendable, one could argue that these gestures are largely publicity stunts to improve the public image of the company. And still, the company likely receives little economic benefit from these minimal societal interactions.

The chart below clearly illustrates the differences between CSV and CSR and ultimately the advantages of choosing shared value.

 

Fair Trade vs. Creating Shared Value
As mentioned in the chart, fair trade is actually an example of CSR. You may be asking yourself, “but isn’t fair trade good?” The answer to that is “yes, but we could do better.”

The article describes how fair trade aims to increase the amount of money going directly to impoverished farmers by paying them higher prices for the same crops. This is achieved by redistributing where the money goes, not by creating more value for the crops.

On the other hand, the shared value model aims to improve growing techniques and strengthen their local cluster of supporting suppliers to ultimately increase the farmers’ efficiency, yields, product quality, and sustainability. This model creates larger revenue and profits that benefit both the farmer and the companies that buy their crops from them.

If you’re still not convinced, the article explains how one study shows that cocoa farmers in Côte d’Ivoire received an income increase of 10%-20% through fair trade, but those participating in a shared value system saw their income increase by more than 300%. Through these methods, CSV could be a huge step in helping end extreme poverty.


So what do we do now?
It could be awhile before companies warm up to the idea of adopting shared value as the core model of their business. I think the best we can do to promote this idea of creating economic value in a way that also creates value for society is to spread the word and share these thoughts and ideas with business owners.

Until shared value is more universally adopted, fair trade is still the best way to support impoverished farmers and ensure they receive fair wages that will help them pull themselves out of poverty. You can read our previous blogs or visit the Fairtrade Foundation to see how companies are making huge impacts on lives every day through fair trade.

The video below is a short clip of one of the authors of the article further describing shared value and how businesses can earn the respect of society again by helping their community while they also help themselves.

Posted by Ashli Alberty in Fairtrade & Ethical Purchasing for column Business In Action on Feb 4th 2011, 07:42

The Co-Operative: Fighting Global Poverty?

 



The above short film from the Co-Operative was launched just before Christmas alongside the Co-Op’s commitment to put fighting poverty at the centre of their work. Not just the centre of their social responsibility program, but at the centre of their business, as their below diagram shows.

This is a welcome change from making corporate responsibility work a small side project for a business, but it's also a challenge as pressures of profit-making bump against a commitment to values that might not always agree.

You can learn more about the Co-Operative’s work on poverty at their website, or by liking their page on Facebook.

What do you think – are the Co-Op serious about fighting global poverty?

How an ethical approach can be good for business

 

How have companies taken the initiative and joined the campaign to end extreme poverty? In our business in action column we will be looking at initiatives from businesses, both large and small, to contribute to ending poverty.

Turns out an ethical and global approach to business investment can be good for business.

How, I hear you ask?

Well, it starts with free ice cream.

Three weeks ago, during one of my frequent visits to the twittersphere, I came across this:

BenAndJerryOz: Work in Bris/Mel/Syd? Complete this tweet: "I want @benandjerryoz to come to my office because" and add #FreeScoopFridays

Now, on its own – the existence of this tweet isn’t so significant, particularly as, like most twitter users, I generally don’t ‘follow’ companies, and thus wouldn’t normally see it.

But one of my globally conscious friends is following Ben and Jerry’s, and shared that tweet.

Why? Because earlier this year Ben and Jerry’s committed to making one particularly notable ethical decision in recent times – they have committed to convert their entire icecream range to Fairtrade by 2013.

Now, this was a product I could get behind – delicious, and provided by a company that is supporting sustainable, community based development. So, I responded:

CarrRenee: I want @benandjerryoz to come to my office because @TheGPP volunteers work hard to make a difference & deserve a reward! #FreeScoopFridays

And, last week, Ben & Jerry’s arrived at our new offices, with 50 free tubs of delicious ice cream!

Now, I’m a strong believer in marketing that relies on product exposure, because I think your product should be good enough to sell itself. And this ice cream certainly did (I highly recommend the strawberry cheesecake flavour): to all the people in the office, and the family and friends they took the spare tubs home to.

So now Ben & Jerry’s not only have a delicious product, a new group of likely customers, and a product sourcing philosophy that will excite consumers (that’s not something you hear very often, is it?).

With their Fairtrade commitment, Ben & Jerry’s will certainly be adding a very appealing and unique product feature to the hundreds of thousands of Australians, and millions more globally, who not only care about extreme poverty issues, but also buy icecream, chocolate, coffee, tea, clothing, shoes, underwear and sporting equipment – which can all be sourced Fairtrade.

It’s exciting to see companies recognising the positive role they can have within global markets, and recognising that ethical investments are also good business decisions.

I’m also excited to reward these companies with my business – knowing that from 2013 buying this icecream will support Fairtrade cooperatives that total a combined membership of over 27,000 farmers, who can then invest the money they receive from my ice cream back into their business and local community.

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*If you’d like to find out more about ways you can support Fairtrade, check out our How-To Guide. You can also find more about Ben & Jerry's decision to go fully Fairtrade below...
 

The 10,000 Women Initiative

 

How have companies taken the initiative and joined the campaign to end extreme poverty? In our business in action column we will be looking at initiatives from businesses, both large and small, to contribute to ending poverty.

If I asked you to think of Goldman Sachs, what would spring to your mind? Rich bankers? Excessive pay? Extreme bonuses? What about a $100 million initiative to expand the entrepreneurial talent and managerial pool in developing and emerging economies?

The 10,000 Women initiative was launched in March 2008 aimed at giving women in developing economies education in business and management. Time and again it has been proved that one of the major factors in stimulating growth in developing countries is to facilitate the empowerment of women, and this initiative is doing just that. The program is active in more than 20 countries and has so far reached 2,000 women.

To ensure the education received by the women is relevant to the women, the programme is facilitated at ground level via a network of partner NGOs and academic organisations. The women are receive mentoring and support following on from the programme from staff at Goldman’s and other relevant businesses.

The programme has great success in empowering the participants. An example would be Penelope in Zambia, who progressed from having never touched a computer before entering the programme to the manager of an ICT centre providing instruction and training for others in the use of computers and the internet. You can see more of their success stories on their website here.

As we work towards ending extreme poverty in a generation, we can’t forget the role that businesses can play in creating opportunities like this.

If you know of a business doing interesting work to fight poverty – let us know below, and we might be able to feature it in future weeks.

Posted by Guy Kirkpatrick - GPP Intern in Education for column Business In Action on Oct 9th 2010, 09:52