The Triple Bottom Line Blog

One troubling question for today’s global managers is: How far out into the supply chain, and across what range of issues, do our responsibilities extend?

The answer: Further than you might think.

Nike was one of the first companies to realize, after repeated lashings by the media, that it did not hold the power to define its own responsibilities. Activists were turning public opinion against the company, and sooner or later Nike had to respond. That response was perhaps later rather than sooner, both for activists and for the company’s own reputation, but it happened in time for the company to survive – and even to turn the issue in its favor by striving for best-practices in this area.

But while the anti-Nike campaigns relied on boycotts and protests to push for corporate action beyond what was legally required, more recently human rights activists have found a legal basis for their demands. The Alien Tort Claims Act of 1789, originally intended as an anti-piracy measure (the old-fashioned kind of piracy, on the high seas), allows non-citizens to seek legal recourse in the US for violations of international law. Yes, that’s right: anyone, anywhere, can use the US court system to uphold the tenets of international law – tenets often based on norms and precedents, rather than deliberate legislation.

This Alien Tort Claims Act (ATCA) remained largely forgotten until the 1980s, but since then it has been used against Chevron, Chiquita, Coca-Cola, Exxon-Mobil, Firestone, Shell, Wal-Mart, and others.

Earlier this month, Drummond coal company won the first Alien Tort Claims case to reach a verdict; the company was ruled non-complicit in the killing of three union leaders of a Colombian mine. According to SocialFunds.com writer Bill Baue, however, the key take-away is not the verdict itself; it’s the fact that the case was taken seriously enough to reach a verdict. In other words, it was not dismissed, and the discovered facts rather than the legal basis gave Drummond its recent sigh of relief. Besides, there are appeals in progress.

And as Baue points out, tobacco legislation was defeated time and time again before it finally became a multi-billion-dollar liability for the corporations involved.

Chiquita is an interesting example, as some activists believe the company to be demonstrating best-practices in its transparency – openly admitting it paid “protection” money to different terrorist groups in Colombia. The company has since paid its fines and withdrawn from the country, but the pressure is not off. Less-friendly activists feel that the company’s actions are insufficient, and accuse it further of selling weapons to the terrorist groups involved. On the bright side, what Chiquita did was arguably to protect its workers; other companies stand accused of having their own workers killed.

One such company, Coca Cola, has been stubbornly (and foolishly) refusing to recognize the campaign against it. The company is the target of the “Killer Coke” campaign which was recently sweeping college campuses. Its alleged crime: failing to speak out when Colombian paramilitaries began killing its workers. A Coke spokeswoman says, "We were not complicit in what happened, so it wouldn't make sense for us to pay reparations. "But according to one of its accusers, Edgar Paez, Coke had another kind of complicity: "If the company had condemned the first death, there probably wouldn't have been any more." Managers take note: lawsuits and activist campaigns can be based on just on your company’s actions, but also on inaction.

An earlier example of high-profile corporate inaction is Shell Oil; a 1999 Harvard Business School case study examines whether the company should have acted to protect indigenous-rights leader and respected author Ken Saro-Wiwa, whose death sentence was eventually carried out despite international protest. Shell never took a stance on the issue, claiming it did not want to be involved in foreign politics – but at the same time, some argue that the Nigerian government suppressed activist campaigns in order to maintain a business environment attractive to Shell, and that failing to speak out made the company complicit.

In my own experience, managers dealing with supply-chain issues want to believe that they have all the answers, or can determine them pretty quickly. But these examples show otherwise. They show that:

• Your company can face not only reputational challenges and boycotts, but also legal challenges, based on human rights violations overseas.
  
• These challenges do not necessarily distinguish between your own workers and those of your suppliers – and may even extend to activists engaged in campaigns against your company.
  
• Your company can be accused not only of wrongful actions, but also of wrongful inactions – and of complicity.
  
• New campaigns spring up quickly, and what could never have been on your radar screen last year might make front-page headlines this year.

Remember: don’t learn the hard way. Keep your antennae out, and be aware of any accusations against your company. Think broadly of how blame might be interpreted, and engage early with your accusers. Listen to them, and show yourself open to finding the right solution. Statements and settlements will be less costly, and their goodwill will go further, if you make them early and proactively.

And always remember, just because you think you’re taking care of your supply chain doesn’t mean other important stakeholders agree – and doesn’t mean the press and the public will agree. Keep trying to do the right thing as you interpret it, but also keep your ears open, and be ready to react quickly even to issues you think are bunk. Human rights issues are growing in visibility and in scope, and it would be a shame to tarnish your reputation over them.

NOTE: In this post we originally misspelled the name of the country of Colombia as "Columbia," like the university. Thanks to reader Shoshana Grossman-Crist for showing us the error of our ways.

Labels: Bill Baue, Chiquita, Coca-Cola, Drummond, Human Rights and Child Labor, Nike, Shell Oil, Supply Chain

I asked Andy about what topics we ought to be writing about more on this blog, and in response he sent me this email:

I always get questions on the lecture circuit about how companies in this country [i.e. the United States] can afford to be more sustainable or more responsible when they have to compete with low-cost goods and services provided by China and the rest of the developing world.

The first point I make is to refer to one of your initial posts about how globalization means that China and the others can't get away with bad practices for long if they are planning to export to us.

The second point I make is that the chickens are coming home to roost, even faster than I would have expected. Last week, for example, there was an article in The Times about how American toy manufactures are having a resurgence because of the China toy recalls. You might want to link to the piece . . . just don't quote the whole bloody thing.

(Andy thinks I have a habit of quoting too much from the stories I link to. In deference to him I'll link to the Times story, but I won't quote a single word. Read the whole thing if you like. Seems as if retailers and consumers are happy enough to pay higher prices for toys when the cheaper alternative products are coated in poisonous paint . . .)

But speaking of chickens coming home to roost, it seems as if an entire blog about sustainability could be written using nothing but stories from China. Almost two months ago, Andy himself wrote this post about the risks of being a corporate sponsor of next year's Beijing Olympics. Between Darfur, child labor, censorship, and capital punishment--not to mention rampant pollution, product piracy, and, now, shoddy manufacturing practices--it seems as if being linked with China is an increasingly dangerous corporate strategy.

At the same time, there's no doubt that China is a rising world power than no global corporation can afford to ignore. What to do?

Today I encountered this good column about the issue from consultant David Wolf. I'll quote him--sparingly enough for Andy's taste, I hope:

Several things set the Olympics apart. The Olympics is global. It covers a wide range of sports. It is a pinnacle event, meaning that in most of the sports involved you can reach no higher than Olympic champion. It occurs every four years.

But there is one more thing that, in the mind of sponsors, sets the Olympics on a higher plane than even the Superbowl, The World Series, or the World Cup. It is the unspoken conviction that the Olympics is somehow the last form of pure athletic endeavour, and that supporting the Olympics is somehow a good thing, in and of itself.

But any company (and I guarantee you, there will be a few in the coming months) that attempts to frame their support of the Olympics as some form of corporate social responsibility should be publicly ridiculed. Olympic sponsorship is a marketing exercise, pure and simple, and should be universally acknowledged as such.

It's an excellent point. Wolf goes on to stress that any company associated with the 2008 games needs to make sure it has in place a robust sustainability program focused specifically on its China practices. The best possible response to protestors who want to attack your corporation for its sponsorship of the Beijing games is to be able to point to your policies that are bringing concrete assistance to Chinese workers, children, human rights activists, and other worthy beneficiaries. Without such a response, protestations about your good intentions as a partner of China and a supporter of the Games will ring hollow.

One last point: Although many of us assume that the "commercialization" and "politicization" of the Olympic Games--along with the attendant controversies--are recent phenomena, that's simply not true. Corporate sponsorship has been a feature of the modern Olympics since their founding in 1896. And as for controversy--well, one of the sponsors of the infamous 1936 Berlin Olympics was none other than Coca-Cola.

How's that for a corporate affiliation--to be linked forever in history with the likes of Hitler, Goebbels, and Leni Riefenstahl? It might take a brand as powerful as Coke's to shrug off that kind of publicity.

So if you're a corporate manager trying to figure out how to position your company in today's interconnected, globalized world, don't feel too sorry for yourself. The problems you're wrestling with may be thornier than ever, but they're scarcely brand new . . . if that's any comfort.

Labels: China, Coca-Cola, Communications and Marketing, David Wolf, Olympics