Transcript Slide 1

Michael E. Conroy
November 28, 2007
Carnegie Council for Ethics in International Affairs
Colibrí Consulting
Overview
 What is the “certification revolution”?
 Why has civil society created it?
 What does it mean for advocacy NGOs?
 What does it mean for business?
 How does this facilitate new ethics in
international affairs?
 What are the key challenges facing the
movement?
 In the end, how is this “revolutionary”?
What is the “Certification Revolution”?
 Unparalleled changes in global corporate
accountability on social and environmental practices
 Sweeping across sectors and around the world
 Intersection of three powerful forces:
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Brilliant “market campaigns” to drive corporate change
Creation of third-party, independent “certification systems”
to verify compliance with stakeholder-based standards
Internal champions within corporations who recognize the
new corporate accountability imperative
Emergence of booming new markets for ethicallycertified products
Why our society needs this?
 We can’t get government to provide regulation of
global corporations at the level of social and
environmental accountability that we want!
 Even when we do, governments generally cannot
control TNCs in their worldwide actions, once they go
beyond national boundaries!
 The WTO will not allow international bans on
products based on PPMs (“process and production
methods”)!
 The world needs “governance” of corporations that can
extend worldwide! And civil society is now creating it!
What is a “market campaign”?
 A coordinated campaign to call public attention to
problems in a company’s supply chain
 Focused first on damaging a company’s market share,
but effectively directed at a company’s brand and share
value
 Driven in terms of high moral values
 Effective only when filled with accurate and reliable
information
 Leading to negotiations with the firm on the
conditions under which the pressure is reduced
Why focus on brands?
 Brand value is the fastest growing component of total
capitalization for the world’s largest corporations
 For many of them, brand value exceeds “brick and
mortar” value; e.g. Tiffany=77%, McDonald’s=71%,
Ford=71%, Coke=64%
 Brand value is the most volatile component of the
share-value of many companies, subject to every news
story every day
 Look what happened to Nike and Coke…
What is a certification system?
 Under the best of circumstances:
 Stakeholder-based principles, criteria, and indicators for
improved corporate (or other producer) practices
 Third-party independent verification of compliance
 A consumer-oriented seal of approval for compliance
 Historically, the UL seal one of the best examples:
 Today, modern examples include:
Why advocacy NGOs need
certification systems?
 Not needed if the corporate action is simply to STOP
doing something: e.g., using mercury thermometers
 Often needed if the preferred corporate response is
more complicated, nuanced
 Gives campaigners a concrete set of targets toward
which to drive the companies
 Provides an exterior set of criteria against which
company compliance can be measured
 Allows positive reinforcement for companies that do
comply, through “Atta boy!” ads and statements
Why does business need them?
29 January 2007
 This world is here now for
forest products, fisheries, ag
commodities and others!
 Corporate accountability
“right at the top of the
agenda” for North American
CEOs
 “Growing clout of watchdog
groups” recognized
 “Brand value and shareholder
value at risk…”
Stages of corporate accountability
 19th Century corporate social responsibility
 John D. Rockefeller and Standard Oil, i.e., first-party
certification
 20th Century corporate social and environmental
responsibility
 Union Carbide, Bhopal, and “Responsible Care”; the
birth of second-party certification
 21st Century corporate accountability
 Third-party, independent certification systems, “CSR
with consequences,” such as the FTL
The fundamental business dynamics…
 Branding is the name of the globalization game
 Every dollar successfully invested in expanding brand
recognition also increases risk of challenges to the brand
on social and environmental grounds
 Certification systems are risk mitigation in brand
management, and they reduce transaction costs for their
clients’ own pursuit of corporate accountability
 Supply-chain certification also brings other tangible
financial benefits for marketing, finance, insurance, and
labor force turnover, and improved social license
 Only credible certification is 3rd party, independent, with
explicit social and environmental NGO support
Risks of not pursuing socially responsible and
eco-friendly practices
 Encourages advocacy campaigns worldwide to boycott
your products, attack your brand
 Loses market opportunities to be an industry leader
for ethically-motivated consumers
 Overlooks one of the most important trends in 21st
Century production strategy
 Damages brand and overall share value
Signs of success?
 Certified Fair Trade in 2007 will top $2.5 billion in
sales, providing wide benefits to more than 1 million
farm families; growing at 40% per year
 FSC-certified forests now top 300 million acres
worldwide, more than 10% of the world’s working
forests, growing at 25% per year
 MSC-certified fisheries now cover 70% of oceancaught salmon (not farmed!) and 26% of whitefish,
more requests for fishery certification than they can
handle… driven by Wal-Mart & McDonald’s, among
others
And more…
 The July 2007 release of Harry Potter and the Deathly
Hallows in the U.S., anticipating sales of nearly 20
million copies, was published with 65% of the paper
from FSC-certified sources… this is “the largest
purchase of FSC-certified paper to be used in a single
book printing to date.”
 Tiffany & Co., Pottery Barn, many other firms are
committed to using only FSC-certified paper and
packaging
 Major retail chains are competing for Fair Trade
products: Costco vs Sam’s Club vs Whole Foods
 Marks & Spencer vs TESCO in the UK
And more…
 The world’s 40 largest bank groups, led by ABN-AMRO
and Citigroup have committed to using the “Equator
Principles” as bases for screening all project lending
worldwide over $10 million on social, environmental,
and human rights grounds; not yet a true certification
systems, but moving in that direction
 The worlds gold and diamond mining industries are
actively searching for a certification system that would
assure jewelers and consumers of the ethical qualities
of their products
Ethics in international affairs?
 Global corporations are the five-ton elephants in the
room whenever we discuss global ethics and
international affairs, but we seldom focus on them,
perhaps assuming that we have no leverage
 Now we do! Challenge to brand value is key
 The ‘certification revolution’ has created new tools for
engaging with global corporations in ways that
complement international policy debates; e.g., the
Business & Human Rights Resource Centre, and
UNCTAD exploration of new rules for corporations
working in societies in conflict
How is this “revolutionary”?
 The 19th and 20th Centuries saw the ascendance of
global corporations as forces increasingly beyond the
rule of law and public policy
 Civil society found decreasing ability to control their
behavior, especially as their influence over political
processes made corporate-led globalization the rule
 The ‘certification revolution’ is returning effective
power to civil society to create “new rules” for the
governance of global corporations, beyond national
legislation and regulation. This is revolutionary!
Continuing problems
 Some don’t believe that “negotiated” standards are
tough enough.
 Some companies make minimal commitments and
then “greenwash” or “fairwash” their reputations.
 Campaigners don’t want to see companies benefit, just
change!
 The costs of certification are difficult to recover and to
use wisely to grow the movement.
 In every sector, high-bar standards are met with
industry low-bar responses: competition for credibility