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:
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