International

How Broad is EU’s REACH?

Europe has led on climate change. Now, it is staking out leadership on chemicals with the new REACH regulations.EU flag

By Ken Stier

The December adoption by the European Union of a new community-wide chemicals regulatory regime is still reverberating through the $2.56 trillion global industry, which is struggling to grasp the enormity of the coming changes. The principal aim of the new regime—known as REACH (Registration, Evaluation, Authorisation, Restriction of Chemicals), which comes into force in June—is to enhance environmental and public health protection. Although no hegemonic notion of extraterritoriality is asserted, the new provisions apply to chemicals (and products made from chemicals) manufactured in Europe, as well as those imported into Europe, effectively raising standards internationally. The U.S. industry exported $186 billion worth of chemicals to Europe in 2005.

Robert Donkers, a founding REACH co-author, and presently the environmental counselor at the European Commission office in Washington, says the agreement represents a “paradigm shift”—moving the burden of establishing that chemicals can be used safely from public authorities to industry.

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The Future of the Global Compact

Does the new UN Secretary General have the commitment—and corporate experience—to drive the compact?

By Andrew Savitz and Moses Choi

When the CEO of Novartis met with the Secretary General of the United Nations in the summer of 2000, neither suspected that the result would be to reinvent the very way the Swiss pharmaceutical giant does business. Kofi Annan was merely trying to entice Dr. Daniel Vasella and other corporate leaders to join his new Global Compact.

Since then, more than 3,000 CEOs have signed the Compact, making it the world’s largest voluntary corporate citizenship initiative. Annan’s objective was to bring companies together with labor, civil society and UN agencies “to unite the power of the market with the authority of universal ideals.”

Half the companies have reported changing their policies to harmonize with the Compact’s 10 principles for corporate behavior, which address human rights, labor standards, environment and corruption.

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Big Business Focuses on Small Loans

Shining a new spotlight on the field of microfinance.

By Abby Schultz

The award in October of the Nobel Peace Prize to Muhammad Yunus of Bangladesh and the institution he founded 30 years ago, Grameen Bank, has focused new interest on the field of microfinance, which provides the poor a way out of poverty by lending them small amounts of money for short periods of time without asking for collateral. The loans have allowed millions of low-income people to grow tiny businesses into viable enterprises.

The Nobel Prize “makes it difficult for people to not be paying attention,” says Shari Berenbach, Executive Director of The Calvert Foundation, which has about $30 million invested in 42 leading microfinance organizations.

Based on the success of Yunus and others, the field of microcredit has grown to include for-profit as well as nonprofit institutions, and has expanded through some of these organizations to include other financial products, including insurance, savings deposits, and mortgage lending.

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Africa Needs the Private Sector

AfricaWhy has the continent been left out of the business revolution?

By William Duggan

Africa today has the most extreme poverty in the world. How has the West responded to this suffering? Thanks in part to celebrities like Bono and Angelina Jolie, calls for increasing aid to Africa are becoming popular, even sexy. Bill and Melinda Gates are using their fortune to fight disease in Africa. And Warren Buffett recently announced that he would give more than $30 billion to the Gates Foundation.

There’s also a coordinated campaign to end poverty in Africa and other regions, a project called the United Nations Millennium Development Goals. These eight goals, which the UN hopes to achieve by 2015, include reducing extreme poverty by half, halting the spread of AIDS and ensuring universal primary education. Any role business might play appears only once on this list, in the very last item: a global partnership for development.

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Win or Lose in Court

Alien Tort Claims Act Pushes Corporate Respect for Human Rights

It’s a law that’s been on the books since 1789 — a law that has the potential to dramatically increase corporate accountability for human-rights abuses. But, amazingly, some 200 years later, we know very little about how courts will interpret the Alien Tort Claims Act (ATCA) in cases against corporations. Is it the silver bullet human-rights activists hope for — or just a weak weapon, as some multinational corporations might want to believe?

“I think ATCA is the only effective tool out there right now for advancing corporate respect for human rights, and I think it will continue to be a very effective tool,” says Terry Collingsworth, executive director of the International Labor Rights Fund. “We spent years negotiating with companies, working on voluntary codes, and at the end of the day, the companies viewed those as public relations devices.”

Collingsworth’s view has yet to be validated by the courts.

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The South African Brand of CSR

Government-created structures help "black empowerment" take off.

With its “Project Grow” initiative, the South African paper maker Sappi Manufacturing helps subsistence farmers start self-sustaining tree farms. It provides them with free plant material, technical advice, and interest-free loans — plus it guarantees the farmers a market for their product. Started in 1983 with three farmers, the project now involves more than 9,810 growers, providing 24,000 tons of timber a year to Sappi, a company listed on the Johannesburg Securities Exchange.

That’s one example of a company-sponsored black empowerment project, which ffers a window onto the corporate social responsibility (CSR) ferment in South Africa, where the economy grew 5.1 percent in 2005, business confidence is soaring, and 1,000 jobs a day are being created. The Project Grow initiative is proudly featured in Sappi’s Broad Based Black Economic Empowerment Scorecard — the South African version of a social report, which more companies have issued since 2004.

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Spotlight on China

ChinaSweatshops and online freedom are among the issues.

By Bill Baue

China, host of the 2008 Olympics and a market of enormous importance to many multinational corporations, is also shaping up to be an Olympic battleground on another front: corporate responsibility and law. The controversies over Chinese sweatshops in the supply chains of U.S. corporations such as Nike and the Gap over the past decade are likely to continue on a broader scale. American labor groups and human rights organizations are actively supporting anti-sweatshop legislation proposed by Senator Byron Dorgan (D-ND) and Representative Sherrod Brown (D-OH).

The Decent Working Conditions and Fair Competition Act (S-3485) prohibits the U.S. sale of products manufactured in sweatshop factories abroad. The ban would be enforced with fines of up to $10,000 for each violation, and a provision that allows competitors of retailers who sell sweatshop-produced products to sue for damages for each violation.

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News Note: Exporting Transparency

Glass, Lewis & Co., a San Francisco-based investment research and proxy advisory firm, has sold a 19.9 percent stake to Xinhua Finance of China. Xinhua said the acquisition would advance its efforts to bring transparency and corporate governance to China. Xinhua Finance chief executive Fredy Bush noted that China’s range of shareholding alternatives, from state-owned shares and legal person shares to free float shares, “can make the voting process for a foreign investor very complicated.”
Published in CRO Magazine, Fall 2006.

Measuring Sustainability

GlobeGRI launches “user friendly” revisions to its reporting guidelines.

The challenges and opportunities of sustainability reporting were top of the agenda in Amsterdam in early October, with hundreds of corporate, government and non-governmental organization (NGO) executives scheduled to hear former U.S. Vice President Al Gore and other international notables mark the long-awaited launch of the latest Global Reporting Initiative (GRI) guidelines.

The new guidelines—commonly referred to as G3—are the third set of revisions since the GRI was introducedin 2000 with the stated mission that “reporting on economic, environmental, and social performance—sustainability reporting—become as routine and comparable as financial reporting.” The GRI guidelines seek to create one common form of non-financial reporting for “all organizations regardless of size, sector, or location.

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Think Global, Legislate Local

Emboldened states and cities are taking action on a range of issues.

In an unlikely alliance between a foreign country and a U.S. state, U.K. Prime Minister Tony Blair aligned with California Governor Arnold Schwarzenegger in late July to develop an international system for purchasing and selling carbon dioxide emissions.

The two politicians shared a stage in Long Beach, CA, for a high-profile announcement of their agreement. “California will not wait for our federal government to take strong action on global warming,” said Schwarzenegger, a Republican. “International partnerships are needed in the fight against global warming.”

Only a few weeks later, Schwarzenegger signed a law to reduce greenhouse gas (GHG) emissions 25 percent by 2020, making California the first state to enforce a limit on greenhouse gas emissions. Frances Beinecke, President of the Washington, DC-based Natural Resources Defense Council (NRDC), said, “The whole world has been watching to see whether California passes this bill, and now the whole world will watch as California takes the lead in developing a clean energy market.

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