March 18, 2013 5:30 pm

From boycotts to business briefs

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A large group of people hand select coffee beans in rural Ethiopia.©Alamy

Smell the Sidamo: charities have helped coffee growers in Ethiopia stand up to big companies

A strange alchemy is under way. As big business stakes claims to being more charitable, charities are becoming more business-minded – and employing rather uncharitable language to whip multinationals into shape.

Thus while organisations such as BP, GlaxoSmithKline, Unilever or Clifford Chance promote their role in creating a fairer world – “We passionately believe in the power of the private sector to improve people’s lives . . .” they and others wrote recently in a letter to the Financial Times – charities have been busy exposing corporate failings elsewhere in lengthy reports that compile forensic detail.

Top food and drink companies were blasted last month by Oxfam for “a veil of secrecy [that] hides human costs”; and Associated British Foods came under fire from ActionAid for exploiting loopholes to avoid paying taxes that it claimed would have sent 48,000 Zambian children to school.

There is a long history of non-governmental organisations policing corporations – think Barclays Bank in South Africa in the apartheid era, or BP in Nigeria – but it is “definitely increasing” says Robert Blood, foun­der of Sigwatch, which tracks and analyses activist campaigns for NGOs. And the tactics have changed.

“Like all political institutions, NGOs have to be effective and they have discovered over time [that] one of the best ways to achieve real change is to put pressure on corporations,” he says. They do this by playing businesses off against each other or by embarrassing management into switching policies. Thus Oxfam’s report offered (with caveats) praise to Unilever, the Anglo-Dutch maker of Flora margarine and Dove shower gel, while flagging up failings at Associated British Foods (ABF), owner of Primark, the high street discount retailer. Reports by ActionAid have highlighted tax issues in Africa – which the companies concerned, including SABMiller and ABF, reject.

Acting as corporate watchdog may seem a long way off for pleasant,
cardigan-wearing ladies selling second-hand clothes in Oxfam shops on behalf of African babies, but charities have realised that companies could play big role in the eradication of poverty in emerging markets.

“Companies are so powerful in these countries, not least because governments don’t have very tight regulations, so they have freedom to behave however they want to,” says Barbara Stocking, until recently chief executive of Oxfam GB.

Corporate power also stems from scale. Emerging markets now frequently ac­count for a significant slice of revenues: in the case of the western food and drink industry, emerging markets make up 30-50 per cent of sales. Also, the companies source substantial volumes from poorer parts of the world: cocoa in the Ivory Coast, or coffee in Latin America and Vietnam, and palm oil in southeast Asia.

Ms Stocking says: “It is not by accident that [Oxfam is] doing more in the food and drink industry”, where many smallholders are poor.

Charity reports aim for serious investigation

Oxfam’s Behind the Brands report on the world’s top 10 food and drink companies, was “at least a couple of years” in the making and followed a similar report on banks in the Netherlands. The research, done in conjunction with domestic charities in local countries, is a continuing effort, and the report changes online if the policies of the companies featured change .

In total, about 10-15 per cent of Oxfam’s spending on poverty (£285m last year) goes on campaigning work, which includes research, policy and advocacy, and public campaigning.

ActionAid UK, which spent just 0.2 per cent of its total income (£61.5m) scrutinising corporate behaviour last year, claims big bang for its bucks. In 2010 it published a report accusing SABMiller, the world’snumber two brewer by sales, of adopting a “complex system of tax havens to siphon profits out of subsidiaries in developing countries”.

While SABMiller swiftly denied the accusations, ActionAid says the report helped spur 21 African tax authorities to create a new treaty in 2012, giving them information-sharing powers to tackle tax avoidance together.

ActionAid, like Oxfam, believes consumers have become more concerned about poor behaviour by corporations. Thanks at least in part to the financial crisis, says Beverley Duckworth, director of policy, the public is more interested in issues such as tax avoidance and in linking them to poverty and how companies conduct themselves.

“The driver from our perspective is poverty and injustice, so the work we do is always about being rooted in the communities we work with and our job is to bring these issues to the attention of the public and then put pressure on the government to act, in this case to change international tax rules,” says Ms Duckworth.

Nestlé, no stranger to being challenged by NGOs on issues ranging from baby milk to palm oil, ran into a row in Ethiopia in 2002 when it – legitimately – claimed compensation over a plant that had been nationalised in the 1970s. However, the Swiss- based food group’s attempt to add on interest charges as well raised hackles, particularly as it was demanding payment against the backdrop of an extreme drought and food crisis. Oxfam pointed the finger; Nestlé dropped its additional charges.

Also in Ethiopia, Starbucks’ marketing fell foul of Oxfam when it opposed the government’s efforts to trademark the names of local coffee bean varieties such as Sidamo and Harrar. It did not want to shell out for the right to use the Ethiopian names in selling coffee, but following an Oxfam media campaign, Starbucks backed down.

Mr Blood says many companies are becoming quicker to react to this kind of criticism. “Corporate management is changing faster than public opinion,” says Mr Blood. “Companies are acutely sensitive of how they look to the rest of the world.”

The crucial difference with past campaigns is that the aim is to change regulatory structures as well as company policies and there is less call for the kind of boycotts that charities famously called for against Nestlé in response to the sales of
baby formula in the developing world.

Instead, charities now want consumers to articulate what they want, if only by clicking the “like” icon on Facebook. Button pushers “may not be doing something dramatic”, says Ms Stocking. “But they’ve noticed and want to do something.”

Ms Duckworth describes cases such as the Zambian tax issue as “catalysers for change, putting pressure on individual companies to be responsible and play fair and also building pressure on governments to take action.”

Sometimes, rather than triggering change, a charity report triggers a tit-for-tat row over misinterpretation or accuracy of facts. ABF, for example, was criticised by both the ActionAid and Oxfam reports for poor corporate citizenship, but rejected the points.

“The idea that ABF would use a ‘veil of secrecy’ in order to hide the ‘human cost’ of its supply chain is simply ridiculous,” the company, whose holding include Twinings Tea, said. “The company has worked hard for many years, over a wide geography, at all levels of the supply chain to ensure its suppliers meet the highest ethical standards . . . Where issues are found, they are appropriately resolved.”

But ABF and its peers can expect charities to remain on their case, wink­ling out and highlighting issues. Not least, says Mr Blood, because no one else is doing so: governments in emerging markets have more pressing matters and cash-strapped consumers are increasingly more worried about shopping to their own budget than helping those in far-off countries.

“NGOs like Oxfam and Christian Aid are going for the one source of power that’s still left, and that’s corporations,” says Mr Blood. “It’s fascinating, not least because NGOs are waking up to the fact that large corporations are their ally, not enemy.”

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