CSR in Japan: transparency & trust

Do you gain trust by being transparent? Or do you become more transparent when people trust you?

These are some questions I’m left with after getting a bit more perspective on corporate social responsibility (CSR) reporting in Japan today. According to a 2011 survey of KPMG, 99% of Japanese companies publish a CSR report. An impressively high number, especially when you realize that there is no government regulation telling them to do so.

On corporate reporting

And, not only do many companies report – these reports are also easily accessible. No less than three (competing) Japanese websites focus on sharing CSR reports online and offer related services, such as extended search options, a report cover design award and seminars on this topic. But most of all: they offer exposure of these reports.

Today, I spoke to the people behind one of these websites, CSR Japan, about their work and about the characteristics of CSR reporting in Japan. I initially contacted this organisation as I assumed it would be the CSR association in Japan, much like MVO Nederland is in the Netherlands. The information on their website quickly showed their focus on collecting CSR reports (the website currently contains almost 500 reports of over 200 companies) and making these accessible.

I haven’t seen anything similar in the Netherlands, and I love how you can really search the relevant themes you want to know about – and it will give you the individual pages from the various reports. Imagine how much easier that makes it if you want to compare what various companies write about supply chain management, to give just one example. And on the plus side for companies who have their report listed here, they can get an overview of what pages have been viewed how often, and there’s a weekly ranking of the most searched for topics. This week, the top 5 consists of: company mission, work-life balance, investor relations, biodiversity and ‘relation with society and the environment’.

And as mentioned, CSR Japan is just one of three:

Eco Hotline has the largest collection with reports from more than 500 companies

CSR Toshokan has published reports from 400 companies

Each comes with their own additional services, of which Eco Hotline’s Report Cover Design Award is one example. [I will update this post when I have an answer to the question where this difference in quantity comes from. My guess is companies pay for the advantage of being listed, but I need to check]

Reasons for being transparent

So, why are these companies happily writing these reports, while in Europe there is a debate going on that making reporting mandatory will lead to higher costs for business? Why are Japanese companies doing this voluntarily?

CSR Japan explains this through the fact that there have been some major environmental disasters in Japan in the past (of which a well known example is Minamata). This has increased awareness from the public and from companies that it is important to be transparent about their business activities and their (environmental) impact.

Because indeed, the reports of Japanese companies seem to focus more (in comparison to for example European reports) on environmental than on social aspects of CSR. This also came back in other talks I have had today. The explanation for this may be sought in the fact that Japan has developed their own guidelines for reporting, but these focus solely on environmental issues: Environmental Reporting Guidelines by the Ministry of Environment. Luckily the other topics are partly covered by reporting through a combination of these guidelines, GRI and ISO26000.

What audience?

So, it appears that Japanese companies are mostly transparent about their activities – which is of course very good. We then spoke about who reads the reports and whether or not this makes companies vulnerable. In Europe and the US, NGO’s sometimes maintain a type of watchdog function to make sure that companies are behaving correctly – hence the vulnerability by reporting what you do, or do not do. Interestingly, Japanese NGO’s do not seem to have this function at all – and in fact are usually very trusting of Japanese companies. There are hardly examples of big campaigns being set up when something has gone wrong, because it turns out that much more than in many other countries the population of Japan overwhelmingly trusts its corporations. And doesn’t particularly think of the NGO-sector of being trusted to do the right thing.

This interesting bit of information comes from the Edelman Trust Barometer, which I heard about in a later meeting, and which surveys the level of trust annually across around 20 countries worldwide in the government, the media, business and ngo’s. This is quite a different view towards corporations than for instance in the Netherlands, where it sometimes feels that NGO’s have no trust at all in companies (and where in fact some NGO’s and politicians are calling for more regulation and monitoring on CSR topics to ensure that companies will not do anything wrong through their business activities).

I also feel that this situation changes the dynamic of CSR in Japan, compared to Europe. It may be too early to draw that conclusion, after only a few discussions. Of course you would hope that the watchful eye of NGO’s and consumers is not the sole reason for companies to behave responsibly. However, knowing that you are being held accountable for your actions – or maybe rather, knowing that no one is really watching what you are doing – must make for different choices in putting together and implementing a company’s CSR policy.

Which brings me back to the question: does transparency beget trust, or is it the other way around?

FairPhone – almost here?

Last week I wrote about fair fashion, but a topic which is possibly even more complex is fair electronics. The more information gets out about the supply chain of producing electronics – and let’s face it, don’t we all live with our cell phones, laptops, e-readers, tablets? – the more it seems that there is no good done in any part of it. Whether it’s materials (such as conflict minerals) or local labour circumstances (such as the issues that came out at Foxconn several times last year), it seems it would be pretty much impossible to make a fair smartphone – exactly because of those complexities in the supply chain.

A Dutch start-up is courageously trying to do exactly this: produce a fair phone. Or at least, one that is as fair as feasible currently. I’ve been following the company as they share their dilemma’s and the choices they need to make, such as which Chinese production partner to work with.

I admire a group of people like this, who see a problem and set out to find a solution to this problem. And be honest about it. It may not be quite 100% fair just yet, but it’s looking more and more likely that it will be the next best thing – by a long way.

It’s also starting to look very likely that this might be the answer to my personal dilemma of whether or not to get a smartphone…

Bangladesh and the long road to ‘fair’ fashion

When it comes to news on CSR in Asia, this week has been all about the collapsed factory in Bangladesh. As I’m writing this, the news is announcing a still rising death toll, up to 500+ by now.

A tragedy. And I feel it does show that the prices we pay for our clothes in Western Europe are not sustainable, least of all for the people who manufacture these clothes. Would it kill us to pay a few euro more for a t-shirt so that other people can have a slightly better standard of living?

The problems in Bangladesh’ textile production industry aren’t new, and a search on the BBC News site will bring up reports from many accidents over the last few years. A change is long overdue.

Today I also heard the news that Disney is withdrawing its production from Bangladesh (and several other countries).* Apparently this had already been decided after the fire in a textile factory in Dhaka killing over a 100 people in November 2012.

However, even if this may be an effective way for Disney to reduce its risks, this can’t be the way that that change is going to take place. Without the textile industry in Bangladesh, many many more people would be without a job and without any income. Bangladesh depends in large on this industry for its exports. Should we boycott the country? Or should industry take responsibility and work together with (local) government and ngo’s to improve the labour circumstances on the ground, and thereby improve the quality of life of many people?

An easy choice, when writing it down like that. But a difficult process to begin and to get going effectively. And, it can’t be down to industry alone. It also means that consumers have a responsibility to ask for better produced clothing. Unfortunately, that requires information: how does your favourite brand rank when it comes to labour, safety, health in its production locations?

In the Netherlands there are a few resources available, which will hopefully be gaining in exposure. Some examples are Rankabrand and an app by Talking Dress to help you find brands that perform better on these issues.

And if you want to know more about sustainable fashion or CSR in the textile industry, there are a few events coming up in the next two months or so:
> the communications agency Schuttelaar & Partners will host their next Maatschappelijk Café on fair fashion (May 28, Den Haag)
> three Dutch industry associations in textiles and fashion are collaborating to organize a conference on CSR in the textiles industry: Groen is de Rode Draad (June 20, Den Haag)

* UPDATE [5/5] – through a friend I just came across this article which discusses the Disney withdrawal in more detail. I still don’t believe that disengagement is the way forward. However, I can also understand the argument of lack of leverage (assuming Disney’s leverage is as non-existent as they seem to imply) for disengaging if that means you can allow more attention and effort in making sure other production locations are responsibly managed. Nevertheless, I do hope the choice for which country to leave from and in which country to stay was not just based on a Worldbank list as it should also depend on individual factories and local knowledge (available within the company, Disney in this case) – where circumstances may vary a lot locally.

CSR in Asia

Outside of the office, the last few weeks I’ve been working on my professional plans for the upcoming new year – I will be sharing more on that later but it will not be a surprise that they center on Asia and CSR. Those are also the topics that I (irregularly) write about here.

However, these are also two topics that – in the Netherlands, at least – don’t automatically belong together. CSR discussions and events here are often focused on issues that concern companies in their activities within the Netherlands itself. Understandable, of course.

But at the same time CSR doesn’t limit itself to the borders of the country where a company is based. Especially in a country where international trade is so important to economic growth, companies are naturally confronted with international issues as part of their CSR policy.

I am specifically interested in how CSR is developing in Asian countries, and what this may mean for Dutch or other international businesses. Of course Asia includes some of the world’s largest and fastest growing economies. This means that many foreign companies do business in this region and developing CSR policies that fit local activities will be increasingly important for them.

I try to keep track of many different sources of information on these two topics, but again it seems as if these two themes do not really find eachother on a Dutch platform. As a cautious beginning I started a Dutch-language Twitter account where I will be collecting news, information, blogs and whatever else is interesting to send out into the world about CSR-developments and sustainability topics in Asia. For those in the Netherlands, I hope to see you as followers! Find it here: MVO in Azië

On benefit corporations

On Tuesday night I attended the second CSR Meetup in Amsterdam which would be about the phenomenon of benefit corporations. A term I had never heard of before, so I was interested to learn more as it’s one part of social entrepreneurship.

I like the idea of social entrepreneurship where a social issue becomes central and contributing to a change on this issue is taken up as a business venture. This also seems to be an increasing phenomenon.

Taking on a social issue as a business, or at least making social issues central to how you do business, also means taking into account the concerns of all stakeholders. And not just the shareholder whose main objective is likely to be making the most profit. In the Netherlands this idea isn’t new at all: Dutch corporate law determines that a company needs to make the best decision for the company based on the interests of all stakeholders. However, in the US this is not the case. According to corporate law there the wishes of the shareholders – i.e. maximizing profit – are leading for company decisions. A more legal discussion on these differences can be read in this article by Sjoerd Kamerbeek.

The non-profit organisation B-Lab is working with businesses in the US to change this and it wants to introduce legislation that will make it legally binding to take all stakeholders into account and report on this for these types of corporations. Eleven states have so far passed this legislation which makes the legal environment for social enterprises much more secure.

B-Lab is doing a lot more than just this policy work which was the main topic of the CSR Meetup where the organisation gave an overview of their main activity: certifying companies for the B-Corp standards.

B-Corp is a certification scheme which aims to ‘shine the light’ on these companies with that community mission. It isn’t just about a product – for which there are many standards already – but looks at the whole of the company and whether it lives up to this premise and reports on it accordingly. So far, over 600 companies (one well-known example of which is Patagonia) have been certified, mainly in the US. Interest is this scheme is increasing in other countries and the organization is exploring which other countries would be interesting to expand to.

What I find most interesting about B-Corp is that it seems to turn around the premise of doing business and assesses a company on that. Many other certification & reporting schemes (GRI, ISO26000, MVO Prestatieladder, to name just a few that I know of) work with the idea that a company’s main concern is making a profit but they should do this responsibly – and this is where these certifications come in. B-Corp looks at it the other way around: a company is in it for the good of society and it’s, happily, making money doing so. How well does it live up to that premise, and, what is a company’s social impact, are the questions that B-Corp tries to answer.

The ideas behind B-Corp are interesting and it’s good to see it growing, though I can’t help wondering if there would also be a place for yet another certification scheme in the Netherlands. Consumers are already getting lost in the masses of eco- and sustainability labels on products: would one that is not about the product but about the company behind it be any less confusing or any more transparent? I also see that it is becoming more difficult for, especially, SME’s to figure out if CSR certification will be useful to them and if so, which scheme to use. Adding another option to the mix might only be counterproductive.

I haven’t made up my mind yet, despite an interesting evening of presentations and discussion. I am curious though to see what progress B-Lab will make in further positioning this scheme in the US and abroad. And most of all, how companies will respond.

MVO Exchange: perfect bestaat niet

Twee weken geleden organiseerden MVO Nederland en Agentschap NL een zakelijk evenement over Internationaal Maatschappelijk Verantwoord Ondernemen: hoe doe je nu op een goede manier zaken in het buitenland?

Onderwerpen die gedurende de dag aan bod kwamen waren bijvoorbeeld corruptie, ketenverantwoordelijkheid, communicatie, financiering en allerlei andere aspecten waar je in het buitenland mee te maken krijgt. Maar die ook vanuit Nederland enorm moeilijk te controleren en te beïnvloeden zijn. Want hoe kom je er achter of alles gaat zoals afgesproken in, bijvoorbeeld, die Chinese fabriek waar jij onderdelen inkoopt? En als je er wel achter komt dat niet alles gaat zoals je wil, wat doe je dan? Complexe dilemma’s, en dat blijkt telkens weer uit de ervaringsverhalen die ik van bedrijven hoor over deze thematiek.

Dat is ook wat me vooral is bijgebleven van deze dag, of wel de MVO Exchange: complexe materie dat bijna niet helemaal perfect uit te voeren is.

Zo was er een ondernemer die sprak over zijn bedrijfje dat intussen succesvol lampjes op zonne-energie verkoopt in een aantal landen in Afrika waardoor mensen in kleine dorpjes licht krijgen, ’s avonds nog dingen kunnen doen, kinderen kunnen lezen en zo meer naar school kunnen. Allemaal ontzettend goed. Maar vanuit de zaal kwam de onvermijdelijke vraag: “Maar waar & hoe worden deze lampjes geproduceerd?”. In China, en hoe… dat wisten ze niet precies. De ondernemer gaf wel duidelijk aan dat wat hem betreft het doel van de onderneming is om licht te krijgen in die dorpen. En dat lukt. En aan de rest wordt gewerkt zodra hier goede en haalbare oplossingen voor zijn.

En er was de Dopper, het hippe waterflesje waardoor je gewoon kraanwater kan drinken en niet steeds nieuwe plastic flesjes water hoeft te kopen om die vervolgens weer weg te gooien. En een deel van het geld gaat naar een NGO voor waterprojecten. Wat wil je nog meer? Maar ook hier kritische, en terechte, vragen uit het publiek: “Waarom is dit wel geproduceerd van plastic? Waarom is het niet op z’n minst biologisch afbreekbaar plastic?” Etc. Nu blijkt dat het tweede niet technisch mogelijk is, maar het blijven scherpe vragen. Want zouden we in een ideale wereld niet van producten af willen die olie als grondstof hebben, en daarmee dus ook van plastic? Op dit moment zoekt de Dopper naar producenten in China voor een RVS-versie van de fles, maar ja… ook dat is niet zo makkelijk.

Dit zijn maar twee voorbeelden. Maar de dag zat hier vol mee. En niet alleen deze dag, maar veel andere ervaringen die ik hoor van bedrijven. Dit zijn niet alleen de ervaringen van kleine bedrijven, ook de grote multinationals van deze wereld lopen tegen dezelfde dilemma’s aan. Hoe goed deze bedrijven ook bezig zijn, ze hebben ook nog een lange weg te gaan. Maar gelukkig gaan ze allen met vertrouwen die weg op.

Perfectionisme op het gebied van MVO en duurzaamheid blijkt in elk geval niet te bestaan. Een bedrijf dat denkt zijn MVO-beleid zo in te kunnen richten dat het daarmee alle issues heeft afgedekt komt dus bedrogen uit. Want ja, de dilemma’s zijn ook vaak moeilijk bij elkaar te brengen.

Dit bleek ook eerder deze week weer toen een bedrijf vertelde over hun afwegingen bij inkoop in China, bijvoorbeeld rond overuren. Je wil als Nederlands bedrijf voorkomen dat jouw leverancier zijn mensen veel te veel uren laat werken. Maar ja, stel nou dat dat komt omdat jouw klant heel snel een grote order geleverd moest hebben? Maar ook: bij deze productielocaties in China werken vooral migranten. De enige reden voor hen om naar die plek te komen is om te werken, zo veel mogelijk om zo veel mogelijk geld te kunnen verdienen en terug te sturen naar hun familie en kinderen. Dus wat nou als zij gewoon die extra uren juist willen maken, en anders wel naar de buurman gaan om te werken…?

Chindia Rules!

Chindia Rules! is the title of a series of debates on how the rise of China and India is influencing the world, of which i attended the first evening last night.

The theme of this first debate was CSR & the new world order. A very broad topic to discuss on just one of those countries, let alone connecting these two countries in the discussion.

The panel was a varied group of China and India experts, though I felt that the group was a little unbalanced. On the Chinese side, Dutch men were speaking from a business and law perspective. And on the Indian side the panel included an Indian businessman and an NGO. This also meant that it really was difficult to get a good grasp on developments because no one could properly juxtapose these two countries (by themselves, or in response to the other). The moderator was clearly struggling.

This doesn’t mean that there were no interesting points raised. Stephen Frost, as one of the opening speakers, gave some interesting insights on the credibility of Chinese CSR reporting. This is mostly non-existent for two main reasons: 1) no assurance is provided on the reporting (eg, through auditing as is customary for CSR reporting); and 2) Chinese companies are resistant to transparancy.

This last point was confirmed by one fo the panel members, Henk Schulte Nordholt, when he said that sharing information is seen as losing power, as losing competitiveness.

Another point that has stuck with me is the difference between CSR and philanthropy in the Chinese context. The latter is something you are expected to do as a successful profit-making company, and also helps your relationship with the local community and local government. However, this train of thought doesn’t extend to CSR. Yet?

The final part of the evening brought some interesting questions from the audience. The one that probably shows best that there is still a long way to go was a question from a Dutch investor: she wanted to know how to approach Chinese companies as a potential investor. After some non-committal responses the clearest answer came from a Chinese man in the audience: “Don’t talk about human rights and such issues. Talk about business first. And then talk about something else.”

* A discussion paper was published to accompany this series of debates, which can be found here