Blood-Tainted Milk in China and Country Contradictions

[SRI-Extra in 60secs This past week [some] culprits in the tainted milk scandal in China were sentenced to death. The tension between doing good business and the right thing is real, settled in court and in the press, sometimes in death. The toxic milk powder scandal killed at least six children and sickened nearly 300,000 last year. What makes it a little awkward is that NZ-based mega-dairy Fronterra owns 43% of Sanlu. Human rights do impact business, and a Bill of Rights is a key component. In the USA the Centre for Science in the Public Interest will sue Coca-Cola [NYSE: KO] for claims on VitaminWater health benefits. Further exploration on forming an AfricaSIF reaffirmed the two classic challenges faced elsewhere in the world, 1. definitions of ESG, and 2. the matter of priorities of ESG. Ranking the issues of sustainability will differ from country to country, or city to city, company to company. FTfm covered GS Sustain and Sarah Forrest’s team in London, the GSAM Africa marketing person is in JHB this week. The Economist this week raised the Norwegian profile in their "Norway and the environment briefing, Binge and Purge” where they reference Oslo as “[h]ome to a green-minded people and government, Norway exports the dirty stuff to the rest of the world. The result is a contradiction”. Statoil does have 7.8kg carbon emission footprint per barrel versus industry average of 19kg, 37% of global average. At least Norway has been active since 1991, and is switching to cap-and-trade to offer a material and measurable drawdown of emissions. South Africa’s minister of finance, Trevor Manuel, gives the annual budget shortly, and one may make suggestions directly to his website Tips for Trevor. The Danes signed a wind power agreement in South Africa. FT released annual MBA ranking with Wharton on top. Today’s Business Day "Management Review” included two articles on climate change and sustainability, but the content was unfortunately stale. GS]

Blood-Tainted Milk in China and Country Contradictions

Business failure has drastic consequences. Greedy executives, incompetent managers, self-interested workers, any of these may break down the fair play of good business. The tension between doing good business and the right thing is real, settled in court and in the press, sometimes in death. This past week the culprits in the tainted-milk scare in China were sentenced to death. I wonder what sort of moral dilemma that creates for the social investment advocates in the US who rose up in alarm at the China-sourced milk scandal, who probably do not support the death penalty in their human rights approach. Principles will always be tested in practice. Obama has been smart to stay flexible. The news reports with photos of anguished parents struck a cord this week: the photo documentary at the constitutional court of death penalty in South Africa in 1985 seemed eerily similar to the newspaper photos from China. The toxic milk powder scandal killed at least six children and sickened nearly 300,000 last year. The legal trials target executives from the Sanlu dairy group and city officials accused of allowing the sale of milk adulterated with melamine or for covering up the scandal.

Steps to control melamine are being sorted by the centrally controlled economy. What makes it a little awkward is that NZ-based mega-dairy Fronterra owns 43% of Sanlu. The ructions on the event, and the death penalty, has caused political tensions in Kiwiland, despite the demands for the death penalty from affected parents. Pursuing the one company does certainly smack of victimization because 22 companies are implicated. Apparently, Fronterra was also a bit tardy in getting the info to US regulators in Washington DC as NZ bloggers report, see the timeline from BBC. Ah, the joys of being from a progressive country, like Fronterra, but owning a major stake in a company in a semi market-based system, like China. No word on the consumer alarm from September 2008 rolling into better labeling or food security upgrades outside of the blame-chain. No word on the next Fronterra sustainability report. The trials in China will continue. The sad reality is at least the bosses are accountable. More deadly than another banker being bumped for his greed, so maybe John Thain fired from Merril Lynch this week by Bank of America's Ken Lewis should breathe a sigh of relief. After forgetting to identify big losses, the anecdote about corporate excess - a million dollar office makeover at MER in Manhattan midtown in the midst of a meltdown - just helped make bankers look out of touch. Still. CNBC reports you can pick up some on Craigslist now!

SRI-Extra will cover more nutrition issues in 2009, including in the USA where Centre for Science in the Public Interest will sue Coca-Cola [NYSE: KO] for claims on VitaminWater health benefits, the lawsuit contending that the marketing for Coca-Cola VitaminWater product is 'deceptive' and makes 'unsubstantiated claims'. KO purchased VitaminWater maker Glaceau in 2007 for USD4.1 bn as they raced to catch up with Pepsi's non-carbonated soft drinks brands business, and counteract a poor nutrition profile of their brand portfolio.

Conversations in Johannesburg, Sandton and Cape Town over the past week have furthered the understanding of the opportunity [or not] for an African Sustainable Investment Forum, an AfricaSIF. It has reaffirmed the two classic challenges faced elsewhere in the world:

1. definitions of ESG, which cover sustainability, climate change, and which environmental, social and corporate governance [ESG] factors; and
2. the matter of ESG priorities, how climate change stacks up against say, jobs for under-employed, or houses versus human rights issues.

Ranking the issues of sustainability will differ from country to country, or city to city, company to company. Creating jobs trumps climate change as an issue. The survey of responsible investment in Peru in 2009 by Liliana at Duke University Fuqua Business School will offer some fresh facts to compare with the study in South Africa in 2007 with Neil [good news is he has just been appointed actiing director of the UNISA Center for Corporate Citizenship]. Balancing sustainability across a voting society raises many challenges. The question of definitions raised in SRI-Extra last week also had resonance in the FTfm coverage of GS Sustain and Sarah Forrest’s team in London. The question tends to make fund managers splutter, but in recent months, advocates of sustainable investment have been able to point to clearly unsustainable investment strategies, and indeed an unsustainable global financial system, as proof they are not just posturing. Sidenote: The Economist or FTfm page may throw up the latest Toyota advertisement campaign, AIM: zero emissions. Do you also think the people as trees is a little wierd in the photograph, something does not look right, yes?.

Constitution Hill

The SA constitution and its Bill of Rights was the freshest in the world when launched in 1996. 20-something rights are enshrined, including social and political rights. A visit to the Witwatersrand and the Constitutional Court on Constitution Hill with a fellow LLB from University of Natal [UKZN] helped illustrate the conundrum. The fine, architectural-award winning Constitutional Court complex was built on the remains of a notorious prison not far from the University of Witwatersrand or from the headquarters of SAPPI [SAPPI Ltd/JNB/SAP]. But on a typical summer blue sky and cumulus cloud afternoon, the parking lot with its head-high weeds and empty lot reminded me of a forlorn municipality office somewhere in Kwazulu-Natal, or a university during the summer break. Where were all the visitors? And why did the entrance to this most important component of democracy and the rule of law look worse than any of the world-class shopping malls along Oxford Road toward Sandton City? One wonders if the Constitutional Court should not have been added as an appendage to a shopping mall in a busy center to offer more foot-traffic, and bring the crux of the legal system to the people it is designed to empower? More people of every economic class were buying something to drink that afternoon, than visiting this iconic institution. No word on a listing of citizens’ duties to help make them the enshrined rights happen, starting with making the site more user-friendly, and picking up trash. Sadly, picking up after oneself is not just an SA problem, even Obama’s celebration was blighted by refuse left behind.

Country Contradictions

The Economist this week raised the Norwegian profile in their Norway and the environment briefing, “Binge and Purge” where they reference Oslo as “[h]ome to a green-minded people and government, Norway exports the dirty stuff to the rest of the world. The result is a contradiction”. The title alarmed me: sounded like my weight-loss program [which is a little behind schedule post Christmas 2008]. The Economist does offer some pithy reminders of what Norway has been doing since instituting a carbon tax in 1991, spending money on climate change mitigation technologies, including a novel one using fresh and saltwater. The Norwegians have even done a test on the merits of bridges versus mountains to assess the carbon impacts: bridges work best for over water, tunnels for under mountains. The pension fund divestment according to an ethical policy in 2006 led to a Harvard Business School case study Norway Sells Wal-Mart that I use at Kenan-Flagler Business School, although I am developing a more articulate example with University of North Carolina-Chapel Hill and MIT Sloan in 2009.

Statoil [StatoilHydro ASA/OSL/STL] does have 7.8kg carbon emission footprint per barrel versus industry average of 19kg, 37% of global average. But The Economist drives on the point similar to Bush’s White House, pointing out contradictions in making a positive action toward addressing environmental issues because the logic model is not buttoned-down and perfect. They attempt to offer some balance. The Economist article's online reader feedback forum matches some of the colourful language and comments in other media online around the world. It illustrates the power of the online version over the print version, although I remain solidly a hardcopy adherent, in solidarity with all the newsprints out there, including the New York Times saved by wealthy Mexican Carlos Slim last week.

Norway is switching to cap-and-trade to offer a material and measurable drawdown of emissions. This should make interesting reading for South Africa’s minister of finance, Trevor Manuel, a few weeks before his next budget [last year he pitched a carbon tax]. And Trevor may be listening. In a demonstration of Mr Manuel’s open-door policy and comfort in his shoes after ten years, one may make suggestions directly to his website Tips for Trevor. The most noteworthy or bizarre - or both – often are referenced in his speech, since 2001.

Activity in wind this week included further coverage of the Danish support for wind in South Africa, and treaties being signed. It is a fine profile for the Danish Wind Industry Association, worth EUR 4,7bn in 2007 to the Danes. Noteworthy in light of my comments last week about relative power of government ministers, the SA representative was the Minister of Energy & Minerals. The Darling wind farm is still in-between days. Jon mentioned that he came back from a hammering kitesurfing session the other day, but the windfarm blades were not moving…

World Rankings and Advertorials

FT released the 2009 FT MBA ranking. I prefer the recruiter driven WSJ version. The world’s top financial MBA, Wharton at the University of Pennsylvania dropped a note in the inbox, covering a trip to Antartica as part of a leadership program, Penguins, Leadership, and Thinking about the Planet. Prof Erik Orts of Initiative for Global Environment Leadership [IGEL] program tried to make the environment connection, and as expected, purchased carbon offsets [142mt through the Wharton Leadership Program Office. The group did not have a cakewalk, which is good, because hardship, physical hardship, is a powerful teaching tool. The Ghandi exhibit at Constitution Hill explained that Mahatma Ghandi made comments about how he achieved what he did in South Africa and then India were made possible after physical pain and isolation cleared his thinking. Every good cycle must have helped me, especially the ones that hurt the most.

The big accounting and consulting firms are moving strongly in the climate space, it certainly makes for a fertile consulting area in an era of shrinking consulting fee hours. The effort in the space is important, but perhaps the practice may be conflicted. Today’s “Business Day Management Review” included an article by the chartered accountants body president pitching “businesses must consider climate change in a strategic way and integrate sustainability into long term plans”. Of course, the media had to title it “Eco Warriors outlook will help the bottom line”. “Climate Change requires concerted action now” by Ajen Sita, head of assurance for Africa sub-area, Ernst & Young, unfortunately, has content so advertorial, it has the E&Y writer referencing CDP data from 2006, when CDP was in 2008, and CDP South Africa for the second year. Pretty weak reflection on BD, Wits and HBR all of which collaborate on the media item.

SRIX.GS