In early April, Morley Fund Management, which manages £100bn in assets, announced that from now on it will vote against the annual accounts of the FTSE 100 companies unless they include an environmental report. The move reflects the growing feeling among fund managers that companies which ignore their social and environmental responsibilities do not have long-term growth potential. It should serve as a final wake-up call to businesses which persist in thinking that public concern about their activities is misplaced or a passing phase.
It was, after all, public concern, usually voiced through pressure groups, which, ultimately, bought Morley to its decision. By arguing that companies should consider the social and environmental impact they have on stakeholders as well as the financial impact they have on shareholders, campaigners have made the moral imperative and the business imperative one and the same thing. Punitive legislation and taxes make damaging activity less profitable. And public exposure damages a company’s brand, reputation and sales.
Oil companies already know the score. They are the obvious bad guys, because burning fossil fuels and causing global warming can never – despite President Bush’s stretch of the imagination – be construed as socially or environmentally responsible in any way. They have paid the price recently. Outrage over Shell’s activities in Nigeria nearly forced the company to its knees and made it consider issues of corporate responsibility.
While oil companies are likely to remain the bad guys for years to come, other industries are increasingly coming under the spotlight. The pharmaceuticals industry is a case in point. Its refusal, until recently, to sell life-saving drugs to poor countries at affordable prices prompted a host of reputable non-governmental organisations, including Oxfam, to launch a public awareness campaign on the issue. The argument was simple: why, when it costs only $300 to make AIDs drugs, is the industry trying to sell them to the impoverished South African government for $10,000?
The industry would argue that the price reflects the research and development costs and the need to protect patents which are vital if it is to continue developing new drugs. But the arguments just do not stick. The public wonders where the extra $9,700 goes, sees the enormous profits made by the pharmaceutical companies and puts two and two together, deducing that they are happy to let poor people die. And the fact that the industry did a complete U-turn and started offering drugs on a sliding scale as soon as public protests began to bite makes a mockery of these arguments.
This, combined with the industry’s stunningly stupid decision to take the South African government to court for buying cheaper generic versions of the drugs – it ought to sack its public relations advisers right now – means its public standing is in pieces. Discredited and disrespected, the industry can expect to be under the spotlight for years to come, and will need to find a way to carry on making profits while making sure its drugs are affordable to those who need them. With the biggest public health risks, such as HIV and tuberculosis, forecast to spread most in the poorer parts of the world, this will be no mean feat. But letting people die should not be considered an option.
Who else should be worried? Consensus amongst campaigning groups is that banks involved in currency speculation and companies developing ill-advised infrastructure projects should watch their backs.
The part played by currency speculators in the 1997 Asian currency crisis and the UK’s 1992 departure from the European Exchange Rate Mechanism (ERM) renewed calls for a tax on speculative transactions. The Tobin tax, named after its inventor, proposes a 0.5% tax as a way of raising money and discouraging traders from speculating on a currency unless they have a real interest in the outcome. Campaigners admit they are a long way off getting government level support for a Tobin Tax, but are confident that ways to contain currency speculation will be found. Steven Tibbett, senior campaigner at War on Want, the UK charity heading a campaign on the Tobin Tax says: “We don’t expect overnight changes but governments are realising that the issues raised by speculation are real and that a solution needs to be found. I would liken the stage the campaign is currently at to that of the ‘Drop the Debt’ campaign in the 1980s.
If Tibbett is right, banks can expect some sort of curtailment on their currency speculation by 2015, but evidence suggests action may be forced forward. Public opinion in developing countries is, not surprisingly, vehemently opposed to currency speculation. George Soros, the financier who made £1bn in a day from gambling on Britain’s exit from the ERM, recently abandoned a trip to Thailand after threats from local activists who likened him to a vampire. “He sucks blood from the people. Nobody is willing to welcome Dracula into his country,” said one protester.
The metaphor may seem a little extreme, but it reflects the deep sense of injustice felt by a population which was forced into poverty overnight by, amongst other things, the actions of a few traders in banks.
This also reflects the pattern of things to come. People in developing countries are the principal victims of irresponsible corporate behaviour and are deciding that enough is enough. Given that they do not have too much left to lose, they are taking a stand against the companies. After all, it was the local Ogoni people who focused international attention on Shell’s implication in environmental and human rights abuses in Nigeria. And it was Kurds who started the uproar about the Ilisu Dam in South East Turkey. Future large-scale projects which run roughshod over people’s livelihoods or disregard environmental dangers, are likely to run into similar local resistance.
More to the point, this resistance may soon be extended to companies selling public services. The soon-to-be finalised General Agreement on Trade in Services (GATS) is attracting severe criticism for advocating opening the public sector to private companies. Campaigners worry that basic human necessities such as health, education, water and sanitation, will soon be run as profit making businesses with devastating consequences. They cite the disastrous privatisation of water services in Bolivia as a bad omen. There, privatisation led to huge overnight increases in water rates, and families suddenly had to spend one-third of their monthly income on water. They took to the streets, the government conceded that the sell-off had been ill-advised and bought the water company back.
If GATS goes ahead as planned, vast marketplaces will be opened up to companies. It is difficult to see how they will strike a balance between the need to make a profit and the fact that their service needs to be cheap and accessible to all. Companies eyeing these markets would do well to learn from the pharmaceutical industry’s misfortune. There is no reason to assume companies offering more general health care or other vital services, such as education or water, will, or should be, any more exempt.
Companies have proved to be very stubborn about accepting public concern about their activities. The oil industry, for example, is still prospecting for new oil in ecologically unique areas such as the Arctic, instead of developing renewable energy resources. So far they have managed to contain public anger by giving lip service to environmental protection, but time and patience is running out. Some pressure groups are considering legal action against the oil companies for the cost of climate change – using the holocaust and tobacco compensation claims as their blueprint. Given that UN scientists reckon climate change damage will cost $300bn a year by 2050, the oil companies should start saving now.
A law suit is far from the worst case. Some groups are resorting to more direct action. Environmentalists in the US have started setting fire to houses built on greenfield land in a bid to stop the country’s relentless urban sprawl. One man has now had his house burnt down twice. The FBI has called them terrorists, but they have a huge amount of support from a public who see no other way of getting the ‘enough is enough’ message through.
Jessica McCallin is a freelance journalist, E-mail: jessica.mccallin@ukgateway.net
