31 December 1995

Business Focus

Caring Capitalism

Jon Entine, a campaigning journalist specialising in business ethics, says the 'green' stances taken by some firms raise as many questions as they answer.

The story of good intentions gone awry is becoming a familiar refrain in the once-pristine world of New Age "socially responsible" capitalism. The fiasco of the "rainforest harvest", the sourcing by eco-friendly retailers of goods from what turn out to be sweatshops, and the Greenpeace-generated hysteria over Shell's Brent Spar oil platform are just a few recent ethical fumblings.

The movement's highest-profile company, Body Shop International, is expected in February to release a much-delayed review of its ethical operations. It will be interesting to see how it treats the ethical issues it has faced.

As western business passes the mid-point of the 1990s, there are signs that the green marketing boom ushered in by Body Shop and other entrepreneurial companies may become the victim of high promises and public cynicism.

Jon Lickerman, a researcher with Calvert, an ethical-fund manager, says: "So many socially responsible companies have noble corporate philosophies but then seem to mistreat their own workers, suppliers and customers."

Founded two decades ago on high hopes and promoted by a sympathetic press, the rags-to-riches Robin Hood business movement is floundering.

The "ethical business" movement, known by some as cause-related or social marketing, has a quixotic history. It brings together two 1960s currents: environmental, anti-war, feminist and human-rights activism on the one hand, and narcissism on the other. In her American Express commercial, Anita Roddick says: "I'd rather work for justice, human rights and fair trade than ever sell a bubble-bath." The generation that once wanted to change the world now wants us to "shop for a better world", the title of a green consumer guide. Body Shop sells more than a dozen kinds of bubble-bath.

Cause-related marketing is a hot business trend. Surveys suggest British consumers spend Pounds 25billion a year with companies seen as progressive. The "ethical" investment movement, which includes funds from Abtrust, Friends Provident, Jupiter, NPI and TSB, attracts thousands of investors interested in screening out "sin" companies, such as tobacco makers, and screening in "progressive" firms.

Many funds use social agenda screens drawing on notions of liberal propriety and correctness and using buzzwords such as "natural", "cruelty-free" and "fair trade". Entrepreneurs who have built fortunes employing low-wage workers and selling high-priced commodities such as ice cream or "naturally based" shampoo containing colours and fragrances derived from petrochemicals and packaged in plastic are promoted as icons. There appears to be a bias against technology (except multimedia) and defence contractors and a bias in favour of boutique retailers.

Tobacco companies are taboo. Banks get a pass, though loans to nuclear-power companies and other "sin" industries may go undetected. Self-promotion sometimes rates higher than worker and customer relations.

The sector is loath to acknowledge spotty research or problematic social criteria. Mark Campanale, an NPI Global Care Fund analyst, was criticised last summer for saying ethical funds could be seen as "mere marketing gimmicks ... a sop to the conscience of naive investors". Yet Campanale was writing what many researchers admit privately.

Under some criteria, entire industries are dismissed though they make essential products and pay workers well. British Petroleum, with an enviable environmental record within its industry and a state-of-the-art audit, is left off "ethical" lists because it uses fossil fuels. Whitbread fails the test because it makes beer, owns pubs and has donated to the Tories. Yet its charity and community record is almost unmatched.

The urge to demonise big business and idolise eco-entrepreneurs ignores the complexity of business. Robert Gray, of Dundee University's social and environmental accounting centre, says: "Corporations and industries with the most innovative environmental programmes are not always the ones getting most of the attention."MANY traditional companies have quietly emerged as leaders in dealing with necessary, but inevitably messy, technologies. The chemical industry embraced transparency and accountability after the Bhopal disaster in India. Canadian producers in 1988 launched a "responsible care" initiative; this year, its 55 members underwent mandatory third-party verification of risk-assessment procedures.

"Even a tiny 1% improvement in the environmental standards of a DuPont or a Monsanto will have a more meaningful impact than creating a hundred new boutique retailers," says Paul Hawken, a writer on corporate ethics.

High among the issues that Body Shop has faced is the controversy surrounding a former Christian Brother who ran the Boys' Town orphanage in India. Body Shop used to buy "footsie roller" foot massagers from Boys' Town. It was its first Third World "trade not aid" scheme.

After adverse press reports about Boys' Town in 1990, Body Shop pulled out. It then resuscitated the "trade not aid" venture at a new facility, Teddy Exports, which employed local teenagers, setting up a hospital and school. But recently dozens of Boys' Town thugs crossed the road to Teddy Exports. Eleven workers were knifed, two seriously. The woman who ran the project is now home in Ireland, afraid to return. Steve Mitchell, who owns four Body Shop franchises and has worked on both projects, says: "It's a complete mess. Nobody knows what will happen. This is probably its death knell."

Boys' Town has been a long-running problem for the company. Richard Adams, the founder of Traidcraft and director of two "Out of This World" sustainable markets, remembers when he first saw leaflets about Boys' Town at Body Shop's stores in 1987. "I was shocked," he says.

As a Traidcraft director, Adams had carried a different Boys' Town product, wood carvings. After receiving poor-quality goods, he sent a manager to investigate. He was stunned by the news. "The project's then director was sourcing carvings from child-labour sweatshops," he recalls.

When Adams found out about Body Shop's Boys' Town link, he wrote to the Roddicks. "I never heard back," he says. Over the next few years glowing reports went to franchisees about Boys' Town. "We have the power to change people's lives for the better," Roddick wrote.

The Boys' Town saga shows how even the best-intentioned of New Age capitalists can experience the gulf between rhetoric and philanthropy. SINCE Roddick opened her first store in 1976 using plastic bottles, recycling philosophy, store and logo design and a product list with catalogue descriptions remarkably similar to another Body Shop, a Berkeley, California, store founded in 1970, she has successfully nurtured the idea that she operates on a higher, ethical plain. While rivals sold beauty in a bottle, Roddick marketed integrity and idealism.

In promoting Body Shop, Roddick lambasted rivals as "monsters" who "lie and exploit women", and called her City backers "pin-striped dinosaurs" and "wankers". This language was taken as candour by journalists who share her campaigning views. Here was a harbinger of the New Age, weaned on can-do chutzpah, do-right values and me-too economics. The baby boomers had found a voice and standard bearer.

Body Shop's romance with cause-related marketing blossomed in 1986 when Roddick teamed up with Greenpeace in a two-for-one promotion: "Buy not-tested-on-animals jojoba oil substitute for whale spermaceti and save the whale". The next year she linked up with the British Union Against Vivisection to lobby against testing on animals. In 1987, pictures of Roddick with bare-breasted natives were plastered on shop walls to promote newly launched "trade not aid" products. The campaigns brought in new waves of socially conscious shoppers but also introduced trade issues that all capitalists face.

That tension was on display two years ago when Roddick spoke at an International Chamber of Commerce meeting in Mexico on "Corporate Responsibility: Good Works Not Good Words".

"I've established England's most effective and successful international retailing company," she said. "We want a new paradigm ... for seeing and understanding how business can and must be a force for positive social change."

Roddick then introduced China. "Just say no," she said, co-opting an anti-drug slogan. Say "no to dealing with torturers and despots. This is what Levi Strauss decided when it closed operations in China ... The world applauded when the Olympics chose not to go to Beijing we should listen to that message." Yet Body Shop sources baskets from China and, according to its own estimates, its fair-trade turnover, which Gordon Roddick claims is a "cornerstone", represents a tiny fraction of sales.

But Roddick remains a favourite of the media. "Anita," says Mara Amats, who introduced Body Shop to a Nepalese papermaking project, "instinctively understands the facile nature of the press and plays to it." THE MEDIA have often overlooked how traditional companies deal with complex ethical issues such as testing on animals.

On the one hand, companies such as Gillette and Procter & Gamble perform expensive, government-required safety tests. Both have pioneered alternatives to animal testing and Gillette publishes the rationale for each of its tests.

On the other hand, Body Shop and so-called "bathtub" firms, which promote cruelty-free products and help keep the controversy boiling, use animal-tested ingredients developed by rivals while earning a pricey green premium.

Between 1980 and 1986, before many companies realised the potential profit in animal-testing demonology, mainstream producers had cut testing by up to 95%. Scientists at Body Shop's rivals do not go to bed at night dreaming of pouring chemicals into the eyes of rabbits a point driven home in 1990 when a suit by the German Society for the Prevention of Cruelty to Animals and the government forced franchisees to stop claiming Body Shop set a higher ethical standard than other companies. During this time, Body Shop pulled its "not tested on animals" slogan and replaced it with "against animal testing".

Scientists say in-vitro tests or computer models cannot approximate a living animal and say testing, mostly on mice or rats, remains necessary to protect human health. ETHICAL stances taken by some companies raise as many questions as they answer: Co-operative Bank, which endowed a Manchester University business-ethics chair, said it would no longer supply services to those exporting weapons to repressive regimes. But the effect of its "progressive" stance was negligible: Co-op's international business is tiny. Reebok, applauded for its Human Rights Award, sources from Far East producers who pay tiny wages. Asked about this, Reebok's Paul Firestone says he will not "impose American culture on other countries". Esprit de Corp, Levi Strauss and The Gap source clothing from what many would describe as sweatshops in countries where human-rights violations are common.

Though most New Age capitalists are guilty of little more than "greenwashing", actions based on lofty aspirations can lead to big problems. The rainforest harvest, which proponents claimed provided natives with an alternative to selling land to industrial groups, may encourage the nightmare it seeks to contain.

The project was launched in 1988 when Ben Cohen of Ben & Jerry's, the ice-cream firm, met an anthropologist promoting capitalism on the Amazon. Soon after, Cohen launched Rainforest Crunch ice cream and Roddick brought out brazil-nut hair conditioner. The result was that a tiny crop of high-priced nuts was targeted by the region's giant agri-businesses. Production volumes soared and prices tumbled, cutting native incomes just as governments used the harvest as an excuse to cut aid. Finally, Ben & Jerry's changed the wording on its Rainforest Crunch label after its own social-performance review revealed that 95% of its brazil nuts came not from forest people's co-operatives but from commercial suppliers.

The ethical business movement has some soul-searching ahead. Observers ask whether it should be about the New Age entrepreneurial vision or about reasonably priced quality products, fair treatment of workers, suppliers, customers and the community, a responsible attitude to the environment, and transparency.

It is revealing what happens when workers, rather than boutique activists, determine what constitutes ethical business. In 1991, South Africa's black trade unions asked their members how pension funds should be invested. New Age issues such as animal testing were out. The key criteria were product quality, jobs, working conditions, benefits, safety and equal opportunity.

That companies believe they are taking an ethical stand does not obviate their responsibility to clarify complex issues. "Social marketing", whether practised by New Age firms or giant corporations, should be viewed with caution.

The Times of London