Few can contest Scandinavia’s place at the forefront of the corporate responsibility (CR) movement. The evidence is indisputable: companies from Denmark, Sweden, Norway, Finland and Iceland consistently top CR league tables and win sustainability awards, and their governments are often the first to pass progressive legislation.
Their companies are often the first to join CR initiatives such as the Global Compact or World Business Council for Sustainable Development and their governments are swift to sign on to most international standards and conventions pertaining to environmental protection and human rights.
Yale University and the World Economic Forum’s annual Environmental Sustainability Index consistently puts Scandinavian countries in the lead. Denmark was one of the first countries to trial a carbon emissions trading system.
One of the country’s largest companies, Novozymes, has, for three years running, topped both the Global and European Dow Jones Sustainability Group Indexes for its field; biotechnology and pharmaceuticals.
Norway was the first country to insist on female quotas for company boardrooms – the government has ordered firms to make sure that at least 40 percent of their board members are women.
Electrolux is at the forefront of technological innovation. Its white goods frequently receive the European Union’s Energy+ Award for their efficiency.
Alternative energy
In alternative energy production Scandinavia is also very much leading the way. Sweden is shutting down its nuclear reactors and forcing the business and farming sectors of accept severe environmental regulation.
Denmark is the first country in the world to use wind power as a significant contributor to its national electricity grid.
In Iceland too, some interesting work is taking place. Earlier this year Shell, together with Icelandic New Energy, opened the world's first hydrogen fuel station on the main artery road to and from Reykjavík.
The new hydrogen is the first such establishment in the world to operate alongside a general petrol service station and is also designed to be an information site for consumers curious about the experiment.
The plan is for the station to power fuel cell school buses initially, followed in 2006 by passengar cars and as Shell calls them, "seagoing test vessels", presumably boats in plain English. Following the Iceland experiment Shell estimates commercially viable vehicles will be on the market by 2010.
German SRI rating agency Oekom, which ranks all 30 members of Organisation for Economic Cooperation and Development, plus Russia, according to standards promoted by, among others, the UN, the World Health Organisation and Amnesty International, finds four Scandinavian countries topping the league. “The modern industrial nations of Scandinavia already indicate what a society equipped for the future might look like,” says Oekom’s Matthias Bonning.
Without straying into clichés about Scandinavians being more open-minded, caring-sharing people, the region’s CR advances are down, in part, to its political and social culture. Automatic deference to authority, for example, is not the traditional Scandinavian way. Rather, authority is seen as something to continuously question and engage with. Trades unions have traditionally had a strong and respected position in Scandinavian life.
Dialogue between employers, workers and government law-makers is ongoing, creating a dynamic environment where problems can be raised, discussed and dealt with. Working conditions throughout the region consequently are generally good, and big standoffs between employers and their employees virtually unheard of.
“There were lots of famous cases of big brand names being tarnished through their association with human rights abuses and oppressive regimes over the past decade,” says Lars Stalberg, business group chair of the Swedish section of Amnesty International. “But all the incidents happened elsewhere. Labour relations are good in Scandinavia, so employees weren’t bringing human rights complaints against companies. As such, Scandinavian companies didn’t really think that human rights issues applied to them.”
This is not to say that human rights and other issues surrounding CR didn’t matter to Scandinavian companies, just that they were reasonably immune.
Waking up to the challenges
This ended, Stalberg said, a few years back when companies such as IKEA and Hennes & Mauritz were found to be using child labour, albeit indirectly, through their supply chains. It was the start, he said, of companies waking up to the more strategic aspects of CR; to the idea that companies have an impact beyond their direct operations that they need to take account of.
When human rights or environmental organisations have cause for concern, they raise it with the company and set about finding a mutually agreeable solution. It’s all very civilised and a far cry from the adversarial, us .v. the corporate anti-Christ, which often dominates relations between NGOs and business in other parts of the Western world, especially in the USA.
Indeed, some Scandinavian companies have actually been targeted because of their good reputations. Late in 2003, American trade union UNITE, in the face of falling membership and finances, launched a campaign against Swedish retailer Hennes & Mauritz, trying to unionise their shop workers and claiming union repression tactics by the company.
Senior sources from other unions admitted off-the-record that they believed the UNITE campaign was partly aimed at H&M as they are a "soft target" compared with many US retailers due to their Swedish roots and history of co-operation with European unions.
In 2002 Norsk Hydro, which is 40 percent owned by the Norwegian government, gave £85,000 to Amnesty International in return for instruction of how to handle human rights. The multinational, whose countries of operation include China, Indonesia, Iran, Colombia and Angola, and whose sectors of operation range from aluminium to agricultural fertilisers, petrochemicals and North Sea oil, often found itself working in dubious human rights territory and now welcomes the deal to train staff on general human rights issues but also to help the company work through specific problems it faces and tailor make some of the training to particular countries.
Long regional history in Scandinavia
“There is a long history of stakeholder engagement in Scandinavia,” says Rikke Netterstrom, advisor on corporate social responsibility at Denmark’s Novozymes. “For us, it dates back to the 1970s when an understanding of the link between certain enzymes and allergies became known. It made us very aware of the importance of having the trust of your customers. We started liaising with Danish consumer organisations on the issue, and our stakeholder engagement has continued ever since. As new issues arise, new stakeholder initiatives arise. In the past few years, for example, as genetically modified organisms (GMOs) became a cause for concern, we began holding regular stakeholder roundtable discussions. The Scandinavian market is not adversarial. It is based on companies and NGOs working in partnership and trust. I think it’s an approach rooted in the way our societies are structured.”
Novozymes sister company, Novo Nordisk, took stakeholder engagement even further, preferring to lead the way on issues of particular importance to it. As with Novo Enzymes, GMOs have become a major CR issue for the company. The public is inherently suspicious and showing little desire to buy GMOs. Environmental groups are virulently opposed. And the jury is still out on whether they will sink or swim in the future. Novo Nordisk, on the other hand, thinks GMOs have lots to offer, especially in the development of treatment for diabetes, its principle focus. Until legislation is passed either giving a definitive go ahead to or ban of the use of GMOs, their success will depend on winning public trust.
To this end, Novo Nordisk has developed educational tools for children up to the age of 16, outlining the pros and cons of GMOs. The tools involve setting out a typical GMO-related dilemma and getting students involved in roll playing to try to solve it. Interested schools can get the materials from the company.
Novo Nordisk is also providing leadership on diabetes awareness and treatment, the company’s mainstay. Despite a consistent increase in the disease worldwide – to the point where it is now considered an epidemic – it is very much neglected in favour of AIDS, tuberculosis and other high profile illnesses. To counter this, Novo Nordisk has started National Diabetes Days in its countries of operation. It trains local health workers and the general public on how to spot and treat the illness. And throughout it all it follows World Health Organisation (WHO) guidelines.
Governmental encouragement
When it comes to the environment, Scandinavian companies have been prompted by their governments. By the mid-1990s, governments had passed legislation making environmental reporting and disclosure mandatory. The legislation has encouraged companies to surpass minimum standards in order to secure respect, SRI investment and a future free of lawsuits and penalties.
Constant advances in the assessment and containment of environmental problems has resulted. Swedish construction firm Skanska, for example, has informed its 6,300 key suppliers of its Code of Conduct, urging them to follow it and, in turn, to urge their suppliers to do the same. In addition, several of its European business units regularly carry out environmental evaluation of their most important suppliers, with a view to, bit-by-bit, bringing each and every one of its suppliers into the mode. Similarly, the company has certain red lines beyond which it won’t let itself or its suppliers pass. For example, five hazardous substances – CFCs, halon, acrylamide, asbestos and PCBs – are absolutely out of bounds.
Sweden’s Electrolux has been at the forefront of greener technology. It is now a totally CFC-free company, wins awards for its white goods’ energy efficiency and has developed a chemical-free dry cleaner.
An understanding that they can and should help develop the societies in which they operate also seems to be part of Scandinavian companies understanding of CR. For example, since 1999 Statoil’s Venezuelan operation has, in conjunction with the UN Development Programme, Amnesty International and Venezuelan legal schools, been sponsoring a human rights project aimed at training Venezuelan judges. The way Statoil sees it, this programme serves a triple purpose.
It enhances the company’s reputation both locally and internationally. It makes a direct contribution to capacity building and sustainable development in local communities. And, by involving the company in project directly related to social needs and human rights, helps it increase its understanding of the societies in which it operates and, as such, improve its risk management and ability to operate under demanding circumstances.
A shame for Statoil that both their chairman and chief executive were recently forced to resign following a police probe into incentive payments made to consultants, apparently in order to win contracts in Iran. Those at the very top can also suffer from ethical lapses as much in Scandinavia as elsewhere, it seems.
Perhaps part of reason for successful buy in to CR by many Scandinavian firms is the region's pragmatic approach to societal problems. As Amnesty International’s Lars Stalberg says, “Many companies come to us and join our training and roundtable discussions to learn how to avoid problems. It’s risk management. Amnesty would obviously prefer that they come to us because they share our values, but as long as they come and it results in improved human rights, that’s all that matters.”
Mutual self-interest it may be, but it’s a mutual self-interest that works and that will almost certainly ensure that Scandinavia remains top CR dog for years to come.
The Nordic Partnership
As an emerging business area, CR needed new skills and competencies. But with no predecessors to poach talent from, companies all over the world have had to develop it themselves, learning as they go along.
In Scandinavia, 17 companies with CR programmes decided there was safety in numbers and in May 2001 formed the Nordic Partnership.
The objective of the Partnership is to develop a business model, based on Nordic values and attitudes, that integrates sustainability into the way businesses are managed, organised and developed. By sharing experiences and discussing specific case studies, the members hope to overcome any barriers they face on the way to a more sustainable future.
Regular meetings are held to assess how far they have come in developing this new business model. And the members focus in on specific issues of concern. In 2003, for example, supply chains, partnership accountability, investment and rules of the game were a focus.
Its investment work was based on a recognition of the financial sectors significant leverage power and looked at how to make SRI the norm. Its rules of the game were aimed at the development of a simple, dynamic tool, centred on stakeholder engagement and collaboration, to identify barriers and opportunities created by current market practices. Most work takes the form of discussions and roundtable meetings.
In decades to come, it is likely that the skills and expertise members of the Nordic Partnerships will develop will become a valuable commodity in their own rights, with companies able to roll their knowledge out into standalone sustainable business consultancies.
History
As in most regions, CR in Scandinavia thinking grew from an experiment in negative screening. In 1960, Sweden’s Ansvar Aktie Fond took what, at the time, was considered an innovative approach to investing by boycotting companies involved with Apartheid South Africa or with alcohol and tobacco.
At that time, Holland was the only other country to have an ethical fund, also launched in 1960.
Environmental issues were added to the ‘exclusion criteria’ during the 1970s when a nascent Western environmental movement started making the general public aware of the impact the companies they bought products from had on the environment.
In the 1980s, Sweden launched two additional ethical funds, based on negative screening, and diverse groups started getting involved in the issue. The Church of Sweden, for example, launched its own fund.
But if the 1980s saw the launch of two new funds in the whole decade, the 1990s saw two new SRI funds every year and the development of more sophisticated rating systems. Positive screening and increased attention to social and human rights questions became more common.
Punitive measures against ‘bad’ companies or industries became less common as the idea that any company, no matter what its product, could be encouraged to behave more responsibly. Institutional Investors, especially pension funds, started getting interested. In addition, other Scandinavian countries followed suit, launching SRI funds of their own.
By the end of the decade, the idea that companies should be responsible for their social and environmental impact and, more importantly, that consumers, both individual and institutional, could make them more responsible by withholding investment was firmly rooted throughout Scandinavia. Sweden continues to lead, with more than 50 percent of its population currently investing directly or indirectly in different types of SRI funds.
Governments began actively promoting the market. In 2000, the Norwegian government decided to invest 1 billion krona of the assets managed by the state-owned Petroleum fund along environmental and human rights lines. Also in 2000, the Swedish Government decided that the Swedish National Pension Funds should incorporate SRI into their investment policies.
A look at the largest, Nokia
In July 2003 Finland’s Nokia and WWF signed an agreement to launch a series of discussions with stakeholders and a new learning initiative for Nokia employees around the world. The agreement, signed for an initial term of three years, will involve teaching Nokia employees about environmental matters through training workshop and seminars.
Nokia says that that employees are enthused by the concept of the firm doing more on in the are of non financial responsibility, claiming that as part of their stakeholder dialogue programme, ongoing since 2002, their "Listening to You" employee opinion survey attracted an 81% response rate, while an on-line employee discussion forum generated almost 7,000 postings.
As part of its dialogue process the company held employee and consumer focus group discussions in Brazil, China, the US and Finland. Discussing issues such as recycling, supply chain ethics, mobile communications and health, employee well-being and community involvement.
Interestingly, Nokia says that while findings show that awareness of CR issues varies among employees, there are "many similarities between people's priorities and expectations of the firm". Not just in Finland it seems, do people have high expectations of Scadinavian companies.
Well rated in both the Dow Jones sustainability indexes and listed in FTSE4Good, Nokia, was recently the most commonly traded stock in SRI fund portfolios in Europe and a favourite of the ratings and research agencies. O
n the thorny issue of supply chain human rights involving the sourcing of valuable mobile phone component tantalum, the company says that, "We are doing our outmost to avoid using tantalum from Congo in our products. Nokia has sent a notification of the Congo situation to its suppliers using Tantalum asking them to follow the situation, and to avoid purchasing tantalum from Congo."
The Diane Fossey Gorilla Fund, using celebrity patrons such as Leonardo DiCaprio and Arthur C Clarke, had waged a campaign for a tantalum ban, and has in the past requested it´s supporters write to Nokia asking them to source from other continents than Africa.
Among Nokia´s relatively few critics is the "boycott Israel" campaign, who object to Nokia´s investments in the country and allege overly favourable behaviour towards Israeli firms. Others include California resident Henry La who filed a class action lawsuit on May 7 2003, alleging design defects in certain Nokia mobile phones.
The suit alleges that the company sold the phones while they were aware since 1998 that the phones' displays were prone to "fade or disappear" and accuses the firm of misleading marketing. So far the suit does not appear to have been resolved.
In October 2003, a consumer watchdog in the Netherlands, Consumentenbond, called for an investigation over allegations of an exploding Nokia phone, which they allege, had an original Nokia battery inside. In past cases in Europe of exploding phones, "investigation showed that no original batteries were used", a Nokia spokesman told AFP at the time.
The other big issue for Nokia as a mobile phone brand, that of claims that cell phones pose a series of health risks ranging from infections to brain damage, still remains unproven in a major court case.
Apart from what seem like fairly isolated incidents and accusations, the company seems to be doing well in corporate responsibility.
Nokia´s reports follow the Global Reporting Initiative Guidelines, and in September 2003 it won an award for its efforts in promoting corporate responsibility in the Czech Republic.
Jessica McCallin is a freelance journalist. Tobias Webb is the editor of Ethical Corporation magazine