Marketers become own watchdogs

Scrutiny of day-to-day business has operations improving conditions

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In 2004, timberland co. audited the working conditions at 312 factories where its boots, apparel and accessories are made. Sixty-seven percent (96 facilities) logged unsatisfactory scores for things ranging from health and safety to child labor.

In 2003, Nike reported that audits in its contract factories turned up a 4% rate of harassment/abuse of workers, and 54% were found to have health and safety violations.

As the consuming public grapples with consumption guilt and watchdog groups grow more vocal, silence from Corporate America is not an option.

Corporate social responsibility reports are on the rise. Often annual reports give an accounting of everything from charitable giving to environmental impacts, labor relations and frequently disclose data from factory audits.

Gordon Peterson, VP-code of conduct at Timberland, says full disclosure is the only way that these reports make sense.

"We know there are areas of our business where we need to improve, and we feel it's important to honestly and openly share that information with the public and our consumers."


These reports are "helping to push the bar higher," says Beth Ginsburg, manager of corporate accountability at Boston-based Ceres, a network of investment funds and environmental groups that pushes for more environmental disclosure by companies. Ford Motor Co., General Mills, McDonald's and Bank of America are among 15 Fortune 500 companies that have signed on to the Ceres standards, which require members produce an annual environmental report.

That's not to say that critics are appeased.

"The majority of these are puffery and are just very light," says Alice Tepper Marlin, president of Social Accountability International, which audits major brands' factories for decent working conditions, granting companies, including The Gap and Eileen Fischer, its SA8000 certification of compliance.

As a former securities analyst on Wall Street, Ms. Marlin blasts the lack of verifiable and standardized metrics among the reports, particularly from public companies. She advocates the integration of the reports into the regulated annual financial reports public companies must file with the Securities & Exchange Commission.

"That would increase the audience dramatically," she says, in addition to making data "comparable year over year and across companies."

Even though it's arguable public companies can just say what they want since there is no regulation of the reports, unlike financial reports filed with SEC, a kind of de facto system of scrutiny has arisen.

Nonprofit groups review the data, as do socially responsible investment funds-considered the biggest audience for the reports. They often withdraw investments in companies for not disclosing more or for not producing reports in the first place.

Some groups, most notably the Global Reporting Initiative, are pushing for standardization within corporate responsibility reports.

Hundreds of marketers operating internationally have signed on, but only 89 U.S.-based companies use its guidelines. It's a varied list that includes oil giant Sunoco, consumer products behemoth Procter & Gamble Co. and Starbucks Coffee Co.

Marc Epstein, author of "The Accountable Corporation" and professor of management at Rice University, notes the readability of the reports needs to be addressed.

"It's not just disclosing more detail about every plant emission put into the environment and every chemical," he says. "They overload the data, and readers can't figure out anything. They need to do it balanced and in English." Additionally, Mr. Epstein says companies need to more fully explore their broader role in society instead of just highlighting charitable giving programs.

"Companies get in trouble not over the millions they are giving to charity, but for their actions in normal day-to-day business operations. That's what society really cares about because that's where the impact is," he says.