Archives for posts with tag: partnerships

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Going green often starts with what you eat: fair trade tea, organic apples. We buy these products because they reduce impacts on people and planet. But when we go to the Pharmacy to pick up our needed medicines, we often remain uninformed of these issues. Who ever heard of organic Lipitor?

Though the pharmaceutical industry takes great strides to ensure a reliable and safe supply chain as demanded by FDA safety regulations, a lack of awareness of the environmental impacts of the pharmaceutical supply chain led to an atmosphere which made the Heparin Incident possible. People died as a result.

Business for Social Responsibility(BSR), an international NGO dedicated to promoting ethics and environmental sustainability in multinational corporations, created the Pharmaceutical Supply Chain Initiative (PSCI) to address these essential issues. Recently, I had the opportunity to interview Andrew Matthews, Manager of Advisory Services at BSR and discuss their work in this and other areas:

“BSR [does] a lot of different types of work, we do a lot of strategy…number one: how you set your CSR priorities and then integrate those with the core business strategy and measure those over time. And we also do a lot of work with supply chain sustainability so looking at ethics, labor, environment, health, safety and management systems, help companies put the protocols into place to help manage their suppliers in an effective way and further sustainability. My focus, [in addition to] supply chain, is on industry, on healthcare, we focus on social innovation, focusing on emerging markets…”

Andrew was able to draw on his diverse experience of work both internationally and in the investor community in order to further services at BSR. Having worked in a variety of prior roles including a corporate strategy startup in DC where “we helped fortune 500 companies understand the political and economic environments of BRIC countries” and a year teaching English in Malayasia, Andrew has a unique and distinctive perspective on the challenges facing the pharmaceutical industry. His overall trajectory towards corporate social responsibility (CSR) started in college. While researching business ethics he learned “how the private sector was doing a lot to further Millennium Development Goals and was often making a bigger impact, a more measurable impact than non-profits – which was where I was working at the time.” He finds his work at BSR satisfying and empowering as “its really a great marriage of development and private sector financial sector thinking – applying commercial solutions to social problems.” Currently, his work focuses both on healthcare and medical device industry initiatives in addition to PSCI.

On the origins and overall goals of the PSCI, Andrew explained:

“There is an initiative in industry called the Electronic Industry Citizenship Coalition (EICC) and they came together as an industry to understand how they could improve their supply chain, both from procurement and selecting suppliers, and evaluating them in audits, to improving them through supplier capacity building initiatives and monitoring them over time. We saw an opportunity to do that in the pharmaceutical industry. So, in 2006, four companies came together and put together a set of principles that govern responsible supply chain management.  After those principles were released, between ‘07 and ‘09, there was an explosion of interest and now we are up to 17 companies.”

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EICC – Model for BSR’s PSCI

BSR was not satisfied with having simply another declaration that companies could put in their marketing material. BSR wanted to take this out of the boardroom and into the field. Andrew elaborated on this point:

“From the time we set the principles into place, we thought how do we put them into practice. So we launched an audit program, that sends in site auditors preferably with pharmaceutical experience, to look at these suppliers and how they match PSCI principles whether they are living up to them and then they create an audit report that is shared amongst all the members. They evaluate the suppliers against criteria our members have established, which include ethics labor environment, health, safety and management systems. Then we also provide resources for these suppliers to learn more about what they can do related to sustainability, so we have an online library for suppliers, in 2014 we are having teleconferences and a workshop in China actually in 2013 we held a conference in Europe on industrial hygiene and a lot of suppliers in Europe attended that and enjoyed it. We have seen rising interest from suppliers and it’s poised to grow.”

The field of responsible supply chain management is growing, and no sector exemplifies the challenges and possibilities more than that of pharmaceuticals. Understanding the implications of factories on the health of their workers and environment, as well as the multiple different chemical components needed to manufacture a single drug, are the key issues that need addressing in this sector. As the heparin incident exemplifies, these issues can rapidly deteriorate into one where patients are harmed if supply chains are not properly managed. And companies are listening and beginning to engage:

“One of the biggest reasons PSCI members get involved is because they see supply chain as a business risk, because if the supplier explodes, to put it bluntly, will affect the ability to get millions of dollars of product to the market. They see it as a significant risk and take it seriously. They see sustainability more and more as a valid set of issues to take into their analyses.”

As the PSCI eloquently shows, sustainability and collaboration can go hand in hand. Through sharing information, the industry is able to move forward together. While PSCI shares some information publicly, it is hoped that through further transparency and embracing the principles of open source, the entire field of pharmaceutical manufacturing can benefit from the breakthroughs of these leading companies.

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Kurt Vonnegut’s vision of the Chronosynchlastic Infidibulum has come true, except instead of our bodies being dispersed across interstellar space,  it is our everyday products that are dispersed over space and time across the globe. Networks of suppliers are mirrored by social networks with information flowing (relatively) freely to anyone with a wifi connection… and informed consumers are now scrutinizing their purchases to a greater degree than ever before. The rise of the Corporate Social Responsibility (CSR) movement fueled an expectation of transparency amongst the multi-nationals that operate from a nominal home base but only truly coalesce as a product in your living room, or in this case a consulting report for building a dam.

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Rumfoord’s dog Kazak materializing on Titan

Poyry, with over 5000 employees, is one of the largest international consulting design firms in the world and a major economic player in its home base of Helsinki, Finland. Yet Poyry’s work reaches far from Finalnd, and its role in the Xayaburi dam project represents a case of how the evolving legal concepts around CSR are starting to provide a mechanism through which stakeholders can influence company policies. As The Diplomat reports:

The Xayaburi dam project has been the subject of an international consultation process under the auspices of the Mekong River Commission (MRC), which comprises four member states: Cambodia, Laos, Thailand and Vietnam

But the MRC has split between Laos and Thailand, which support the dam (Thailand is providing all the funding and will purchase 95% of the power generated), and Cambodia and Vietnam, which view dams on the Mekong as a cumulative threat to agriculture, fisheries and livelihoods.

Scientists warn that a cascade of dams threaten food security along the Mekong for around 65 million people. The prime minsters of both Cambodia and Vietnam have demanded further scientific studies on downriver impacts to be carried out prior to any construction, but supported by Pöyry’s recommendations, Laos has ignored its Indochina neighbors.

It was the deadlock inside the MRC that prompted the government of Laos to hire Zurich-based Pöyry Energy, allegedly with a view to circumventing the consultation procedures laid down by the 1995 Mekong Treaty

In response, fourteen Finnish NGOs filed a landmark case against Pöyry, alleging that it had violated OECD rules. Finland was obliged to set up a Corporate Social Responsibility Committee in 2012, to hear the complaint against parent firm Pöyry PLC, the parent company in Helsinki.

As the largest donor to the MRC, Finland has a special interest in the Xayaburi controversy. All development partners of the MRC have expressed deep concerns about the environmental impacts of Xayaburi,   the first dam to be built on the Lower Mekong.

The Finnish NGOs have accused the international consultant Pöyry of promoting a reckless and irresponsible mode of development, and undermining international cooperation among the riparian countries through the Mekong River Commission.

Pöyry has since announced that it has won a new eight-year contract to supervise construction of the Xayaburi dam.

Poyry’s work on the Xayaburi was not the first time the company was involved with the Mekong. In the 1990’s, Vietnam hired Swiss consultant Electrowatt (now part of Poyry) to build a controversial set of dams on a tributary to the Mekong in Vietnam, despite the protests of Cambodia. Like the situation in Xayaburi, Electrowatt’s analysis did not include any downstream impacts from the dam construction. The case of the Yali Dam set a precedent for ignoring regional neighbors, and it appears Laos took note of a compliant consultant to hire.

OECD guidelines stipulate that “Enterprises should contribute to economic, environmental and social progress with a view to achieving sustainable development”.  Poyry’s role in shepherding along approval of the dam in Laos and its subsequent multi-million dollar contract to oversee construction, present an affront to the OECD guidelines, not to mention a conflict of interest.

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Protesters downstream of the proposed dam referring to Poyry’s role in the process

This was clear to the group of over a dozen Finnish NGO’s who sued Poyry, claiming the company was in violation of international law and undermining the Mekong River Commission as detailed on the Business and Human Rights Resource Center. The case ultimately went to the Finnish Ministry of Employment and Economy for a ruling from its committee on Corporate Social Responsibility. Through a series of secretly submitted documents, Poyry was ultimately able to escape any sanctions for its behavior in the case, as OECD Watch reports:

The final statement confirms that consulting and business service companies such as Pöyry are covered by the Guidelines and have a responsibility to conduct due diligence to avoid being linked to adverse social and environmental impacts caused by their clients. However, the NCP determined that Pöyry had not acted in breach of the Guidelines in this case. Finnwatch, an NGO advising the NCP, issued a statement disputing this finding.

The case, which was the first ever handled by the Finnish NCP, raises serious concerns about the NCPs equitability. The NCP gave in to Pöyrys demands for an excessive degree of confidentiality and did not allow the complainants to see or rebut to the companys response to the allegations. The NCP based part of its final statement on Pöyrys confidential response, which was never shared with the complainants a practice that has been deemed unacceptable by other NCPs. Recall that a similar lack of equitability led the UK NCPs Steering Board to overturn its own flawed final statement in the BP BTC case in 2011.

Regardless of the ultimate result, the case presents an example of the maturing of the CSR field from a series of well-(or not)-intentioned yet unverified reports of corporate progress to a verifiable and accountable set of policies and actions taken by corporations with true legal and economic consequences. Though it was the first case heard by the Finnish government regarding OECD CSR guidelines, it will certainly not be the last, and that type of precedent is one other stakeholders can utilize to address social and environmental concerns.

When it comes to intractable trans-boundary natural resource problems, which the Mekong is a prime example of, the more stakeholders with a voice at the table the better the outcomes can be. Consultants and coprorations operating in the developing world would do well to consider the full sustainability impacts of their operations lest they find themselves in greater legal risk from newly emerging models of regulation in regards to CSR.

What do you think? Are new legal mechanisms for CSR compliance (e.g. OECD Guidelines) an effective means to enforce good corporate governance? Or do they need more teeth to make an impact? Feel free to share thought and any similar examples.

Cargill Expands “Responsible Soy” Project To Protect Rainforest

When The Nature Conservancy (TNC) approached Cargill to reduce the impact of Soy farming on deforestation in Brazil, their intent was pure: we need to stop this habitat destruction. Bolstered by Greenpeace’s successful campaign to convince McDonald’s to pressure their beef suppliers, namely Cargill, to reduce the impacts of their cattle feed on deforestion, TNC approached an economically pressured Cargill about how to manage the supply chain of their Brazilian soy production in a way that could reduce the negative impacts to biodiversity in the region.

This well intended partnership, which gave birth to the Responsible Soy program , appeared to be a win-win: Cargill uses its weight in the region to reduce deforestation by buying soy from land that was previously cleared, such as cattle ranches, rather than farms on newly deforested land. And TNC can build on the partnership to expand and partner with other companies, all the while having a positive impact on the Cerrado and Amazon.

But the economics of Soy, driven in large part by a Chinese market demand that values price stability over sustainability, resulted in unintended consquences, as detailed by researchers from McGill:

Soybean cultivation carries the political weight necessary to induce infrastructure improvements, which in turn stimulates crop expansion. Further, Nepstad et al (2006) suggest that growth of the Brazilian soy industry may have indirectly led to the expansion of the cattle herd. According to Nepstad et al (2006), soy has driven up land prices in the Amazon (5–10 fold in many areas of Mato Grosso), allowing many cattle ranchers to sell valuable holdings at enormous capital gains and purchase new land further north and expand their herd further. This hypothesis is consistent with our spatial analysis showing northward displacement of pasture, with declining pasture in parts of Mato Grosso, and increasing pasture further north (figures 1and 4), and also supported by findings from other recent studies (Dros 2004Cattaneo 2008). Our statistical analysis of the relationship between soy/cattle price and deforestation lends further credence to this hypothesis (figure 6). It shows that while the relationship between cattle price and deforestation has been more or less stable, soy has become increasingly related to deforestation over time. In summary, even if the proximate cause of deforestation was mainly ranching, it is likely that soy cultivation is a major underlying cause (http://iopscience.iop.org/1748-9326/5/2/024002/fulltext/)

The lesson is not to get together for a partnership between large corporations and non-profits, if anything the relationship between Cargill and TNC has likely increased environmental awareness within Cargill, a key cultural shift essential to moving us towards a more sustainable planet. The problem lies in creating these partnerships without a consideration of how a change in a major economic player will impact the other parts of the local economy. The economy works much like an ecosystem, you can’t impact one section without changing many others.

Future projects would be wise to consider the downstream envrio-economic impacts that could result from a change in policy among a corporate behemoth in developing economies, and the lessons learned in the Cerrado could then be used to model future plans elsewhere.