~csearwebaptopracticeBehind-the-mask

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Prots and transparency We support efforts such as the UK governmentsExtractive Industries Transparency Initiative, thePublish What You Pay campaign, and work by theWorld Bank and others to promote transparency of oil and gas revenues.Meeting the Energy Challenge , the Shell report 2002

Nigerias population, one of the worlds poorest, hasnot beneted from the fabulous oil riches produced,largely by Shell, over the past half century. Someeconomists and development experts argue thatNigeria is actually worse off in development termsbecause of oil. All agree that nancial transparencyis vital to help direct oil revenues towards fundingdevelopment. 26 While the Nigerian governmentsthat have presided over this human catastrophemust take much of the blame, oil companies havealso participated in the extraction of the countrys oilwealth at the expense of the communities livingaround the oilelds.

Recently, the Nigerian government has madesignicant moves to fall into line with UK-backedExtractive Industries Transparency Initiative (EITI). In aspeech on 7 November 2003, Olusegun Obasanjo,Nigerias president, pledged that the governmentwould publish openly the revenues it receives from theoil industry. 27 Under the EITI, Nigeria would make publicall oil company payments and require that all companiesalso publish details of payments independently.

Shell claims to favour transparency, too. But itsown recent decision to publish information about

payments to the Nigerian government is only halfthe story. George Frynas, a lecturer ininternational management at the University ofBirmingham, who has followed Shells activity inNigeria for more than a decade, told Christian Aid:If the company means what it says abouttransparency, it could start by publishing therevenue it itself receives from Nigerian operations,and a thorough breakdown. Otherwise it isdeclaring its support for transparency initiatives

while not taking the most important practicalsteps towards being more transparent.

The SPDC 2002 report states: At an oil price ofUS$19 per barrel, the governments take in taxes,royalties and equity share is US$13.78 per barrel. Ofthe remaining US$5.22, operating cost and futureinvestment take the lions share, with aboutUS$1.22 left to be shared as a margin among theprivate shareholders (Shell, TotalFina Elf and Agip).However, Shell does not publish disaggregatedaccounts for SPDC. Shell International haspromised, on Christian Aids behalf, to request acopy of SPDCs accounts from its subsidiary.

Were not holding ourselves up on a pedestal inNigeria. We think that we have made some changesboth in the way that we operate and in the way thatwe interact with communities, and that thosechanges have been for the better, Shell toldChristian Aid. But we dont say that its been acomplete success, far from it. And were pretty openabout some of the issues and some of the dilemmasand problems in the annual report that comes fromNigeria. 28 I think wed also say that Nigeria is a verytough place to operate. Shell also says it is nowinviting external specialists to look at its operationsand advise the company about what it is doing.

If these assurances are to mean anything, Shellshould now make public its accounts for Nigeria,

joint investigation reports about spills, informationabout the age of its pipelines and other documentsthat NGOs and campaigners have been requesting

in some cases repeatedly and for many years. Shellhas already indicated its willingness to share somedocuments with Christian Aid a welcome movethat it should pursue more widely. The companyshould also support public enquiries into some of themore tragic oil-related events of the past, such asUmuechem. These still cloud the present-day NigerDelta and threaten its future security.

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Christian Aid: Behind the mask


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George O has farmed under a British AmericanTobacco Kenya (BAT Kenya) contract since 1996.He cultivates around two acres of tobacco in theRangwe division of Nyanza province on the shoresof Lake Victoria. 2

In order to sell his crop to BAT, George O must growit according to the companys instructions. He mustraise the seedlings, transplant them into his elds,spray pesticides from a backpack and harvest byhand. Then, using a straw-roofed barn, he must drythe leaves by curing them over a re, sort them intothe bewildering number of grades insisted on byBAT, before selling them to the company at market.

For all this effort spanning nine months of GeorgeOs working year and leaving him little time to growother commercial crops when the loan he has

taken out from the company is deducted from thevalue of his leaf, he earns little. In 2003, George Osays he made a prot of 10,000 Kenyan shillings(US$140).

George O does grow maize, beans and tomatoesalongside his tobacco, but only so his family cansurvive, tiding them over until he delivers his nextharvest to BAT. He says he would prefer to growonly vegetables as he feels this would be far less

labour intensive and less harmful to his health andthat of his family. George O, like many of hisneighbours who also grow tobacco for BAT, isconcerned about the symptoms he suffers when heuses the pesticides sold to him by the company.

During spraying we have problems with the chest andwhen we harvest we get skin irritations, especially onthe arms, he says. When we ask for protective gear,they [BAT] say they will bring it and then time goes by.BAT Kenya says farmers have protective clothing. In astatement responding to Christian Aids concerns, thecompany says, All farmers are provided withprotective clothing and training on how to use it. Theultimate responsibility of wearing this clothing lies withthe farmer.

But George O has no protective clothing and little

understanding of what some of the pesticides especially organophosphate insecticide might bedoing to his health. He also knows little about howthe tobacco leaf he sells BAT is valued; he has torely on the word of the companys leaf technicianwho weighs and grades the tobacco, anddetermines how much George O is paid for it. AndGeorge O, like many other Kenyan tobacco farmers,is concerned about the lack of transparency in thisprocess there is no third party present although

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Hooked on tobacco

BAT in KenyaOur approach over many years has been to work through dedicated staff in the eld alongside farmers,many of whom are small producers in scattered ruralcommunities. We train, advise and support farmers,providing seed and advice on all aspects of cropproduction. Our approach benets the environment

and benets both the farmers and us in improving crop yields and quality.

British American Tobacco website 1


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BAT says that an elected farmers representativeshould act as an independent checker.

Research among tobacco farmers in Kenya, thevast majority of whom work under an annual BATcontract, indicates that many experience symptomsassociated with exposure to pesticides breathingdifculties, nausea, chest pains, and eye and skinirritation. In the words of one farmer: Ofcials oftobacco companies will never enter areas of activitywithout protection. Yet they watch us do tobaccowork without the protective gear. This is a sign ofhow uncaring the companies are. 3

A new study also indicates that many of the tobacco

farmers contracted to BAT Kenya might actuallylose money on tobacco cultivation, rather thanearning a decent return for their hard work and forthe risks they take. 4

That farmers in Kenya appear to suffer ill-healthassociated with pesticide exposure, that they spraywithout protective clothing, that they work hard andadd such value to their tobacco but receive suchscant reward, will come as no surprise to BAT. In

January 2002, Christian Aid published a report,Hooked on Tobacco , in which precisely the sameconcerns were raised about tobacco farmers undercontract to BATs subsidiary in Brazil, Souza Cruz. 5

Christian Aid met with BAT shortly after the reportwas published to reiterate its message thatknowing how vulnerable the small scale familyfarmers who grow its tobacco are, BAT is failing inits duty of care over them as de facto employees.

The government of Kenya and the countrystobacco companies, of which BAT Kenya is thelargest, maintain that tobacco farming is vital to thecountrys economy. The company also says itregards its farmers as valued business partners.

Yet Christian Aids partner organisation in Kenya,the Anglican Church of Kenya, has harbouredconcerns for several years about the impact oftobacco cultivation on the areas in which it is grownand on the farming families who grow it.

Now, Christian Aids investigation, and new studiesby national and international organisations, indicatethat the benets to farmers are questionable, andthat tobacco growing may be harmful to farmers

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Farmers in Kenya use similar chemicals to those in Brazil where Christian Aid reported a catalogue ofillnesses corresponding to spraying

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health and may even endanger the food supply inKenyas poorer communities. In addition, Christian

Aid has obtained BAT company documentsshowing that in the past BAT Kenya has inuencedKenyan legislation in the companys favour.

Farmers report ill-healthEnvironmental issues and health and safety are high

priorities for responsible companies and British American Tobacco is no exception. 6

BAT website

In Kenya, tobacco is grown almost exclusively onsmall plots of land some as small as a quarter of ahectare by family farmers who live as well as work

among their tobacco elds. For them, there is noescaping either the tobacco or the products theyspray on it.

Under BAT Kenya contracts, pesticides andfertilisers are given to farmers as a loan, which isthen deducted from their nal earnings. George Oscontract with BAT stipulates that while sprayingpesticides farmers should always wear boots,gloves and clothes that cover the whole body.However, like most farmers in the region, he hasnever been given, sold or even offered protectiveclothing without prompting the company. Eventhen, none arrives.

Another farmer who didnt use protective clothing isDaniel Obech. BAT tells us such things are needed,but since we dont have them, we use pesticideswithout them, he told Christian Aid in January 2001.

At the time, Obech was cultivating two hectares oftobacco for BAT Kenya.

Less than one year after Christian Aids rst visit tohis farm, Obech quit tobacco farming for healthreasons. I was ill and had very little strength, hesaid in 2003. Now my strength is coming back.Obech is growing tomatoes and vegetables, and isearning less. But, he says, the fact both he and hisfamily are in better health means it is worth it.

Obech, who began growing tobacco for BAT Kenyain 1994, explained in 2001 how labour intensive thework was. From October to July he was kept busypreparing the nursery, seedbeds and elds,

transplanting seedlings, weeding, removing suckersand spraying pesticides. When I am spraying, I feellike I am going to vomit, he said. After spraying youcant eat, you have no appetite.

Obech was one of 20 farmers surveyed in 2000 forhealth problems experienced throughout thetobacco-growing period, during which pesticidesare applied weekly. All complained of constipation,18 of nausea, 11 of blurred vision, 18 of headaches,

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Daniel Obech sprays pesticide on his crop in 2001.He stopped farming for BAT in 2002 because ofill health


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19 of eye irritation and eight of chest pains. 7 BATKenya says it has not seen the survey. Sufce it tosay that our extension [advice and training] servicessupport to our farmers cover all aspects ofenvironment, health and safety, said the company.

Many farmers across the tobacco-growing area ofNyanza province make similar health-related claimsabout growing tobacco for BAT Kenya. Threebrothers, who, between them, have worked for BATKenya for 60 years, complain of poor informationabout the potential harm the pesticides they usemight do to their health. They also complain ofhealth problems and poor pay.

The three live in a family compound close to theircuring house. The kind of illnesses we have we canlink to work, says one. We have skin irritations,coughs and aching joints. During curing time thechildren sneeze a lot.

The words of the Kenyan farmers echo those ofBrazilian farmers Christian Aid interviewed duringresearch for Hooked on Tobacco . The harvest is theworst time for me, especially if the leaves are wet.Last year I was sick for three days, said BrunoFilho, a tobacco farmer from Rio Grande do Sul insouthern Brazil.

Hooked on Tobacco revealed how, in the view offarmers and farmers organisations in Brazil,Souza Cruz had encouraged a spray-happyculture where pesticide use and misuse wascommon. In Kenya, farmers use a similar

prescription of pesticides including Orthene, anorganophosphate (OP) insecticide, and Dithane,an ethylene (bis) dithio carbamate fungicide. OPshave been linked with neurological damage andare based on nerve agents. Ethylene (bis)dithiocarbamates, although low in acute toxicity,have been linked with Parkinsons Disease-likesymptoms. Souza Cruz recommends and sellsboth of these pesticides in Brazil. 8

BAT Kenya says it trains, supports and advisesfarmers on appropriate agro-chemical use andstorage. Over many years, the overall number andquantity of agro-chemicals used in British AmericanTobacco programmes has been signicantly reducedto less than 2kg per hectare of active ingredient.

The companys claim that it provides all contractedfarmers with protective clothing is thrown into sharprelief by the accounts of the farmers themselves.The Kenyan brothers biggest complaint is the lackof protective clothing for pesticide use. We haveseen the picture [of a farmer wearing protectiveclothing] in the BAT Kenya contract. There was onetime when they brought boots and overalls. Theysaid the cost would be deducted from our dockets,explains one of the brothers. When we protestedthey said they had paid for the boots and for thetailors to make the overalls and therefore we had to

pay them.

The wife of another interrupts at this point. I wouldappeal for protective clothing. Anyone in contactwith tobacco work should be protected, especiallythe children.

All BAT Kenya farmers have a contract or passbook with BAT. Under the heading Environmentaland Safety Issues for Farmers it stipulates that

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Farmers are concerned that there is often no thirdparty present when BAT buys their tobacco


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farmers should always wear boots, gloves andclothes that cover the whole body.

But the pass book is confusing. It contains aneducational comic strip called The ProgressiveFarmer. Beside the instruction Do not spray[pesticides] against the wind, a farmer wearingprotection is pictured. The picture immediately belowshows a farmer spraying into the wind wearingeveryday clothing, which is captioned It is harmful toyour health. BAT Kenya says this is intended toillustrate good versus bad practice, but the captionscould easily mislead the reader into believing thatonly spraying against the wind is harmful.

It is not a contractual obligation for farmers to wearprotection and, as contracted workers and notemployees, BAT is under no legal obligation toensure that they do. On most occasions, accordingto farmers testimony, BAT makes no clothingavailable and the contract does not specify whetherit is the responsibility of the company or the farmersto provide it. However, BAT claims in its statementson social responsibility to have high standards ofhealth and safety when it comes to its farmers.

In Brazil, Christian Aid found that while manyfarmers had protective clothing, which they wererequired to buy from Souza Cruz, few of themunderstood its importance or how to use it. Hooked on Tobacco accused BAT of failing to guaranteesufcient training and safety on small-scale, familyfarms. The companys Kenyan subsidiary appearsto be displaying the same failures.

SocialNEEDS Network, a Kenyan NGO based inKisumu in the heart of the tobacco-growing district,has made a study of the hazards tobacco farmersunder contract to BAT Kenya face. The statisticsare shocking.

Of the 200 farmers in three districts in Nyanzaprovince surveyed by SocialNEEDS Network, 96.3per cent never used goggles, 92.6 per cent never

wore overalls and 92.6 per cent never woregumboots. The gures for children helping out on thefarms are equally worrying. Only one per cent woreoveralls and less than one per cent wore boots. 9

In addition to the risk posed by pesticides, tobaccoitself is toxic to workers. Green tobacco sickness(GTS), an illness explored in detail in Hooked onTobacco , is often found among farmers harvestingtobacco. It is caused by dermal (skin) absorption ofnicotine from direct contact with wet tobacco leaves.Its symptoms include nausea, dizziness, cramps andaching joints. During harvest time, the averagefarmer may be exposed to up to 600 millilitres of dewor rain on the tobacco plants, which carries theequivalent nicotine content of 36 cigarettes. 10

Health workers in developing countries haveinsufcient resources to deal with sick farmers. Butthe clinical ofcer for Rangwe, Dr Japheth Opiya,sees most of his patients during the harvest andcuring season. Most complain of coughs, aching

joints and rashes on their arms, which he suspectsare caused by GTS. Unfortunately most farmers donot make the connection between their healthproblems and tobacco, says Dr Opiya.

Dr Opiya is also concerned by the extensive use ofpesticides. He does not have the resources tomonitor the effects but all the chemicals run intothe river, he says. We depend on the river foreverything: washing, drinking and cooking. All thesepesticides are washed into the river, it toucheseveryone, even if you are not a farmer.

BAT Kenya says it cannot provide a blanketresponse on farmers health conditions withoutprofessional medical reports and carefulconsideration of each individuals health conditionand other mitigating circumstances.

Farmers in Kenya are contracted to work for BATKenya under very similar circumstances to thosecontracted by Souza Cruz in Brazil. They, like their

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Brazilian counterparts, are small-scale farmers wholive and work among their tobacco crop. Anythingthey do to their crop, such as spraying pesticideson it or curing it, takes place a matter of feet fromthe family.

Poor returns

All you see now are dwellings and tobacco-drying kilns in the compounds. Tobacco, the cash crop, has replaced food crops and livestock, and threatens the food security of every family. Yet tobacco is not yielding enough money for these

people to buy food for subsistence and viable livelihoods.Excerpt from testimony submitted on 17 August 2000 to theWorld Health Organisations public hearing for the FrameworkConvention on Tobacco Control

Many farmers regard tobacco as a good moneyearner as they receive an annual lump sum aftertheir tobacco leaf is graded. BAT Kenya isacknowledged as paying promptly which isimportant in an area where other cash crops onlyshow a return on a piecemeal basis. In the words ofone farmer: Tobacco is the one crop which givesme cash quick.

Psychologically, the lump-sum payment issignicant. Because cash ow is a major problemfor the majority of poor farmers, BAT Kenyas recordfor prompt payment on delivery of the tobacco cropis seen as a plus point. But farmers are not skilled atbudgeting, many are also illiterate, and they oftenfail to take account of the time it takes them to

cultivate their tobacco and other costs, such as fuelfor curing the leaves.

A new study by Dr Esther Arthur-Ogara of theKenyan Ministry of Health, in conjunction with theUniversity of Indiana, promises to explode the mythof good returns from tobacco. The farmers, who arepoorly educated, have difculty organising abudget. Dr Arthur-Ogaras team has been workingon budgeting with them hitherto a small sample

group of 17 teaching them to take proper accountof their business expenditure and labour costsduring the nine months they spend cultivatingtobacco. Their study, as yet unpublished, indicatesthat rather than earning tobacco farmers generousprots, more than 80 per cent of them incur anancial loss. 11

BAT Kenya says that prices paid to farmers arereviewed annually, in line with other local cash crops,in order to remain competitive. The company alsoprovided Christian Aid with a league table of crops inthe Bungoma growing region of Kenya, which putstobacco as the fth highest earner behind tomatoes,groundnuts, bananas and kales (vegetables), andahead of maize, sunowers and cotton. However,tobacco is a notoriously labour-intensive crop tocultivate. AFUBRA, the industry-backed tobacco-growers union in Brazil, says that tobacco cultivationis ten times more labour intensive than maizegrowing. 12 BAT Kenyas gures for Bungoma alsoreveal that Kenyan farmers are paid around US$0.7per kg for their crop and that they receive less thanhalf of this once the cost of the products sold to themby the company is deducted. 13

BAT Kenya told Christian Aid that the loans it givesto farmers are interest-free and that it also givesfree fertiliser and any required chemicals oncentralised nursery sites. However, according toJoe Asila, executive director of SocialNEEDSNetwork, Those [centralised nursery] sites existed20 years ago. For at least the last 15 years farmershave been obliged to buy [through BAT Kenya loans]

their own seeds, their own fertiliser, their ownchemicals. There are no centralised nursery siteswhere such things are provided free of charge byBAT.

For George O, as for the majority of the farmersChristian Aid interviewed in Brazil, the companystobacco-grading process holds the key to income.In Brazil, many farmers claimed that the gradingprocess, at which they were rarely present, was not

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transparent and rarely veried by a third party.George O and others share the concern of theirBrazilian counterparts, believing that they lose out ina system of classifying their tobacco, which is nottransparent and not veried independently.

Daniel Obech also told Christian Aid he wasconcerned about the leaf-grading system. Althoughthe farmers give their tobacco a preliminary grading,nal classication is done at the market by BATKenya leaf technicians. When he left home with his2000 harvest he thought his grades were good. Butwhen I was in the market the grades were bad, mybonus was very small, said Obech in 2001. I criedwhen I went home.

The three brothers from Nyanza province also suspectBAT Kenya underpays them. There are so manygrades of tobacco they nd the system confusing. Inaddition there is no independent checker of thetobacco leaves, say the brothers. BAT Kenya defendsthe system, pointing out that local or nationalgovernment ofcials have the power to inspect anypremise(s) where tobacco is either grown, marketed orstored, thus giving farmers protection and assurance.The company also says that elected farmersrepresentatives should be present at tobacco markets.

The farmers Christian Aid interviewed for Hooked onTobacco made similar allegations about thetobacco-grading process and how it determineswhat they are paid. The report stated: Christian

Aids concern about the pricing of farmers tobaccoin Brazil relates to the transparency of classication

by Souza Cruz. All farmers interviewed duringresearch for this report felt they were not receivingthe price they expected for their tobacco harvest.The evidence from Kenya indicates that Christian

Aid should reiterate its concern.

While there is a growing feeling that tobacco earnslittle or nothing for many of the families whocultivate it, there is also mounting pressure fromthose who think tobaccos economic contribution to

the districts in which its grown is overstated.Kenyas National Tobacco Free Initiative Committee,which is headed by Professor Peter Odhiambo,campaigns for crop substitution replacingtobacco growing with food-crop cultivation. Heis scathing about what he sees as interference bythe tobacco companies in what should be domesticKenyan affairs.

Multinationals are lethal, unethical and corrupting...They think they can arm-twist Third Worldgovernments with threats of labour unrest and lossof revenue. To back up his point ProfessorOdhiambo uses 1999 statistics from the Ministry of

Agriculture for Mbeere district, a major tobacco-growing area in Eastern province.

These are the revenues from that area 16 millionschillings from mangoes, eight million from papaya,5.5 [million] from cotton and for tobacco 430,000schillings. Tobacco is not essential for our economyand we should be concentrating on building amarket system for food crops.

The lack of a reliable local market for vegetables,however, makes it difcult for farmers to moveaway from tobacco and concentrate on growingfood. BAT Kenya itself says that: Tobacco inKenya is predominantly grown in marginal areaswhere there are limited alternative economicactivities. In addition, the tobacco season, whichis nine months long, leaves little time for farmerswith small plots to grow substantial amounts offood. Farmers need to produce two maize crops

per year to provide sufcient food to feed theirfamilies and also generate a prot, makingcommercial maize-growing alongside thecultivation of tobacco impossible.

The focus on tobacco cultivation in some regions ofKenya may contribute to the poor food supply inthose areas. Due to the twin fact that a lot ofvaluable land space and quality time are allocatedto tobacco growth, food production suffers, says

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Samson Mwita Marwa, a former tobacco farmer andmember of the Kenyan parliament. As a result,Kuria district [a tobacco-farming region] has joinedarid and semi-arid areas as an area constantly inneed of famine relief. 14 A survey by UNICEF foundthat 52 per cent of children in Migori district, next toRangwe and also a major tobacco-producing area,suffer from either chronic or acute under-nutrition orare underweight. 15

Under the inuence of tobacco

Today perhaps more than ever before, society expects companies to use their economic strengthfor broader social goals, and to demonstrateenvironmental responsibility, support for communities, high standards of ethical behaviour,

and greater transparency and accountability. 16

BAT website

Far from the shores of Lake Victoria and thetobacco elds, Kenyas capital Nairobi has becomea key battleground in the war between the tobaccoindustry and health professionals.

The countrys proposed Tobacco Control Bill is atthe centre of this battle. In 1999 a draft was sentto the Ministry of Health for nal approval,updated versions were produced in 2001 and2003 but, amid rumours of tobacco-companypressure, it has still not been enacted. The Billsproposals, backed by the Kenya Medical

Association, envisage the creation of a regulatoryboard and restrictions on hawkers and vendors.BAT Kenya was not consulted or involved in

drawing up the legislation on this occasion.Observers are therefore suspicious that thecompany may be behind the delays.

Suspicions about BAT Kenyas inuence on thecurrent Kenyan government are not withoutfoundation. BAT company documents held inthe UK, where legal action by smokers has forcedtobacco companies to make their records public,show that BAT exerted considerable pressure

on the previous government of president Daniel Arap Moi.

In 1994, his government passed the new CropProduction and Livestock (Tobacco Growing andMarketing) Bill, which gave a legal basis to therelationship between farmer and tobacco company.The Bill, drafted at a time when BAT Kenya wasfacing increasing competition from a rival companycalled Mastermind, forbids farmers from making acontract with more than one company or growingtobacco out of season.

In a statement to Christian Aid, BAT Kenya said thatit is not against Kenyan law to grow for more thanone company. However, the 1994 Act says: Nofarmers shall enter into sponsorship agreement[contract] with more than one sponsor for the samegrowing season. 17 BAT also says that preventingout-of-season growing is in the farmers favourbecause it ensures control of leaf diseases which, ifnot checked, can wipe out tobacco cultivationcausing huge losses to farmers.

But documentary evidence, shown to Christian Aidby a research team at the London School ofHygiene and Tropical Medicine and soon to bepublished in the UK, reveals BAT Kenyas role indrawing up the legislation. 18

A fax from the companys regional director before avisit to London by Daniel Arap Moi says: TheKenyan government has passed a tobacco bill,which looks as though it will be very successful (if

properly implemented) in stopping poaching [offarmers and tobacco by other companies] and illegalout-of-season growing. The law was actually drafted

by us but the government is to be congratulated on its wise actions [Christian Aids italics]. 19

BAT Kenya had grown increasingly concerned thatMastermind was offering farmers one shilling perkg more for their tobacco. Although worried thatthis was encouraging farmers to sell tobacco

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grown for BAT to Mastermind, an internal BATKenya letter conrms that this was not thecompanys primary concern. This tactic of payingthe extra shilling to the growers is far moredamaging to us in another way. He [Mastermindsowner] is advising the farmers that BAT has,through all these years, been underpaying them,and now he, the bright knight in shining armour, ispaying the price they deserve for their labour. Youcan imagine the reaction of the farmers. Recently, Igave a short presentation to 200-300 on one oftheir market days and their general attitudetowards me was positively hostile. 20

However, BAT Kenyas record of under-payingfarmers was even criticised by BAT head ofcein London. Its 1992/96 company plan notedthat: The price per kilo paid to farmers is wellbelow ination each year... we do not agree withBATKs philosophy. 21

In another letter to BAT Kenya, written in 1991, BAThead ofce observed: You are paying less tofarmers than any other African leaf-growingcompany and only 46 per cent of crop cost actuallygoes to farmers compared to up to 70 per cent inother countries. 22

BAT Kenya says it is not aware of the specicdocuments or of any such concern.

Beyond Hooked on Tobacco

In 2002, Christian Aid published a report onconcerns about tobacco growing in Brazil. They

published the main points of our reply and our subsidiary in Brazil has held constructivediscussions with Christian Aid and Brazilian farmworkers groups.BAT website 23

The concerns raised by Christian Aids latestinvestigation in Kenya, supported by Kenyan andinternational studies, are so similar to those raisedin Hooked on Tobacco that it begs the question: is

BATs model for contracting farmers, and theproblems it throws up, repeated in other countries?If BAT is similarly failing in its duty of care towardsfarmers in many of the other countries in which itcontracts them, it would be legitimate to questionBATs use of the term sustainable development inrelation to tobacco cultivation.

Others are already raising similar concerns to thosein Hooked on Tobacco . In August 2002, theDepartment of Rural and Social Economic Studies(DESER), the Brazilian partner organisation withwhich Christian Aid jointly published Hooked onTobacco , was asked by a government scal tribunalin Brazil to further research one of the allegations inthe report.

Hooked on Tobacco investigated the mystery

surrounding the use of Brazilian government credit the PRONAF by tobacco companies. It revealedthat Souza Cruz, BATs Brazilian subsidiary, wasclaiming credit from the Brazilian governmentintended for small-scale farmers. Many of thefarmers Christian Aid interviewed were unaware thatgovernment credit had been claimed in their name,others had discovered that they already owed thescheme money when they tried to claim creditthemselves in order to grow other crops. 24

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The Kenyan Ministry of Health is battling to get itstobacco Control Bill approved by Parliament. Someobservers think its delay is due to interference bytabacco companies


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DESER interviewed a further 50 farmers in tendifferent districts in Santa Caterina (not only thoseunder contract to Souza Cruz), one of Brazils threetobacco-producing states. Its subsequent report,submitted to the Minister of Agrarian Developmentin Brazil, supports the theory put forward inHooked on Tobacco . DESER found that 40 percent of the farmers interviewed did not think theysigned documents in addition to the contract withthe tobacco companies and 80 per cent said theydid not have any documentation of a creditagreement involving the PRONAF. Since 2002,tobacco companies have been prevented fromusing the PRONAF.

Following the publication of Hooked on Tobacco ,Christian Aid met BAT to reiterate its concerns. Sincethen Christian Aid has turned down several furtheroffers to discuss the matter with the companybecause it is Christian Aids view that BAT now fullyunderstands the concerns expressed in the report.However, there has been a series of dialoguesinvolving DESER, Souza Cruz, local and stategovernment ofcials, tobacco growers unions andrural workers representatives. DESER feels the talkshave yielded little concrete, but believes they areimportant if the short-term well-being of the tobaccofarmers with whom it works is to be improved.

The company hasnt done anything of substance[since the dialogues began], says MoemaHofstaetter, institutional development coordinatorwith DESER. But having the dialogue is importantbecause its the rst time the tobacco industry has

agreed to talks with NGOs and farmersrepresentatives. Its also helping the farmersbecome more aware of their rights.

The report has had a huge impact at both nationaland international level. Souza Cruz told us that thecompany has lost contracts because the report isalso posted on DESERs website.

The attorney general in Parana, another of Brazils

tobacco-producing states, has also convened aseries of meetings to discuss what should be doneabout the tobacco industry. Its report, TobaccoGrowing Proposals for Action, Parana , includesmeasures to control the use of pesticides, check thehealth of farmers, eliminate the use of child labour intobacco production and control the grading offarmers tobacco by companies. The report alsofocuses on the development of alternative crops totobacco. DESER is taking part in these meetingsand is acting as a watchdog in the process.Throughout, Hooked on Tobacco has been usedwidely to support these discussions.

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Sitting at the factory gates, villagers fromPlachimada in the southern Indian state of Keralawait patiently for a change of heart from the mightymultinational Coca-Cola as its delivery vehiclestrundle back and forth.

Through the crushing heat of the day and theoppressive dark of the night they sit, and have donefor more than a year. Members of their communitypass by, some stop to give support or food. Thesitters sacrice their vital working time and scantresources to keep hammering home their message:Coca-Cola, the factorys owner, is depriving them ofone of their most basic human rights water. 2

Mylama, a 55-year-old woman, leads the protest.She says that rainfall has been scarce for the pasttwo years. But the availability of water in the wellhas no relation to rain, she insists. Even when wehad less rain before the company came, we still hadno shortage of water.

Another protestor, 64-year-old Shahul Hameed, has

been farming since he was born and his land runsup to the Coca-Cola factory connes. According tomy traditional measures, the water in my well usedto be 22 mola 3 deep. Now its only one mola deep,he says. I was able to run my pump for 14 hoursevery day. Now it will only run for 30 minutes. Thatshows you how my agriculture has suffered.

As they sit, day after day, the communitys water isdrawn up from the ground by the factorys pumps

and processed by its machinery into cola, otherzzy drinks and even, ironically, a carbonated watercalled Kinley. It then leaves the factory in bottleson the back of trucks. From Plachimada it istransported to Indian towns and cities where it isbought by those who can afford bottled water. Fromthe wells of Mylama and Shahul, to the tables of theurban elites, courtesy of Coca-Cola.

Its not just people from the local community whoare angry and claim that Coca-Cola is threateninglivelihoods. A retired hydrologist, Dr Achuthan

Avittathoor, who lives in Kerala and has investigatedthe impact of the Coca-Cola factory on thesurrounding communities water, says: I want thetruth. I am not against Coca-Cola. But its aboutpriorities. When there is a shortage of drinkingwater, this must come rst.

Coca-Cola maintains that it is not depleting groundwater in Kerala. In a statement emailed to Christian

Aid, the company blamed lower-than-usual rainfallin the past two years for the lowering of the

villagers wells. But the companys arguments havenot impressed the High Court of Kerala. InDecember 2003, it ruled that Coca-Cola must stopdrawing ground water from Plachimada and gavethe company one month to nd an alternativesource of water. 4 Coca-Cola plans to appeal againstthis decision.

Coca-Cola says it is fully committed to corporatesocial responsibility. Its citizenship report, Living

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Living its valuesCoca-Cola in IndiaAt the heart of our business is the trust consumersplace in us. They rightly expect that we are managingour business according to sound ethical principles, that

we are enhancing the health of our communities, andthat we are using natural resources responsibly.Douglas N Daft, Coca-Cola chairman and chief executive 1


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Our Values , reviews the companys initiatives andaccomplishments as a corporate citizen, andopens with the words: The Coca-Cola companyexists to benet and refresh everyone it touches.This is our promise [their italics].

In India, where it has operated since 1993, Coca-Cola also, signicantly, boasts that several of ourbottling plants provide safe drinking water to local

villagers through the organisation of water tankers,bore wells and hand pumps. 5 But at Plachimada,according to those who sit outside the plant, thevalues the company is living are not those it lauds inits public statements. The companys promise torefresh everyone it touches has, they say, bothliterally and guratively been broken.

Since the Coca-Cola factory opened in 2000,however, people living in the surrounding villages

have complained that their wells are almostempty, when previously there had been enoughwater for everyone. Their claims threaten to makea mockery of Coca-Colas statement that: We willconduct our business in ways that protect andpreserve the environment. We will integrateprinciples of environmental stewardship andsustainable development into our businessdecisions and processes. 6

Although water levels in some wells were droppingbefore Coke opened its gates, the factorys heavyuse of water has, according to people living andfarming near the factory, exacerbated the situationand made their lives dramatically more difcult.Many local women now spend much of their daywalking to and from distant wells to collect water fordrinking, cooking and bathing because nearbywater sources have dried up. Most of the 1,200 or

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Locals at the Plachimada well. Before the Coca-Cola factory opened, they say, the well provided a plentifulsupply of clean water


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so people who live around the factory gates havebeen affected.

When Dr Avittathoor visited the plant and saw thesize of its wells, he estimated the company coulduse 1,100 cubic metres of water per day. Coca-Colasays the Plachimada plant pumps an average of 400cubic metres a day and that it was told by the stateof Kerala that it could draw up to 880 cubic metresper day. 7

Oamjie John, a former Jesuit priest who now worksas an activist in Kerala, says that the local wells arenot only supplied by the immediate rainfall, but alsoby the aquifer, deep reserves of water which are fedby rainfall over thousands of years. These reserveswould not, claims John, have dropped substantiallyafter just two years of unusually poor rainfall unless they were being depleted in other ways.

Local people also say that the quality of the waterleft in the wells has deteriorated. It has anunpleasant taste and chalky consistency, making itundrinkable and useless even for cooking. Vasanda,a 15-year-old tailor, says that rice cooked in waterfrom the village well now becomes hard andunusable within a few hours, whereas traditionallythe food would be prepared in the morning and keptuntil the evening meal, when it was still fresh andgood to eat. I cant cook with the water from thewells. I have to get water from two kilometres away,she says.

Worse still, many of those in communities

surrounding the bottling plant told Christian Aid thesame story during its investigation: while the waterused to be ne to drink, now what is left at thebottom of their wells gives them severe stomachpains and headaches.

A study conducted by the district medical ofcer ata local health centre has conrmed the villagerssuspicions about water quality. It concludes: Thiswater is unt for drinking and the people should be

made aware of that. It also includes the opinion ofa water analyst: The hardness and chloride [level]of the water is very high. The water is unt fordrinking purposes. 8

Water samples have also been analysed by Dr MarkChernaik, a biochemist from Environmental Law

Alliance Worldwide (E-Law) a network of Americanlawyers, scientists and environmental expertsworking to promote environmental protection. Hefound high levels of dissolved salts in the water,commensurate with rapid depletion of the aquifer.

Water from the two wells would be classiedas very hard, says Dr Chernaik. In his report,he concludes that: Use of this water for bathingand washing would cause severe nuisanceand hardship. 9

Refreshing PlachimadaWe believe that being part of communities around the world is a privilege; one we must earn every day

by making responsible, effective decisions and investments that benet our company and our communities alike. 10

Coca-Cola citizenship report 2002

While maintaining that it is not depleting theground water, Coca-Cola has conrmed toChristian Aid that it is currently bringing waterinto the Plachimada plant from other sources.We took a conscious decision not to put stresson water sources at a single location and decidedto source water from surplus areas, said a

company statement.11

Coca-Cola has also acknowledged albeit byimplication that the surrounding villages have aproblem; it has been paying for tankers to distributedrinking water to the area. This water comes fromsurrounding villages within four to ve miles ofPlachimada. According to Mumbai-based Christian

Aid partner Vikas Adhyayan Kendra (VAK), whichhas been supporting the protest outside Cokes

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gates, no survey has been conducted to ascertainwhether people in these villages are also sufferingwater shortages.

Arychami Krishnan, president of the panchayat the village-level council serving the area is morevociferous about the companys attempts to providethe communities living around the bottling plant withemergency water. These are just symbolic gestures,he says. They dont distribute this water evenly.Some get more, some get less. This just createsa division.

Villagers add that the water from the company doesnot come on a regular basis and, therefore, cannotbe relied upon, even though Coca-Cola says itstankers visit the communities daily. There are alsocomplaints that when water is provided, it is ininsufcient quantities. Mylama, leader of the sit-down protest, says that only six to seven litres perperson is distributed, compared with the minimumof 15 litres needed for drinking, cooking, washingand sanitation per person, per day. 12

Coke has publicly dismissed the protests and vigilsof local people as the agitation of Marxists. Thisallegation was at one time posted on Coca-ColaIndias website, but following international mediainterest, has now been removed. 13 However, in itsstatement to Christian Aid, the company, while keento point out that it is sympathetic to the plight of thelocal community accessing water at a time ofshortage in rainfall, said: The small number ofprotestors and their organisers are self-declared

Marxists and communists and they are dealing withwhat they perceive to be a high-prole, Americancapitalist company.

Villagers say that even during previous droughts,they did not run short of water and that water qualitydid not suffer in the way that it has since the bottlingplant opened. However, there is no reliable historicaldata for water usage, quality or depletion that cansubstantiate their claims. It is now difcult to gauge

empirically to what extent Coca-Cola is to blame forthe fall in water levels.

The only study carried out in the area prior to theopening of the plant was an environmental impactassessment (EIA), conducted by Hindustan Coca-Cola itself. However, despite local organisationspersistent requests for a copy, the company hasfailed to produce one. Such a failure, states onelawyer, is illegal because according to the Keralagovernment, EIAs are public documents. 14

Christian Aid asked Coca-Cola if it could see the EIA and was told that the document was part of a larger,commercially sensitive paper that the company wasnot prepared to copy. After several requests, Coca-Cola faxed a document to Christian Aid entitledReport on the Integrated Groundwater SurveysConducted in the Coca-Cola Factory Site at Moolathara, Chitoor Taluk, Pallakkad District, KeralaState . The document is not dated.

Coca-Cola also says that it harvests rainwater andusually returns around 50 per cent of the water it uses.The company blames the panchayat for blocking itsplans to expand rainwater harvesting. However, Dr

Avittathoor challenges this reasoning. The companyclaims that it is putting back into the aquifer throughwater harvesting. But whereas the pumping is from thedeep aquifer, the recharge water goes to the gravityzone [the sub-soil level]. Therefore, pumping causesdepletion of groundwater continuously, he says.

Conduct beyond question

Our business is built on relationships relationships based on respect for each other, for our partners, for the communities where we do business and for theenvironment.Douglas N Daft, Coca-Cola chairman and chief executive

The Palakkad district in which the plant is situatedhas long been known as the rice chest of Kerala. Inthe past, it has produced 35 per cent of the statesrice. Coconuts, groundnuts and okra, as well as

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rice, have all been farmed there for generations, thework mostly carried out by the poorest people inIndian society around 60 per cent of those living inthe district are adivasis , or tribals.

This famed fertility has endured in spite of the areashistorically low rainfall compared with the rest of

lush Kerala. Palakkad lies in a region known as arainshadow where precipitation is notoriouslyscarce. But now, since the Coca-Cola factoryopened, crops have failed and jobbing agriculturallabourers have been forced further aeld to lookfor employment.

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Coke adds life

The esteem in which Coca-Cola bottlers, customers, consumers, share owners, employees, suppliers and communities hold our company even when we falter speaks to the strength of our principles as business assets.Douglas N Daft, Coca-Cola chairman and chief executive

Coca-Cola not only faces allegations and protests from local people angry at the depletion oftheir water supplies, it now stands accused of selling toxic waste from the factory what thecompany calls biosolids to local farmers, billing it as fertiliser. Farmers using the waste havecomplained of skin infections and sores as well as poor crop yield.

During a recent BBC investigation, 15 however, samples of the waste were taken to the UK andanalysed by the University of Exeter. They were found to contain dangerous levels ofcarcinogen, cadmium and lead. David Santillo of the University of Exeter says the results arevery worrying: The presence of high levels of lead and cadmium is of particular concern. Leadis particularly noted for its ability to damage the developing nervous system. Cadmium isespecially toxic to the kidney, but also to the liver it is classied as a known humancarcinogen.

Following the BBCs ndings, the Kerala State Pollution Control Board (KSPCB) ordered a newstudy to be carried out on the waste and the well water. It found that, while cadmium and leadlevels were not, in its view, hazardous, the waste should not be used as fertiliser.

However, as activist Oamjie John points out, the cadmium levels found in the samples thesecond time they were tested by the KSPCB (36.5mg per kg of dry weight) are signicantlylower than the levels the chair of the KSPCB, Paul Thatchil, announced in August 2003 (202 mgper kg). This is a very large difference within just a couple of months, says John.

Coca-Cola denies its biosolids are toxic, although the company does not deny that they docontain both cadmium and lead within the limits prescribed by the State Pollution ControlBoard [in Kerala]. However, following the BBCs investigation, the company stoppeddistributing them as fertiliser because of concerns in the minds of some of the localcommunity. Coca-Cola says it will now dispose of the biosolids by treating them ashazardous waste. 16


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Ajit Muricken of Christian Aid partner organisation VAK believes the damage caused by the factoryswater extraction will take a long time to put right. Ittakes many years for coconut trees to reach thestage when they yield, he says. The lack of water isvery likely to seriously affect the livelihoods ofmarginalised farmers for years to come.

Even the State Ground Water Department of Kerala,which attributed the depletion of some ofPlachimadas open wells to below normal rainfall inthe area, noted: Since there is a drastic fall inrainfall, it is necessary to restrict the exploitation ofgroundwater at least till the status has improved. 17

In others words, at the very least it is inappropriatefor Hindustan Coca-Cola to be extracting waterwhen people living around the factory haveinsufcient to drink.

The Keralan government actively encouragedCoca-Cola to open a plant in Plachimada, giving thecompany a 15 per cent rebate on its capitalinvestment of Rs80 crore (10m), because Palakkadis a poor, or backward, area. Such incentives haveproved successful in attracting foreign investors.

According to UN gures, ows of foreign directinvestment in India rose from US$0.4bn in 1990 toUS$5.5bn in 2002. 18 Coca-Cola says it has investedmore than US$1bn in India since 1993, making itone of the top investors in the country.

But a court action against Coke by the tiny panchayat of Palakkad is threatening one of thecompanys major investments in India the

Plachimada bottling plant. The Kerala High Courtsruling that Coca-Cola can no longer draw groundwater from the area will come as a serious blow tothe company and will cast doubt over the future ofthe plant. The courts ruling also challenges thecompanys statements that it has not contributed tothe depletion of ground water and the ndings of areport commissioned by the company and carriedout by a retired scientist from the NationalGeophysical Research Institute in Hyderabad. The

report claims there is: No eld evidence ofoverexploitation of the groundwater reserves in theplant area. 19

Dr Achuthan Avittathoor is clear how water shouldbe used when it is scarce. In times of shortage, thepriority must be domestic need, then small industry,then essential large industries, and the non-essential industries must come last, he says.

Perhaps Coca-Cola, and its subsidiary in Kerala,would do well to heed the companys own newords. As Stephen J Heyer, Coca-Colas presidentand chief operating ofcer, says in its CitizenshipReport: Our goal as leaders is to unlock theenormous reservoir of talent, capability and passionthat resides in the people of this system to teardown the barriers that prevent us from workingtogether in a collaborative environment to make

great things happen for all of us.

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Mylama, the protest leader, parades with herplacard outside the gates of the Coca-Colafactory in Plachimada


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This report is about corporate social accountability.It is published against a backdrop of growingconcern over corporate inuence and with theconviction that CSR, as dened at the start of thisreport, is simply not sufcient to guarantee goodbusiness practice. Binding standards are needed totake corporate accountability beyond voluntarism.

The cases cited throughout this report support theconclusion that the voluntary commitment ofbusiness to sustainable development is insufcient toguarantee the rights of people and the environment indeveloping countries. Abuses have been numerousand continue to take place. At present, the affectedcommunities and individuals are left with littleprospect of redress or compensation.

BAT claims to give local farmers the resources andinformation they need, and stresses the importanceof safeguarding their health and safety. Butvulnerable Brazilian and Kenyan family farmerscontracted to BATs subsidiaries, de factoemployees who contribute signicantly to thecompanys prots, claim they are not receiving a fairreturn for their labour. Moreover, they report health

problems that appear related to their tobaccocultivation. In the meantime, BATs annual reportsregister its social achievements, and the company iswinning considerable kudos among sociallyresponsible investors as a result.

Coca-Cola subscribes to high principles of ethicalbehaviour and stresses the importance of usingnatural resources responsibly. Yet thousands ofmiles away from the companys headquarters, its

wholly owned subsidiary in India stands accused ofdepleting village wells in an area where water isnotoriously scarce. Indeed, in this instance it hastaken the actions of a local government followingsustained protest by the people of Plachimada tobegin the process of holding Coca-Cola to account.

Shells commitment to sustainable development hasgone further than most at least on paper. Shell iseven prepared to publish the views of its critics. 1 Butthe company has failed to end the kind of practicesin Nigeria that brought it so much strife in the mid-1990s. For poor people living among the oil elds ofthe Niger Delta, Shells pledge to sustainabledevelopment has made little difference. They are stillplagued by oil spills and dysfunctional community-development projects, and their communities aredivided by the companys thirst for oil.

What this report shows is that self-regulation acompanys own commitment to socially responsiblepractice is a wholly inadequate means of ensuringgood practice across all of the companysoperations, or of curbing the extreme cases ofcorporate transgression that Christian Aid and

others have documented. The conduct of BAT, Shelland Coca-Cola in these specic cases is also a farcry from the way in which each would operate intheir home countries the UK, Holland and the USrespectively where laws and regulations are tighterand in general people are more able to seek redress.

Christian Aid is part of a growing network of NGOs,policy institutes, legal experts and developmentspecialists arguing for an agreed set of legally

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From CSR to corporate socialaccountability Companies might expect some UN standards to oponto their desk and give them the answer, but no lawdoes that. It provides general principles and should helpinform companies how to respond in different situations.David Petrasek, expert on international human rights law and editor of Beyond Voluntarism

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binding obligations for business. There is an emergingconsensus about the possible scope of suchobligations, exemplied by the UN Sub-Commissionon the Promotion and Protection of Human Rightsdevelopment of a set of norms covering corporateresponsibility. The time is ripe to move thisconsensus towards legal obligations. Companiescould also benet from clearer standards, whichwould allow them to better assess and contain risks.

There is evidence that this process is underway.Seven companies have already joined the BusinessLeaders Initiative on Human Rights, which, althoughstill voluntary, is an initiative that runs parallel to theUN norms. 2 Membership demands that companiesfollow the norms and, in doing so, open themselvesup to future investigation and censure for failing tomeet the standards the UN sub-commission setsdown. 3 It is an acceptance of an international set ofstandards and the principle of corporate socialaccountability by a small group of multinationals.

Why should multinational corporations, together withtheir subsidiaries and afliates, be legally required toabide by an international set of social standards?

One central reason, as a United NationsDevelopment Programme report explains, is that:There are no mechanisms for making ethicalstandards and human rights binding forcorporations. 4 Aside from the lack of internationalprocedures, resorting to national laws is oftenfrustrated by corporate structures. Parentcompanies establish separate entities to operate in

different countries, which has the effect of limitingtheir liabilities. It is then difcult to hold parentcompanies accountable for the misconduct of theirsubsidiaries, despite their close connection. 5 Thiseffectively means that the current legal standardsfor multinationals are ambiguous and that avenuesfor redress when they are breached are limited.

But legally binding international standards will be nomagic bullet. The more effective existing voluntary

agreements, the growth in socially responsibleinvesting and the willingness of companies to reportsocial and environmental damage are all essentialbedfellows of regulation. Alongside mandatorystandards, they would all yield tangible benets.

In the meantime, communities in developingcountries affected by corporations living close totheir operations or working for them continue, incases of abuse, to bear the costs. Voluntary CSRand self-imposed codes of conduct cannot, on theirown, deliver accountability to these people, whoare, by virtue of their poverty and vulnerability, themost important stakeholders of all.

Multinationals can bring huge benets to thedeveloping countries in which they invest. But thesebenets are reduced or lost altogether if companiesbehave irresponsibly. The tragedy at the heart of thiscontinuing story is not only that communitiescontinue to be damaged sometimes irreparably by the actions of multinationals, and can rarely winredress. But also that each time a multinationalinvestor fails to meet either its own code of conduct,or to comply with existing regulations because theyare poorly enforced, a major opportunity fordevelopment is missed.

Ten reasons to regulateHistorically, progress associated with corporate

social and environmental responsibility has beendriven, to a large extent, by state regulation, collective

bargaining and civil society activism. Increasing reliance on voluntary initiatives may be undermining

these drivers of corporate responsibility.Peter Utting, Business Responsibility for SustainableDevelopment

In an age of increasing global interconnection, wherehuge multinational businesses have unprecedentedreach, international, legally binding human rights andenvironmental rules are ever more necessary. Thebewildering profusion of voluntary codes, agreementsand commitments are insufciently binding to change

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company behaviour and do not offer sufcient legalredress to the victims of corporate abuse.Corporations themselves would benet from the clear,unambiguous boundaries of a single set of universallyagreed, legally binding standards.

Such standards are necessary for the followingten reasons:

1. Human rights and the environment needprotectingUnder current international law, it is primarily theresponsibility of states to uphold human rights. But,as this report shows, multinational corporations canalso abuse human rights and harm the environment,and many states often fail to uphold the rights oftheir citizens.

Clearly, multinationals have many reasons forbehaving responsibly and according to nationallaws. If they fail to safeguard human rights if theirpresence exacerbates conict, for example theyrisk damaging their reputation and alienating thecommunities in which they work. The onus, evenwith more effective regulation, is on businesses topursue actively their responsibilities.

But something so fundamentally important as theprotection of human rights and the environmentcannot be a purely voluntary exercise. When acompanys primary legal obligation is to make aprot for its shareholders, its human rights andenvironmental responsibilities must also be legallybinding. If not, prot may override or even contradict

the moral imperative to uphold human rights.

2. Multinationals need to be brought under international lawIn general, international companies do not fall underthe remit of public international law. Sincemultinationals, by denition, operate in more thanone country, this virtual absence of legalaccountability at international level is a hugeanomaly. It is a particular cause for concern given

the power multinationals wield in relation to many ofthe countries in which they operate.

This legal vacuum is beginning to be lled. TheOECDs guidelines for multinational enterprises,although not fully legally binding, set a broad rangeof standards applicable to companies based inOECD countries and operating anywhere in theworld. The guidelines carry the possibility of actionagainst non-compliant companies.

Even more signicantly, the UN norms are the rstcomprehensive attempt to take existing human rightsprinciples and apply them to corporations. But this iswork in progress and much international support willbe needed if the norms are to become the newblueprint for corporate social accountability.

3. National legislation and regulation are insufcient A wide range of national laws are directly relevant tocorporate social accountability, including labourlaws, health and safety standards, consumerprotection, factory-emission requirements, anti-trust provisions, and product liability. But whilenational laws can and do protect some communitiesfrom abuse by multinational corporations, they areoften patchy and only partially applied allowingcompanies to slip through the regulatory net.

In addition, national legislation differs hugely fromcountry to country, both in the content of laws andin the degree to which they are enforced. Incountries with fragile institutions and weakdemocratic accountability, even where national laws

are strong on paper, there may be neither thepolitical will nor the regulatory resources to enforcethem. Furthermore, many multinationals currentlyoperate in something approaching a regulatoryvoid, with different parts of the company registeredin different countries and only accountable tonational laws and regulatory pressure.

Binding international standards for corporationswould be signicant in themselves in holding

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companies to account and providing communitieswith a means of redress where nationalgovernments were unable or unwilling to do so.They are also likely to be translated into nationallaw, raising the standard of national regulation.

4. Voluntary approaches are wholly inadequateMultinational companies that operate in developingcountries often fail to live up to their own standardsbecause, where national laws are weak, they maybe able to engage in unacceptable conduct withimpunity. The case of Shell in Nigeria shows how acompany, in spite of extremely high self-imposedstandards of social responsibility, has manifestlyfailed to change the way it operates.

Professionals in the eld increasingly recognise theinadequacy of voluntary initiatives, along with theneed to impose legally binding norms. For example,as the International Council on Human RightsPolicys (ICHRP) Beyond Voluntarism concludes:The relevance of international law and enforcementis beginning to be treated seriously. Indeed, there isa growing sense that voluntary codes alone areineffective and that their proliferation is leading tocontradictory or incoherent efforts. 6 Similarly, theUN working group which developed the UN normson the human rights responsibilities of companiesacknowledges that an entirely voluntary system forcodes of conduct is not enough, and anticipatesthat the international community will move towardsthe codication of binding norms backed by a rangeof implementation measures.

As one retail-sector source told Christian Aid, Thereare some companies who will only take socialresponsibility on board if they have to. Youve got touse regulation to make them.

5. Business needs a level playing eldCompanies that are law abiding have little to fearfrom the law. Those that have a real commitment tosocial responsibility should welcome the applicationof higher standards to other companies.

International constraints would minimise the abilityof companies to disregard fundamental values inorder to undercut more scrupulous competitors andcould provide companies with incentives to elevatetheir standards.

The argument for a level playing eld holds evengreater implications at national level. Developingcountries face particular pressure to attract andmaintain foreign investment. Companies seek thebest possible conditions, including tax breaks andother incentives, such as exemption from somelocal labour or environmental legislation, inchoosing between alternative locations. Given theirrelatively weak position, developing countries maybe tempted to erode legal protection for workersand the environment rather than risk losing thebenets of foreign investment. An internationalapproach could ease the pressure on countries tolower their standards.

6. The risk of legal action would inuence marketsand motivate companies to complyDamage to a companys reputation, throughembarrassing campaigns or boycotts, can have anegative impact on its share price. The same is true oflegal action. And a court case may mean customers,shareholders and, most importantly, the affectedcommunities get to hear the full details of acompanys actions as its documents are released intothe public domain. The company may also be ned. Aninternational framework of binding standards wouldtherefore strengthen the incentive for companies tobehave responsibly, because they would be risking

legal action if they did not.

While socially responsible investment (SRI) isgrowing, motivating companies to make a clearcommitment to social responsibility and report ontheir progress, socially responsible investors stillmake up less than one per cent of the overallinvestment market. 7 The vast majority are stillmainly concerned about the value of their sharesand the risks that may threaten the future value of

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the company. Legally binding standards carry thethreat of legal sanctions, encouraging investors totake account of a companys behaviour in thecountries where it operates.

As Will Oulton, one of the founders ofFTSE4Good, puts it, Mainstream investors aremore and more interested in looking not just at thebalance sheet but at whether companies havetaken steps to manage the non-nancial as well asthe nancial risks.

7. Companies have rights but few responsibilitiesCorporations already have access to internationalmechanisms to help them resolve investmentproblems. For instance, a number of companies

have used the investor-state provision in the North American Free Trade Agreement to force changesin national legislation. As the ICHRPs Beyond Voluntarism puts it: Multinational corporationshave beneted from the development ofinternational law, and have lobbied to ensure thatit protects their rights and interests. 8

But rights must always be balanced withresponsibilities. And if the rights of corporations toresolve investment disputes are legally binding thentheir responsibilities should also be bound byinternational agreements.

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Outlawing bribery: a model for international regulationUnder the convention, our major competitors will be obligated to criminalise the bribery of foreign public ofcials in international business transactions. The existing signatories already

account for a large percentage of international contracting, but they also plan an activeoutreach program to encourage other nations to become parties to this important instrument.

President Bill Clinton, on the signing of a US Act to outlaw bribery and bring it into line with the OECD BriberyConvention, November 1998

On 21 November 1997, the OECD adopted a convention aimed at outlawing the bribery bybusiness people of foreign public ofcials. Thirty-ve countries have now ratied theConvention on Combating the Bribery of Foreign Public Ofcials in International BusinessTransactions, which demands each country enacts laws enabling the prosecution of theirbusiness people for bribery overseas. It is the rst modern example of internationally agreed,legally binding regulation for non-nancial reasons.

The UK signed the convention in the same year it was adopted, and it was ratied in 1998. Butuntil 2001 the UK argued that a combination of existing legislation and common law provisions

on corruption were sufcient to full its legal responsibilities under the convention. But chastenedby an OECD working group report, which urged the UK to enact proper legislation and do so as apriority, 9 the government met its obligations by including new anti-bribery laws in the Anti-Terrorism, Crime and Security Act of 2001. The Act came into force on 14 February 2002.

Transparency International (TI), the anti-corruption campaign, had argued long and hard forrm, international legal measures to curb bribery. Some companies were already working hardto combat bribery, says Laurence Cockcroft, TI UKs chairman. But since the anti-briberylaws have been enacted, many more have come to TI for advice and are beginning to changetheir business principles to meet the regulations.


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8. The growing power of multinationals needs tobe checkedLegally binding standards that reach across nationalborders are desperately needed to help curb thepower of multinational corporations, as the casestudies in this report indicate.

Multinationals in developing countries are operatingin an environment where governments aredesperate for foreign investment. They typicallywield a huge amount of economic and politicalpower in the countries where they operate; the hostcountrys GDP is often smaller than the companysannual turnover.

In this environment, accountability is weakened andvulnerable communities are exposed to potentialabuses that their governments may be unwilling orunable to check. This is one of the primary concernsof Beyond Voluntarism , which notes that: Onefunction of law is to limit power by establishingenforceable rights and corresponding duties.

9. Developing countries need incentives toimprove lawsThe debate about corporate accountability indeveloping countries is critical precisely because,while foreign investment has grown, the capacity ofgovernments to monitor corporate activity, ensurestandards and, where necessary, regulate has not. Inthe worst cases, governments may ignore or even

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The OECD convention is proving very important because its dened the context in whichbusiness now has to work and has led to a wide interest in curbing bribery that wasnt therebefore, says Cockcroft. Before the convention, the corruption issue had been notably absentfrom the CSR agenda.

TIs work on the convention is far from over. Cockcroft believes that the new laws will only trulybe tested when successful cases have been prosecuted. Then companies will see theimmense risks they take if they dont put effort into compliance, he says. Prior to the Factories

Act [in 1833], only a handful of companies had taken steps to improve conditions for theirworkers. Few really changed until they were forced to by the risk of prosecution.

The Factories Act example is also instructive because child labour and other dubious practicesin British factories did not end merely because laws were put on the statute books. Visits byfactory inspectors an enforcement mechanism were also critical. According to TI, this iswhats missing from the UKs response to the OECD convention. The authorities police,crown prosecution service and government departments will all say they lack the resources

to bring cases, says Cockcroft. But the way the convention works means that the progress ofthe UK [and all signatory governments] is monitored by other OECD governments and byorganisations like TI. 10

The OECD convention has paved the way to further expand the scope and reach of anti-bribery laws. On 31 October 2003, the UNs General Assembly adopted a UN conventionagainst corruption. Once 30 nations have ratied this document, it will enter into force and bindthe nations that have agreed to it.


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commit human rights abuses in order to ensuremultinationals can operate, as Christian Aid hasshown in its campaigning work on the oil industry inSudan. 11 If there was an international regulatoryframework within which corporations had tooperate, then it may have a knock-on effect forgovernments. For instance, if corporationspublished information about their payments togovernments as some are now doing then thosegovernments would have less room to keep whathappens to the payments they receive a secret.Similarly, the threat of breaching legally bindinghuman rights standards would discouragecompanies from colluding with repressive orcorrupt governments.

Stella Amadi, a lawyer who has worked for severalyears with communities in the Niger Delta oilelds,believes the danger of collusion betweengovernments and companies is one of the strongestarguments for international regulation. There arelots of international treaties that Nigeria has signedbut never enacted in law, she says. If pressure isput on Nigeria from the outside [by multinationalsand governments] youre going to nd that Nigerianlaw responds.

10. People harmed by corporate activity needredressThe case studies presented in this reportparticularly highlight the suffering of individuals andcommunities as a result of certain forms ofcorporate wrongdoing. National laws are the keyrecourse for aggrieved parties. However, the lack of

effective laws and judicial procedures, especially indeveloping countries, can impede redress. Lack ofresources and legal counsel, excessive delays, andthe relative power of the potential defendants themultinationals also hamper access to justice.Further complexities arise when both the companyand the host government are colluding in abuses, orwhen there is ofcial corruption, whether withingovernment ministries or the judiciary.

Seeking redress where the multinational is based usually an OECD country is notoriously difcult.Moreover, efforts are underway to close off eventhose limited avenues, such as the US Alien TortClaims Act (see section 1). 12

An international approach to corporate regulationwill help revitalise domestic law and countriesability to enforce it. An international frameworkcould pave the way for a whole range of judicial andsemi-judicial processes at an international level,too, beginning with national laws in developedcountries offering redress to victims from thecountries in which their multinationals operate.Communities that currently have little opportunity tovoice their concerns before a multinationalcorporation begins operating and limited access to

justice if their concerns are realised, might be ableto seek both justice and compensation.

Moving from social responsibility toaccountability We have lived so long at the mercy of uncontrolled economic forces, that we have become sceptical

about any plan for human emancipation. Such a rational and deliberate reorganisation of our economic life would enable us, out of the increased wealth production, to establish an irreducible

minimum standard which might progressively be raised to one of comfort and security.Lord Harold Macmillan, UK Prime Minister 1957-63 13

Christian Aid is advocating giving teeth to theethical commitments of companies by movingbeyond corporate social responsibility, which does

not and cannot go far enough, to corporate socialaccountability, to ensure that companies have alegal obligation to uphold international standards.

A transparent and rigorous system of evaluating,monitoring and verifying company performanceagainst an agreed set of international standards,with a clear system of penalties when standards arebreached, is urgently needed. This must beaccompanied by a strengthening of national laws

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and regulations, and a complementary system thatprovides those who suffer as a result of currentcorporate practice with the resources to gainredress. This requires new legislation to makecompanies legally accountable for internationalhuman rights and environmental standardswherever they operate and whatever they do.Standards must be made to apply across all of acorporations operations, regardless of anoperations location or an employees position.

In the rst instance, the legal systems of the mostpowerful (largely OECD) countries where many ofthe largest and most inuential multinationals arebased, and to where the bulk of their prots ow must be changed to hold business accountable.

A strengthening of OECD guidelines, along thelines of the OECD bribery convention, might be therst step towards achieving this and wouldencompass the most inuential foreign investorsin developing countries.

Existing voluntary initiatives to bolster the growingmovement for corporate accountability also need tobe strengthened and applied more rigorously. Thisinvolves making such initiatives transparent, wellresourced, and independently monitored andveried, with a clear means of making complaintsand a whistle-blowing system for those harmed by acompanys activities.

Christian Aids proposalsChristian Aid believes that adherence tointernational human rights and environmental

standards must be fundamental to a companyslicence to operate, and that applying suchstandards to its subsidiaries and afliates, andthroughout its supply chain, is part of a companyssocial responsibility. Companies must show thatthey are using their commercial inuence toensure international standards are upheld withintheir sphere of operations. They must alsodemonstrate that they are neither knowinglycomplicit nor beneting from human rights or

environmental violations. 14

Christian Aid advocates a variety of differentcomplementary regulatory mechanisms to ensurecompanies are legally bound to uphold theirsocial and environmental responsibilities.Reporting, disclosure and monitoring are part ofthis process, given the importance oftransparency and accountability.

Christian Aid also urges the introduction ofpenalties for failure to meet new standards, as wellas improved access to redress for individuals andcommunities adversely affected by corporateactivities. This approach may make parentcompanies more liable for the conduct of theirforeign subsidiaries human and environmentalexploitation should not be allowed to exist in aregulatory void.

With an increasingly globalised economy must comeincreasingly global responsibilities. Multinationalcorporations as some of the primary beneciaries ofglobalisation must be required to promote andprotect social values. Moving towards a morecomprehensive legal framework covering the socialresponsibilities of business is a complex process,which will take many years to realise. But the difcultyof the task should not deect from its urgency.Christian Aid is especially concerned that the needs ofpoor people and poor communities become central tothis process, as they will suffer most from its failure.

Christian Aid proposes action at different levels:

UK national levelChristian Aid calls on the UK government to take aleading role on corporate accountability within theUK, EU and internationally by enacting legislation tohelp ensure that UK companies are held legallyaccountable for their actions overseas.

Christian Aid, as part of the CorporateResponsibility (CORE) campaign, is actively working

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strengthening its implementation andenforcement of existing corporate responsibilityinitiatives

adopting legally binding human rights,environmental and social standards for EUcompanies operating overseas

establishing a clear legal framework for socialand environmental reporting among all Europe-based companies, with particular attention totheir operations in developing countries

promoting the UN norms among member states,as these could also help provide a blueprint forcorporate accountability measures at thenational and regional levels.

Internat

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