spinning CSR

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Dutch companies rethink corporate responsibility
The Japan Times: July 21, 2003
By YUJI UTSUNOMIYA
Staff writer

AMSTERDAM -- In Europe, Dutch companies are widely considered to be the
front runners along with British companies in addressing the need for
corporate social responsibility.

The head office of Royal Ahold in Amsterdam

Tim van Kooten, public affairs issues manager at Shell Nederland B.V.

However, most Dutch companies, nongovernmental organizations, and even the
Dutch government, are still in the midst of determining how to instill
this concept in their corporate behavior.

Corporate social responsibility, or CSR, is an element of corporate
behavior that promotes long-term contribution to the development of
society. Companies that look down on this concept and engage in such
practices as bribery, child labor or environmental degradation are usually
punished with boycotts and plunging stock prices when discovered.

Dutch food retailer Royal Ahold, a global operator, is a typical case of
CSR failure. Earlier this month, Dutch prosecutors raided its head office
in the Netherlands in connection with a criminal investigation into
reports in February that its food service units in the United States and
Argentina allegedly window-dressed their books to show an extra 970 euros
million in profits over the past three years.

The accounting scandal marred Royal Ahold's image and dragged its stock
price from nearly 10 euros to about 3 euros on Feb. 24, the first day of
trading after the overstatement was announced.

"While building up the worldwide sales networks, we failed to impose our
CSR rules on our foreign subsidiaries," said Sharon Christians, senior
vice president of corporate communications at Royal Ahold. "We have been
in a serious crisis since Feb. 24 this year. We have to improve our brand
in cooperation with stakeholders, including employees and investors," she
said.

To take the responsibility for the scandal, Royal Ahold President and CEO
Cees van der Hoeven and Chief Financial Officer Michael Meurs resigned.
The company also announced it would pare its global network by selling off
subsidiaries in Brazil, Argentina, Peru, Paraguay, Indonesia and Malaysia
to regain the confidence of shareholders. It also expects to reduce its
pretax profit for the period in question by over $1 billion.

Before the scandal broke, Royal Ahold was considered one of the
Netherlands' front runners in corporate social responsibility. In its 2002
annual report, then President Hoeven said, "In the area of corporate
social responsibility, we have accomplished great deal in our local
markets this year. We are proud of the work our operating companies have
done."

However, as Royal Ahold's thick and serious 40-page report on CSR shows,
mere words are not enough to ward off a major mistake.

According to the Confederation of Netherlands Industry and Employers, the
largest organization of Dutch employers, a rising number of companies have
been devoting more attention to CSR because they are concerned about the
risk of becoming entangled in unforeseeable problems, such as charges of
environmental destruction and food poisoning, that could occur on foreign
soil.

Tim van Kooten, public affairs issues manager for Shell Nederland B.V.,
said CSR is an issue of risk management, not corporate volunteerism.

Shell Nederland, part of the British and Dutch global petrochemical giant,
constantly holds talks with shareholders, employees, customers, business
partners and NGOs about its CSR activities, he said. The company checks on
its subsidiaries' activities from various standpoints, including
environmental protection, business practices and human rights. "We know
that we are a part of the (environmental destruction) problem because we
have been conducting energy business," Kooten said. "We have to think
about CSR seriously."

In March, major electronics maker Royal Philips Electronics compiled its
first annual sustainability report. According to the report, the company
has reduced industrial waste by 16 percent and energy use by 8 percent
compared with the previous year.

Arthur van der Poel, a member of the company's group management committee,
stressed that CSR is a serious issue, not just a chance to issue corporate
PR. "If we did something wrong and did not respond to it correctly, we
would lose our corporate brand image overnight," he said.

According to Herman Wijffels, chairman of the Netherlands Social and
Economic Council, an advisory body to the government, many Dutch firms
have come to understand why CSR is important but are dragging their feet
when it comes to implementing in-house CSR checking and management
systems. And since the Dutch government's understanding of CSR lags behind
that of its business sector, it might be up to outsiders to push the
Netherlands into adopting more responsible behavior, he said. Boycotts,
for example, might change a company's attitude toward CSR in a hurry.

However, Pieter Winsemius, a member of the Scientific Council for
Government Policy, another government advisory body, said NGOs, investors,
consumers and employees should all pressure local companies into taking
action.

Winsemius said that although NGOs are not yet big enough to influence
Dutch companies, they are making an effort. He also pointed out that the
number of companies investors wield influence over is limited. While
consumers can influence companies over short periods of time, they are not
the leading players expected to ultimately force them into better CSR
behavior, Winsemius said.

"Employees should play a leading role to make companies respect CSR
behavior by changing the corporate culture concerning CSR from inside," he
said.