In the course of publishing EC magazine every two months, we come across a wealth of initiatives and ideas from campaign groups, think tanks, governments, industry and individuals that would, if implemented, push us a little nearer to the ethics-based society we'd like to live in. Sometimes, in our reports, we make our own policy recommendations or call for a particular practice to be encouraged or eliminated. For this feature, we have collated some of these demands and proposals into an ECRA Manifesto for Change.
We have divided our proposals into five sections:
1. Government purchasing
2. Information
3. Tax
4. Regulation
5. Controlling corporate power
Many pieces of government action recommended here may be better addressed at EU or international level, although we have not explicitly stated this in every case. Whatever the appropriate level, the UK Government can still enthusiastically press for their adoption on the international stage.
This manifesto has largely been created to spark some new discussion and debate about the potential for government action to encourage more ethical behaviour within market economies. We therefore welcome comments and criticisms - both for things we have included as well as for things we may have left out. It is our intention, in due course, to publish this manifesto on the Web as a document which can develop and improve over time. We hope you like it…
Naturally, this is a pragmatic manifesto based on change which can be realistically be brought about in the current political environment. But don't mistake this outline for the longer-term ideals we aspire to. In the end we look for a society where the environment is respected, where human rights are properly protected and animals are no longer cruelly exploited. But wider than that, we look beyond government control of the way we live and how companies act, believing real power should lie in the hands of individuals and communities. A world like this would require truly radical changes and we see this manifesto as merely the first step along that road. Making proposals for government action is, after all, only a small part of ECRA's work. Our central concern remains the empowerment of consumers through the provision of information and by promoting debate about the limits of consumer power.
1. Government Purchasing
By government purchasing we mean all public sector institutions including
national governments, the civil service, local and regional governments,
quangos and public sector providers like educational institutions, health
and social services. At ECRA we believe that introducing social and environmental
issues into government purchasing decisions should be a priority. There
are six main reasons for this.
i) The general public will ignore any government attempts to encourage
responsible purchasing more widely if it is clear that governments are
not themselves already acting on their own advice.
ii) Powerful institutions with large budgets can persuade companies to address ethical issues very quickly.
iii) Research carried out by governments on which products, processes or companies to favour can be placed in the public domain to inform consumers and private sector buyers.iv) Government purchasing can stimulate markets and lower prices for innovative ethical and environmental products like solar cells or alternative fuels
v) The requirement for consultation (see below) may encourage interest and participation in the political process
vi) It is likely to be economically inefficient for society to absorb social and environmental costs after the event. For example, it may be better for public sector organisations to buy exclusively renewable energy now, rather than pay for the costs of addressing climate change later on.
We believe that the best way to take this forward in the first instance would be a Public Sector Responsible Purchasing Act. Many of governmental institutions are currently cautious and uncertain about the legality of ethical purchasing. The Act should specifically address the 1988 Local Government Act (s17), the EU requirements for 'Best Value', and the WTO Treaty on public procurement and clarify or amend them in such a way that none of these hamper the introduction of ethical purchasing policies...on the condition that:
a) the policies seek to help achieve nationally agreed goals (such as renewable energy use targets) or existing treaties (such as the ILO convention), OR
b) the institution's stakeholders have been consulted and can be shown to support such a move.
The Act should also reserve the right for the government to require public
sector bodies to meet targets for responsible purchasing yet to be set.
2. Information
Consumers are hampered in their ability to purchase ethically by the
lack of information on which to base decisions. There are four main areas
where governments can act to help improve the flow of information: labelling,
disclosure, publishing and education.
Labelling
Clearly the ideal place for information to appear is on the product itself.
But not everything which it is in the public interest to know is going
to physically fit on a product. A lot more can be done though.
i) Country of origin
All products should list a minimum of one and a maximum of three main
countries of origin (by materials weight).
ii) Ingredients labelling
The successful labelling scheme for food ingredients should be extended
to all products. All products and packaging from TVs to footwear should
be required to carry a list of their ten main ingredients by weight in
descending order of importance.
iii) Energy labelling
The successful mandatory EU energy labelling scheme on an A to E scale
for some domestic appliances should be extended to all products which
consumer energy in use - from cars to watches. In ten years time this
should be extended to provide, in addition, data on energy consumed during
manufacture (embodied energy).
iv) Retailer own-brands
With the honourable exception of Co-op supermarkets, consumers in the
UK are hampered in their ability to trace a product's history through
the proliferation of retailer (particularly supermarket) own-brands. Retailer
own-brands should be required to carry a code number which refers to the
manufacturing/producing company's name listed on the retailers own website.
v) e-commerce
Our research on web retailers has discovered that many are not providing
'point of sale' access to information which it is currently mandatory
to label (such as food ingredients, energy labels for domestic appliances
or country of origin). Web retailers should be required to provide active
links to mandatory product label data for all products sold on a site.
vi) Regulation of ethical claims
A tripartite body - modelled on the NGO/Industry/Government partnership
that is the ETI - should be set up to advise on regulating ethical claims.
Building on the excellent work of the National Consumer Council on regulating
green claims, the new body would seek at an early stage to address misleading
use of the word organic/s by some producers and the misleading use of
some 'not tested on animals' labels.
Disclosure
At ECRA we believe that companies of the future should be as open and
transparent as some of our better governments are now.
i) Right to know
The doctrine of 'commercial confidentiality' should be abandoned and replaced
by a presumption of openness or a 'right to know'. Only when a company
can demonstrate that no competitor could reasonably access the information
in question, and that a substantial loss would be reasonably expected
to occur, can it refuse to address reasonable requests for data. An ombudsman
for corporate disclosure might provide adjudication for disputes.
ii) Social and Environmental Reports
Companies of all sizes should be obliged to report on progress made
in addressing social and environmental impacts in their annual financial
reports made to Companies House. Larger companies should be encouraged
(see Tax incentives below) to publish separate, independently-audited,
annual, social & environmental reports on their websites. Each report
should set a minimum of 5 measurable targets for improvement and provide
figures for progress made in the previous year.
In ten years, such reporting for larger companies should be made mandatory.
iii) The Financial Sector
All financial sector companies - including banks, pensions funds and insurance
companies - should provide a schedule listing all shareholdings worth
over £1 million held on the first day of the financial year in their
annual reports to Companies House.
The successful requirement on pension funds to disclose whether or not
they have an ethical policy should be extended to all financial institutions.
Banks should disclose individual bank lending in underinvested communities.
For pensions and savings advice to be deemed 'best advice' under the law,
clients should be asked about ethical issues.
iv) Directors' Pay
As well as disclosing directors' pay (as UK companies are currently
required to do), they should also disclose the lowest 10 pay grades for
staff and subcontractors. A ratio of highest to lowest should also be
calculated and published.
Publishing
The government should become a researcher and publisher of primary
information which rates companies and products against social and environmental
issues. The current Labour government has already 'named and shamed' certain
sectors using league tables, but this could be significantly expanded.
Specifically, we would like to see:
i) A toxics release inventory for Europe:modelled on the US Toxics Release Inventory, this web-accessible database should place in the public domain all emissions consent, release, and enforcement data.
ii) Government-backed environmental performance indicators,
accessible online, and containing information on companies and their products.
Education
i) Socially responsible consumption, and its history and diversity,
should be required learning as part of the core curriculum.
ii) The UK should have a Minister for Outgoing Tourism to educate
the public and to take responsibility for the social and environmental
impact of tourists abroad.
We have split fiscal mechanisms which encourage ethical consumer behaviour
into two types: correcting distortions in the market, and rewarding socially
responsible behaviour.
Correcting distortions in the Market
So many consumer 'choices' - such as whether to use a car or public transport
for a journey - are so constrained by the circumstances under which the
choices are made that it is difficult to say that it is simply a case
of many people behaving unethically.
i) A carbon or energy tax
will ensure that high energy products, or products which have travelled
long distances, are relatively more expensive. This will make it easier
for consumers to afford more environmentally benign products.
ii) Balanced transport taxation
Choosing to travel by air or car often appears significantly 'cheaper'
to consumers because of road subsidies and energy pricing. Aviation fuel
should be taxed at the same rate as road fuel and public transport should
receive at least an equivalent subsidy to other modes of transport.
iii) A pollution tax
Full social and environmental costs of the emission, discharge or
landfill of specific substances should be recovered from producers through
the tax mechanism.
iv) Import Duty
All outstanding import duties on externally-verified fairly traded
produce should be immediately lifted.
(v) Animal Testing
The EU requirement that all new substances be tested on animals should
be lifted, and not extended as planned. Companies should however remain
responsible for any damage caused by unsafe products. There should be
regulation of 'not-tested-on-animals' claims (see labelling above).
vi) Renewables Research
Government-funded research into renewable forms of energy may go some
way to addressing the concern that the fossil fuel industry is less than
enthusiastic about its own renewable research and development programmes.
Rewarding Socially Responsible Behaviour
i) Ethical Investment
All income from funds meeting certain minimum standards for:
a) exclusionary criteria (should include at least 4 environmental
and 4 social), AND
b) quality of screening and service should be taxed at a rate of 2%
lower than the current rate.
ii) Social Investment
Tax credits or tax breaks should be available for investment in community
development banks, community loan funds, micro loan funds, community venture
capital and community businesses and co-operatives. The UK Social Investment
Forum is already making progress with the UK government over some of these
issues.
iii) Responsible Corporations
At ECRA we are keen, in the short term, on reviving the idea of R-corps
- or Responsible Corporations - once aired under the Clinton administration.
The idea involves reducing corporation tax for corporations meeting certain
social and environmental reporting standards. An enlarged government department
for corporate social responsibility could provide advice.
iv) Producer incentives
This would include such things as special tax breaks for renewable
energy providers and financial incentives for organic conversion.
v) Energy Incentives
It should be made financially rewarding for homes with wind or solar
generators to export surplus electricity to the network.
4. Regulation
Regulatory mechanisms still have an important role to play in restricting
market extremes. It is, after all, difficult to argue that a consumer's
right to choose should extend to products that seriously damage the wider
public interest (such as CFCs in aerosols). This section could, of course,
be much larger, and these four sections can simply serve as an example
of the kind of goals that are within easy reach.
i) Minimum standards for appliances
There should be minimum energy and water use standards for all relevant
domestic and industrial appliances. The least efficient models should
be phased out.
ii) Minimum standards for buildings
There should be higher minimum environmental standards for energy
conservation (and generation) in new houses and other new buildings.
iii) Minimum standards for animal welfare
Higher welfare standards should be sought for both home-produced and
imported animal products.
iv) Producer responsibility
Producers should be made financially responsible for the disposal
and/or recycling of both products and packaging at the end of a product's
life. We note the progress in Europe on this issue.
v) Recycling
There should be a requirement for local authorities to implement a
national doorstep recycling scheme on the German model. Companies manufacturing
products containing certain materials should be obliged to label the percentage
of recycled content.
5. Controlling Corporate Power
One of the primary causes of the growth of ethical consumer behaviour has been the globalisation of markets and the rise of 'unelected' multinational corporations. Many global companies are now financially more significant than the economies of small countries, and national governments now find it increasingly difficult to regulate in a global market.
It is therefore difficult to put together a set of legislative proposals
which threaten corporate interests with much confidence that their political
power will not prevent changes of this kind occurring. Because of this
we need to look, in the long term, at structural ways of addressing the
change in distribution of power that has occurred. Perhaps a first step
for the current government would be to acknowledge that the growth of
'corporate power' is an issue that needs to be addressed.
We have divided our proposals for curtailing corporate power into four
sections:- discourse, incorporation, disclosure, and international institutions.
Discourse
It is difficult for societies to publicly debate the role of corporations
because so much 'public space' is controlled by corporations which are,
naturally, unenthusiastic about the debate itself.
i) A 'right to reply' to TV advertising
Currently, campaign groups like Friends of the Earth or Greenepeace
are prevented by law from buying TV advertising space in the same way
as Nuclear Electric or BP. Whilst we explicitly do not want to open up
the medium to any political advertising on the US model, the absence of
a right to reply to specific product-related issues creates huge cultural
bias in favour of the corporate voice. Adverts addressing the need to
consume, or the cruelty of factory-farmed produce, should all find space
on our TV screens.
ii) Reform of libel laws
There are two current suggestions: first, that the position whereby
governments cannot sue their critics for libel be extended to corporations.
Alternatively, a new offence of 'corporate libel' could be created with
a maximum fine of £1000 to be assessed by a Corporate Social Responsibility
tribunal with fixed costs for a hearing not exceeding £500.
iii) Advertising restrictions
All advertising or marketing directed at children under 12 should
be banned. A number of central public spaces should be declared advertising-free
zones. Sponsorship of schools or materials or products for schools should
be phased out.
iv) Shareholder Actions
The rights of shareholders to raise issues at AGMs should be strengthened
by lowering the threshold for resolutions. We note and applaud the recommendations
in the current Company Law Review to require free distribution of resolutions
with AGM papers.
Incorporation and Company Law
i) Directors' Responsibilities
ECRA agrees with those, such as Cafod and Traidcraft, which believe
companies should be made legally accountable to stakeholders other than
just shareholders. Under this 'pluralist approach', they'd be required
to serve a wider range of interests, not simply as a means of achieving
shareholder value, but because serving those interests was a valid objective
in its own right. Directors would be made to take account of all ethical
considerations which could reasonably be regarded as appropriate to the
responsible conduct of business, and to treat the commitments of other
parties, such as employees and suppliers, as investments deserving the
same kind of consideration as those of shareholders.
ii) Taking back the charter
Continued incorporation should be refused where the interests of the
current management do not appear to coincide with the public interest.
Initially this might be in cases of corporate manslaughter, persistent
pollution or at the discretion of the minister for corporate social responsibility.
In such cases a 'forced sale' should take place with the company going
to the highest bidder(s) within a fixed period. Because Shareholders would
have to absorb any loss in such a sale, they may become more assiduous
stewards of corporate behaviour during a company's life.
iii) Human Rights Act
The UK Human Rights Act should be changed so that companies are no
longer regarded as individuals with all the rights pertaining to individual
human beings.
Disclosure
Suggestions for increased disclosure also appear in the 'information
' section above.
i) Lobby Groups
Corporations should be obliged to list in their annual reports membership
of any industry associations or lobby groups held during the year. Industry
associations and lobby groups should, in turn, be obliged to publicly
declare the objects of any representations that have been made to governments
in the year in question.
International Institutions
i) The WTO should be abandoned, along with its 'free trade'
agreements that favour the interests of developed over developing nations
and which exacerbate social, economic and environmental injustice around
the world. It should be replaced with a democratic, consensus-run body
dedicated to the promotion of sustainable trade and economic justice.
ii) Any company group with subsidiary companies located in tax havens should be refused permission to trade.
iii) A 'Tobin Tax' on international currency speculation should be implemented, (see the Banks Report and the column by Simon Birch in this issue).
iv) There should be an international ban on life patents and a
'Producer Responsibility Clause' holding biotech companies financially
liable for any undesirable effects of their products.
