Annual report 2012

Nordic Engagement Cooperation
Annual Engagement Report, 2012
A collaborative engagement network between
ABOUT NORDIC ENGAGEMENT COOPERATION
Launched in 2009, the Nordic Engagement Cooperation (NEC) consists of three Nordic institutional investors:
Folksam from Sweden, Ilmarinen from Finland and KLP from Norway. We have made the strategic decision to
coordinate some of our engagement activities with companies on environmental, social and governance issues. It
is important to stress that even though we have collaboration, each party is responsible for their own investment
decision. Together we manage assets to a value of approximately EUR 105 billion as of end of 2012.
OUR APPROACH
The common denominator for NEC is a belief in dialogue as the most efficient tool to achieve change. However,
other tools are also available if the engagement goals are not achieved. We engage with companies in
collaboration with our service provider GES. The engagement process is based on the findings from the analysis
model GES Global Ethical Standard - a systematic screening of companies regarding their compliance with wellestablished international conventions and guidelines on environmental, social and governance (ESG) issues. By
way of example this includes:
• UN Global Compact
• OECD Guidelines for Multinational Enterprises
• Human rights conventions
• Environmental conventions
• Weapons-related conventions
GES Global Ethical Standard assumes that companies are obliged to comply with international norms, even
though they only are binding for the ratifying countries.
NEC will start engagement with companies that are, or have been, involved in systematic incidents or an isolated
incident that has severe consequences for the environment or humans.
R e s e a r c hwork-flow
and Engagement work -flow
Research and Engagement
Exclusion
Incident
Evaluation
Engagement
Engagement goals
achieved
Long-term collaborative engagement to enhance shareholder value
NEC has now been active for three years and this is our second annual report. During this time we have developed
a common platform for an active ownership process, engagement, and a structured process to decide which
companies to engage with. Through NEC we can pool our resources together and therefore achieve significantly
more in our joint engagement efforts compared to our individual engagement. Today we have a structure in place
which includes quarterly meetings, a clear delegation of responsibilities and a secretariat that is responsible for
the operational work.
All members of NEC are investing with a long-term horizon. Hence we have the opportunity to have a long-term
dialogue with companies, which is essential for successful engagements. With some of our current NEC cases we
were individually engaging before we started our collaboration.
NEC is not a closed cooperation. We have from time to time collaborated with other investors and we are actively
seeking new collaborative initiatives. We also have an open invitation to other investors (Nordic and non-Nordic)
to join our cooperation as a regular member.
During 2012 our Focus list remained the same as 2011 and we did not include any new companies.
Nordic Engagement Cooperation Focus list 2012:
Company
Global Compact
Principle
Incident
Engagement
initiated
AES Corp
Association to vialotion of indigenous rights
2009*
Alstom
Association to complicity in human rights violations
2009*
Anadarko Petroleum
Association to fatal explosion and major oil spill
2010
Barrick Gold Corp
BP Plc
Association to environmental impact caused by minig project and to complicity in human rights
abuses
Association to systematic safety negligence at oil refinery, association to systematic oil spills in
Alaska, association to fatal explosion and major oil spill
2009
2010
Bridgestone Corporation
Association to child labour
2009*
Eutelsat Communications
Association to restriction of freedom of opinion and expression
2009
Exxon Mobil
Association to inadequate precaution in high risk environment
2009
Rio Tinto
Association to environmental impact caused by minig project
2009*
Toyota Motor Co
Association to anti-union practices
2009*
Transocean Ltd
Association to fatal explosion and major oil spill
2011
Wesfarmers
Association to illegal exploration of natural resources
2009*
Incitec Pivot
Association to illegal exploration of natural resources
2009
Tokyo Electric Power Co.
Association to unsafe nuclear power production
2011
Western Sahara Theme
Companis active in Western Sahara and associated to illegal exploration of natural resources
2010
* NEC initiatied our collaborative engaement in 2009 but had engaged individully before that.
Highlights 2012
Our long-term engagement efforts bore fruit in 2012 and we can conclude that we have reached two major
achievements. Since 2006 we have been in dialogue with Bridgestone, the world’s largest tire and rubber
companies, after we received reports about child labour at a plantation in Liberia owned by their subsidiary
Firestone. Our goal has been to ensure that Bridgestone has a zero tolerance against child labour in place and that
this is spread and understood by all employees globally. In July 2012 Firestone Agricultural Union of Liberia
confirmed that our goal had been achieved. The result from this is that no children have been spotted at the
plantation and that they have the possibility to attend schools provided by the company.
The second successful dialogue we have had is with Rio Tinto, one of the world’s largest mining companies. Rio
Tinto is a long-term influential partner in the Freeport McMoRan owned Grasberg mine in Papua, Indonesia. The
mine has been subject to criticism due to the nature and scale of environmental impacts. In a positive
development Rio Tinto, after much lobbying, updated and published its new standard on mine waste
management at the end of 2012. NEC participated in several meetings with Rio Tinto over the years, which helped
contribute to the breakthrough. The revised standard means that Rio Tinto now must handle mine wastes at its
current and future operations in the conventional, low-impact way.
The positive outcome of NEC’s engagement activities 2012
Improvements in engagement cases
Engagement cases deemed successful (%)
About ongoing projects and company dialogues
The thematic engagement on Western Sahara continued throughout the year. In February 2012, NEC invited
other PRI signatories to co-sign a letter to ten companies in the phosphates and oil & gas sectors involved in
Western Sahara. In the letter the investors enquired about human rights preparedness and legal risk awareness,
and, at the same time, stressed the need to clarify how the companies’ imports or operations are in line with the
interests and wishes of the Saharawi people. In total, 17 PRI signatories collectively representing USD 748bn
participated in the co-signing of letters.
These companies, consistently targeted by NEC and GES, responded to engagement in various ways. Wesfarmers,
for example, successfully commissioned the reversal thermal oxidiser (RTO) technology leading to a widening of
the company’s choice of phosphate rock suppliers. Accordingly, Wesfarmers announced that it would not source
any phosphate from Western Sahara in the upcoming production year. Its Russian peer EuroChem also confirmed
that its listed subsidiary Lifosa’s aim to phase out of this specific rock is progressing on schedule, and the company
expects to have ceased all such imports by the end of 2014. PotashCorp, in turn, committed to formally reviewing
its existing human rights policies and practices in response to investor concerns, and at the end of the year
informed GES that it had decided to visit Western Sahara to observe the situation in the territory itself. These
three, along with the seven other companies included in the thematic engagement, have been allocated
company-specific interim objectives to monitor performance towards the desired end goals of the GEScoordinated three-year project.
During 2012 NEC participated together with sixteen other investor in an initiative aimed at Toyota Motor
Corporation. The initiative started when a letter was sent to the Chairman and Representative Director and
Chairman of Toyota’s CSR Committee in December 2011. This letter led to a meeting between a high level
representation from Toyota and members from the investor group. In June 2012, Toyota Motor Europe (TME)
met with Investors in Stockholm to further explain Toyotas policy on human rights in the work place. The meeting
was constructive and TME would bring the issues raised at the meeting to the head quarters in Tokyo. NEC,
together with the other investors in the group will keep engaging with Toyota during 2013.
Engagement meetings 2012
70
60
50
Number of meetings held
with companies on ESG
issues
40
30
Number of contacts with
companies on ESG issues
20
10
0
2011
2012
New engagements for 2013
Two new companies will be added to our focus list - Nestlé and Shell. The cocoa industry has been criticised for its
association to child labour in its supply chain for more than ten years with a particular exposure to the Ivory
Coast, Ghana, Nigeria and Cameroon. According to the Tropical Commodity Coalition, a coalition of Dutch NGOs,
70 per cent of the world’s cocoa beans are produced in these countries. The beans are usually grown on smallscale farms and are then passed through a complex supply chain. Due to this very fact most of the major players
claim it is difficult to properly control the supply chain. The US Department of Labor has even recommended that
cocoa from the Ivory Coast and Nigeria be included on a list of goods believed to be produced by forced or
indentured child labour.
Nestlé must demonstrate how its corporate policy addressing labour rights, including child labour, will be
enforced with programs to be compliant with the standards in its cocoa supply chain. Our engagement focus will
be to ensure that the company continues and increases its efforts to combat child labour by strengthening its
policy, expanding its farmer programs and to ensure that the cocoa part of the supplier guidelines for specific
“high risk commodities”, is developed and introduced. NEC will encourage the company to make clear and
quantitative commitments to combat child labor in the coming years.
Our engagement with Shell will be around both human rights and environmental issues. Shell has for a number of
years had problems with oil spills, gas flaring, waste dumping and other environmental impacts that reportedly
result in violations of the rights of people to food, water, health and livelihood in the Niger Delta in Nigeria. Shell
must ensure that it operates in the Niger Delta according to internationally recognised and practiced
environmental standards. Shell has also had problems in their Arctic operations during last years. Since this high
risk area is strategic for Shell and other oil majors, we will discuss with Shell how they address the inherited risks
in these operations.
Nordic Engagement Cooperation Focus List 2012
NEC is engaged in active dialogues with companies listed below which are documented to conduct business in a
manner contrary to international norms on environmental, social and governance issues. The aim is to improve
company’s policy and its procedures so that they no longer breach our investment guidelines.
BRIDGESTONE CORPORATION
SECTOR: Auto Components
HEAD OFFICE: Japan
COUNTRY
INCIDENT
Liberia
In May 2006, the UN Mission in Liberia (UN MiL) published a report on human rights
conditions at Liberian rubber plantations, including a plantation owned by a subsidiary of the
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Bridgestone Corporation. The report portrays child labour as a serious problem, supporting the
allegations of child labour previously forwarded in a lawsuit against the company, filed by the
International Labor Rights Fund (ILRF) in 2005. Bridgestone claims that it has banned children
from tapping trees, but workers say the ban is not enforced.
RESPONSE & PROGRESS
GOAL
Bridgestone should assure that Bridgestone’s policy on child labour is spread and understood
by all its employees globally, also to the ones that are illiterate. Also, the situation on the
Liberia rubber plantation should be audited.
THIS YEAR'S DEVELOPMENT
In July 2012 Firestone Agricultural Union of Liberia (FAWUL) confirmed that the zero tolerance
policy against child labour is working in practice and that no children accompany their parents
to the fields. The workers’ children either attend the school provided by the company or stay at
home with other relatives. Bridgestone published clear goals how to spread its policy on
Human Rights throughout the group. Also the company reported that they plan to launch an
initiative to assess human rights risks in the regions in which they operate during 2013.
Improvement timeline:
2006: In May 2006, the UN Mission in Liberia published a report on human rights conditions at
Liberian rubber plantations, including a plantation owned by a subsidiary of the Bridgestone
Corporation. The report portrays child labour as a serious problem. Bridgestone claimed that it
had banned children from tapping trees, but workers said that the ban was not enforced.
2008: A Collective Bargaining Agreement (CBA) was signed at the plantation. The new CBA
had a number of improvements including wage increases and a reduction in the production
quota, and the company was required to provide trucks to transport the 75-pound buckets of
latex.
2010: In June, Firestone and FAWUL signed a new CBA and one of the major changes in the
new CBA was a new transport system. A local policy on child labour in Liberia is published on
subsidiary webpage in English. Bridgestone also explained that the zero tolerance policy is
communicated to the workers daily.
2011: Bridgestone published a clear policy on child labour applicable for the whole group.
SECTOR: Metals & Mining
HEAD OFFICE: Australia
RIO TINTO
COUNTRY
INCIDENT
Indonesia
Rio Tinto is a long-term influential partner in the Freeport McMoRan (Freeport) owned
Grasberg mine in Papua, Indonesia. The mine has been subject to criticism due to the nature
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and scale of environmental impacts, in particular riverine tailings disposal, which is regarded
as unacceptable by most national regulators, the World Bank and the broader mining
community. The practice is particularly inappropriate in such a highly biodiverse environment.
Rio Tinto’s involvement has been assessed as one which exacerbates the environmental
damage caused by the Freeport established operation, due to the doubling of production
RESPONSE & PROGRESS
financed by Rio Tinto, and the company’s adherence to the riverine tailings disposal practice.
GOAL
Rio Tinto should demonstrate a strongly proactive approach in ensuring that the Grasberg
operation implements the necessary measures to comply with internationally accepted
standards for tailings management. The company should develop a policy which forbids the
use of riverine tailings disposal on mine sites in which the company has a shareholding.
THIS YEAR'S DEVELOPMENT
In a positive development Rio Tinto, after much lobbying, updated and published its new
standard on mine waste management at the end of 2012. The revised standard means that
Rio Tinto must now handle mine wastes at its current and future operations in the
conventional, low-impact way. At the Grasberg mine, Rio Tinto’s obligation to achieve
continuous improvement is now greater than under the old standard. Significantly Rio Tinto’s
revised standard also puts Freeport McMoRan, the Grasberg operator, under significant
pressure to adopt a similar standard or policy, something which Freeport has thus far been
reluctant to do. NEC participated in two conference calls with Rio Tinto during 2012, which
helped contribute the breakthrough.
Improvement timeline:
2008 – Rio Tinto placed on NEC focus list for engagement due to poor mine waste
management practises. NEC expresses concern about the lack of policy, poor reporting and
passive involvement on environmental issues at the Grasberg mine.
2009 –Issues of reporting quality and mine waste policy are raised by NEC at a meeting with
Rio Tinto in Australia. Rio Tinto explains its historic efforts to be pro-active on environmental
management at Grasberg.
2009-2011 – Regular contact and engagement lobbying by NEC on the above issues.
2012 – Rio Tinto provides further information on current efforts at pro-active environmental
management at Grasberg, including a program of regular meetings between Rio Tinto and
Freeport’s sustainability managers. Rio Tinto commits to improving its corporate standard on
mine waste management.
2012 (December) – Rio Tinto publishes a greatly improved standard on its website. In addition
Freeport publishes an improved environmental monitoring report for Grasberg.
SECTOR: Independent Power Producers...
HEAD OFFICE: United States
AES CORP
COUNTRY
INCIDENT
Panama
Since late 2007, AES Panama (AES) has been constructing the dam Chan 75 on the
Changuinola River in Panama. The UN Special Rapporteur on the situation of human rights
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and fundamental freedoms of indigenous people has publicly condemned a number of human
rights violations against the indigenous Ngöbe people, that reportedly have occurred in
connection with the construction of Chan 75. The World Heritage Committee has also
expressed concern over the project’s potential impact on the World Heritage listed La Amistad
National Park.
RESPONSE & PROGRESS
GOAL
AES should implement a plan for ensuring the respect of the rights of the indigenous
communities in its relocation program and other activities and implement a policy in line with
the ILO Convention 169 and United Nations Declaration on the rights of Indigenous Peoples.
THIS YEAR'S DEVELOPMENT
The Chan 75 dam is has been operating commercially since late 2011, and AES has staff in
Panama who are responsible for managing the social and environmental issues remaining
from the construction phase. There is still a fairly large discrepancy between the accounts of
some NGOs and the company as to the situation on the ground regarding the success of AES’
compensation and resettlement processes. One NGO accuses the company of negotiating in
bad faith, resettling people on lands which are not suitable for sustaining indigenous life and
providing inadequate housing. AES refutes these claims stating that amicable agreements
have been reached with all but one family and that construction of housing is on schedule and
nearing completion. AES also appears to have backed away from its previous assurance to
investors that it would look seriously at developing a corporate level policy on indigenous
peoples. The company now believes that its site level policies are adequate.
Communication between NEC and AES has been ongoing during 2012. One conference call
was held and a range of questions were sent via email to the Investor Relations department.
SECTOR: Electrical Equipment
HEAD OFFICE: France
ALSTOM
COUNTRY
INCIDENT
Sudan
In August 2007, a UN Special Rapporteur from the Human Rights Council called upon
companies involved in the Merowe Dam project in Sudan to halt the operations. The statement
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was made due to concerns over reports on human rights violations in connection with large
resettlements. Among the companies is Alstom, which is the main supplier of electrical
equipment to the project. None of the companies have followed the recommendation from the
UN Special Rapporteur.
RESPONSE & PROGRESS
GOAL
To secure that Alstom acts responsibly regarding the human rights violations and ensures that
the recommendations by the UN Special Rapporteur are adhered to. The company should
also adopt a corporate policy that addresses the risks associated to operations in weak
governance zones like Sudan.
THIS YEAR'S DEVELOPMENT
A continuous dialogue has been held with Alstom. The International Hydropower Association
(IHA) has established a sustainability assessment protocol for hydro projects. This protocol is
elaborated by a multi-stakeholder body with representatives from social and environmental
NGOs, governments, commercial and development banks and the HEA (Hydro Equipment
Association, in which Alstom is a founding member). In 2012, the organisations started testing
the protocol. As a sustainability partner of the IHA, the HEA is participating in the testing and
promoting the protocol. Alstom is also internally working on developing a process regarding
the protocol.
The focus of NEC’s work in 2012 and forwards is to ensure that Alstom will work on improving
its due diligence processes in relation to ESG issues in future infrastructure projects.
SECTOR: Oil, Gas & Consumable Fuels
HEAD OFFICE: United States
ANADARKO PETROLEUM
COUNTRY
INCIDENT
United States
Anadarko was a 25 per cent joint venture partner in the BP operated Macondo oil prospect in
the Gulf of Mexico. In April 2010, a well blowout resulted in the loss of 11 lives and the
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discharge of large quantities of oil into the sea. As a partner with a significant vested interest,
Anadarko had a joint responsibility to ensure that the project was undertaken safely. However,
the company appears to be complicit in the incident due to its acts and omissions.
GOAL
RESPONSE & PROGRESS
Anadarko should demonstrate that it has met its responsibilities regarding the remediation of
the environmental and social impacts of the Gulf of Mexico spill. The company should also
demonstrate that it has routines in place for assessing and controlling the safety and
environmental risks of its projects, and recognize the need to greatly improve transparency on
how it manages environmental and social issues.
THIS YEAR'S DEVELOPMENT
Since the Gulf of Mexico oil spill Anadarko has reached a number of agreements, most notably
the settlement with BP totalling USD 4 billion in 2011. During 2012 the company also claimed
that it was released from liability for damages to nature, personal injury and personal damages
by the US District Court / Judge Barbier. The company is still likely to face fines for breaching
the US Clean Water Act resulting from the Macondo blowout. Anadarko’s ESG performance
otherwise appears to be of a good standard with very few reported incidents. NEC held a
teleconference with Anadarko late in October 2012 and lobbied the company to improve its
documented health and safety standards as well as communicating the importance of annual
sustainability reporting which Anadarko is yet to implement.
SECTOR: Metals & Mining
HEAD OFFICE: Canada
BARRICK GOLD CORP
COUNTRY
INCIDENT
Papua New Guinea
Barrick Gold Corporation is the majority owner and operator of the Porgera gold mine in Papua
New Guinea. The mine disposes its waste tailings directly to local rivers, a practise regarded
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as unacceptable by most national regulators, the World Bank and the broader mining
community. The discharge of tailings has lead to high levels of toxic metals and depletion of
wildlife in the Porgera river and poses an unnecessary risk to people dependent on the river,
as well as Papua New Guinea’s largest lake. GES has also issued an Observation
recommendation on Barrick, related to security force human rights abuses at Porgera.
RESPONSE & PROGRESS
GOAL
Barrick Gold should implement internationally accepted standards for tailings management
and commit to remediating the rivers and catchments impacted by riverine tailings deposition.
The details of the remediation should be documented in the decommissioning plan for the
Porgera mine.
THIS YEAR'S DEVELOPMENT
During 2012 there were no major changes or developments to report regarding Barrick’s
environmental practises at Porgera. The company believes that the river impacts from its mine
waste discharge are acceptably low, in contrast to how many scientists and mining specialists
view this practise. At the corporate level Barrick’s CSR board is now functioning and met twice
in 2012. The board members are highly qualified, and according to the company, they have
room to express themselves on controversial issues. Processes around the CSR board’s
meetings seem transparent; for example the meeting minutes are posted on Barrick’s website.
It remains to be seen to what extent the CSR board tackles the most difficult issues and
whether improved practises are the tangible result. Barrick has ongoing security and human
rights related problems at the North Mara mine in Tanzania and at Porgera in Papua New
Guinea.
One teleconference was held with the company during 2012, and numerous other
correspondences exchanged. The company is generally good at responding promptly to
questions.
SECTOR: Oil, Gas & Consumable Fuels
HEAD OFFICE: United Kingdom
BP PLC
COUNTRY
INCIDENT
United States
BP is the operator of the Macondo oil prospect in the Gulf of Mexico. In April 2010, a well
blowout resulted in the loss of 11 lives and the discharge of large quantities of oil into the sea.
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The environmental and economic impacts to the Gulf coast were serious and may be ongoing
for decades. As operator BP was responsible for the safe design and execution of the project,
and for stopping the flow of oil in the event of a blowout. The cause of the blowout has been
attributed to the breaching of multiple barriers and human errors. BP also was not in
possession of sufficient technology for quickly stopping the flow. The incident confirms that
RESPONSE & PROGRESS
there are systemic safety management deficiencies at BP which need to be addressed.
GOAL
BP should demonstrate that it has properly remediated the environmental and social impacts
of the Gulf of Mexico spill, and has achieved significant improvements in risk and safety
management and culture within the company. The company should also demonstrate that it
has sufficient technology for bringing well blowout situations rapidly under control.
THIS YEAR'S DEVELOPMENT
The main positive development at BP during 2012 was the company’s admission of guilt to the
criminal negligence charges relating to the Gulf of Mexico blowout, for which it settled with US
authorities for the sum of USD 4.5 billion. Some families of victims are not satisfied with the
settlement and the fact no individual criminal charges will be made against BP officials. In
addition, BP agreed to settle claims for USD 7.8 billion made by fishermen and other private
interests in the aftermath of the spill. However, the company still faces court over breaches of
environmental and securities laws. Otherwise, BP is still working through the 26
recommendations of the Bly Report issued after the Gulf incident. This work is on schedule;
however BP’s poor performance at its Norwegian operations during 2011-12 suggests that
further improvements to safety and risk management still need to be made.
NEC participated in a conference call with BP during 2012 and lobbied for further
improvements. NEC also took a special interest in ensuring the company responded to our
questions regarding the shortfalls BP’s Norwegian operations.
EUTELSAT COMMUNICATIONS
SECTOR: Media
HEAD OFFICE: France
COUNTRY
INCIDENT
China
Eutelsat Communications (Eutelsat) has been accused of complicity in censorship practices by
repressive regimes. In 2008, the company suspended the broadcast of the only independent
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Chinese-language television channel (NTDTV) in China, allegedly to gratify the Chinese
government. In January 2009, the European Parliament adopted a Written Declaration urging
the company to immediately resume the transmission and provide reasons for the suspension.
Further censorship allegations were brought forward after incidents in Russia and Iran in 2009
and 2010.
RESPONSE & PROGRESS
GOAL
Eutelsat should demonstrate credible documentation to verify that the termination of NTDTV in
China was caused by other reasons than to please the Chinese regime. The company should
also cooperate with French investigators and respond transparently to stakeholders' questions
and concerns regarding incidents. Furthermore, Eutelsat should adopt a policy that clearly
states that it respects the freedom and pluralism of media and develop decision making
guidelines for concrete situations where these principles may be at risk.
THIS YEAR'S DEVELOPMENT
During 2012, NEC has met with Eutelsat Communications several times through conference
calls and meetings. The company continues to show a willingness to discuss the issue of
Human Rights with its shareholders; however, it has been slow to produce results. The
company is still in the preliminary stage of creating a Human Rights policy addressing the
issue of freedom of expression. In 2012, the company established a committee to define
indicators for the company’s sustainability strategy and it published its first sustainability
report. Unfortunately, Human Rights and freedom of expression was not addressed in this
report.
SECTOR: Oil, Gas & Consumable Fuels
HEAD OFFICE: United States
EXXON MOBIL
COUNTRY
INCIDENT
Russian Federation
Exxon Mobil Corporation's (Exxon) subsidiary Exxon Neftegas Ltd. (ENL) operates the oil and
gas project Sakhalin-1 off Sakhalin Island, in waters that constitute the only known feeding
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grounds for the western gray whale, listed as a critically endangered species. The
International Union for Conservation of Nature's (IUCN) Western Gray Whale Advisory Panel
(WGWAP) reported in March 2011 that the lack of information concerning the timing and
nature of activities from ENL leads to inability to provide reliable advice concerning mitigation
efforts. The link between underwater noise from ENL activities and the 2008 decline in
RESPONSE & PROGRESS
observed whales could not be ruled out since ENL had not provided the necessary data. In
addition, since 2008, the WGWAP has repeatedly expressed strong concern about ENL’s
construction of a pipeline that the panel fears may disturb the ecosystem.
GOAL
Exxon should demonstrate openness towards all relevant stakeholders and transparently
disclose key data that enables independent verification of potential impacts of the Sakhalin-1
operations on the health and survival of the endangered Western Gray Whale species. The
company’s management of Western Gray Whale conservation should align with the UN
Convention on Biological Diversity.
THIS YEAR'S DEVELOPMENT
During 2011 a series of engagement meetings with Exxon has aimed at finding ways to solve
the deadlocked position. A common ground on what issues that needs to be managed has
been established and there has been improved communication regarding the actions of the
Western Gray Whale Interagency Work Group. A substantially better dialogue is established
which enables engagement that more directly addresses the relevant issues.
SECTOR: Chemicals
HEAD OFFICE: Australia
INCITEC PIVOT LTD
COUNTRY
INCIDENT
Western Sahara
In October 2008, Western Sahara Resource Watch (WSRW) forwarded allegations against
Incitec Pivot for importing phosphate from Western Sahara during the last 20 years and thus
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indirectly funding Morocco’s illegal occupation of the country. The practice of importing
phosphate rock from the territory has been confirmed by the company in a statement to Pulse
Radio and at its annual general meetings in 2007 and 2008. In an opinion, issued in 2002, by
the UN Under-Secretary General for Legal Affairs, the exploitation of natural resources in
colonised territories, Western Sahara in particular, was declared illegal if conducted in
RESPONSE & PROGRESS
disregard of the interests and wishes of the people.
GOAL
Incitec Pivot should demonstrate and implement a plan on how to entirely cease its imports of
phosphates from Western Sahara, or demonstrate how the exploitation is in line with the
interests and wishes of the Saharawi people, in accordance with the right to self-determination
stipulated in the International Covenant on Civil and Political Rights and the International
Covenant on Economic, Social and Cultural Rights.
THIS YEAR'S DEVELOPMENT
In recent years, Incitec Pivot's responses to GES have primarily focused on underlining that
the Australian government has not prohibited the trade of natural resources with Morocco. The
company has in the past engaged with several parties, such as the Moroccan company OCP
and ambassadors to Morocco, as well as representatives of the Polisario Front and the
Saharawi Arab Democratic Republic, and it is satisfied that OCP’s operations are beneficial to
the Saharawis. Incitec Pivot has said that while it will review the matter in 2013, installing
something similar to the RTO technology into its plants is unlikely due to economic realities.
The company continues to assess other sources of rock and monitor the situation in Western
Sahara.
TOKYO ELECTRIC POWER COMPANY
SECTOR: Electric Utilities
HEAD OFFICE: Japan
COUNTRY
INCIDENT
Japan
An earthquake triggered a nuclear accident in March 2011 at the Japanese Fukushima Daiichi nuclear power plant and forced tens of thousands of individuals to evacuate. The plant
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operator TEPCO had the prime responsibility for safety according to the practice in Japan and
the applicable International Atomic Energy Agency (IAEA) safety standards, yet failed to
protect against the effects of the earthquake and the tsunami that followed.
GOAL
RESPONSE & PROGRESS
Ensure that the company operates its nuclear power plants safely, safely decommissions
Fukushima Dai-ichi and that the negative effects from the Fukushima Dai-ichi nuclear
accidents are remediated and compensated.
THIS YEAR'S DEVELOPMENT
During 2012 significant progress was made in the dialogue with TEPCO. After a long period of
denial of any failures contributing to the Fukushima Dai-ichi nuclear accident, TEPCO in the
autumn finally admitted responsibility and the need to improve nuclear safety management.
NEC met with TEPCO in Tokyo just when this change in company approach occurred. NEC
therefore had a good opportunity to explain what necessary priorities it saw from an investor
perspective. The dialogue with the company after the Tokyo meeting also indicates that the
company is taking concerns from NEC seriously and that it values NEC’s input. TEPCO still
has many challenges ahead if it before it can regain trust from the general public. The official
investigation of the Japanese Parliament concluded that there was a need for a fundamental
change in the company’s safety culture. To implement such a change will take time but
admittance that there is a problem is a key step.
TOYOTA MOTOR CORPORATION
SECTOR: Automobiles
HEAD OFFICE: Japan
COUNTRY
INCIDENT
Philippines
The Toyota Motor Philippines Company Workers' Association (TMPCWA) union alleges that
the management of Toyota Motor Philippines Corporation, a Toyota Motor Corporation
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subsidiary, has blocked the right to organise and to collectively bargain and enforced illegal
dismissals of workers. The case is under scrutiny by the Philippine court system and by the
International Labour Organization (ILO) Committee of Freedom of Association. ILO reporting
from 2003 and onwards lists a number of actions taken by the company to challenge the
certification of the union and to intimidate employees in their preference of union.
RESPONSE & PROGRESS
GOAL
Toyota should adopt a labour rights policy including the right to freedom of association and the
right to collective bargaining that is in accordance with ILO core conventions 87 and 98. Also
the situation in the Philippines should be solved in a constructive way were all partners are
satisfied. The company’s management of labour rights should align with ILO core conventions
87 and 98.
THIS YEAR'S DEVELOPMENT
During 2012 it has been confirmed from two third party sources, one international and one
Philippine, that the existing and operating union in the Philippine Toyota operation is to be
considered free and fair. Therefore Toyota is not considered to be in violation of freedom of
association and collective bargaining even though there is still an ongoing case at the ILO
regarding this. However Toyota still needs to strengthen and clarify its policies to secure that
there will be no future violations of this norm and in June 2012 a large investor group met with
Toyota in person in Stockholm to discuss this. Toyota said that the discussion and information
from the meeting would be forwarded to the Head Quarters in Japan.
SECTOR: Energy Equipment & Services
HEAD OFFICE: United States
TRANSOCEAN LTD
COUNTRY
INCIDENT
United States
Transocean was the operator of the Deepwater Horizon oil rig leased by BP to drill the
Macondo oil exploration well in the Gulf of Mexico. In April 2010, a well blowout resulted in the
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loss of 11 lives and the discharge of large quantities of oil into the sea. The environmental and
economic impacts to the Gulf coast were serious and may be ongoing for decades. The failure
of critical equipment, such as the rig’s blowout preventer, and drilling and completion
procedures which were the responsibility of Transocean, contributed to the occurrence of the
spill.
RESPONSE & PROGRESS
GOAL
To ensure that Transocean takes its share of responsibility for the Macondo incident,
demonstrates that it has fully integrated the relevant lessons and improves safety policy,
routines and culture to align with the nature and scale of the company’s business. Also
commence sustainability reporting.
THIS YEAR'S DEVELOPMENT
Transocean has been communicating relatively little to investors regarding its challenges
during 2012. The challenges include resolving its Gulf of Mexico oil spill liabilities and
managing the fallout from a smaller spill at one of its rigs in Brazil. Like BP, Transocean also
has had adverse audit findings from Norwegian regulators. The company says that these
matters are the subject of ongoing litigation, but that it is Transocean’s objective to achieve
incident free operations all the time. Transocean says that it proactively reviews and refines its
operating policies and procedures, including those related to health, safety and the
environment. Regarding the Gulf incident, Transocean was released of its liability for claims
arising from breaches of environmental laws during 2012, due to the nature of the contract it
initially signed with BP. Later in the year Transocean requested that it be released also from
any criminal responsibility for the same reasons.
NEC attempted to arrange meetings and teleconferences with Transocean during 2012;
however the company did not make itself available despite being given several opportunities.
The dialogue has therefore taken place via correspondence. In addition to the issues above,
this has involved lobbying the company to commit to annual sustainability reporting.
SECTOR: Food & Staples Retailing
HEAD OFFICE: Australia
WESFARMERS
COUNTRY
INCIDENT
Western Sahara
In June 2007, the Saharawi Journalists & Writers' Union forwarded alleged Wesfarmers’
subsidiary, CSBP, of importing phosphate from Western Sahara and thus indirectly funding
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Morocco's illegal occupation of the country. The practice of importing phosphate rock from the
concerned territory has been confirmed by the company. In an opinion, issued in 2002, by the
UN Under-Secretary General for Legal Affairs, the exploitation of natural resources in
colonised territories, Western Sahara in particular, was declared illegal if conducted in
disregard of the interests and wishes of the people.
RESPONSE & PROGRESS
GOAL
Wesfarmers/CSBP should demonstrate and implement a plan on how to entirely cease its
imports of phosphates from Western Sahara, or demonstrate how the exploitation is in line
with the interests and wishes of the Saharawi people, in accordance with the right to selfdetermination stipulated in the International Covenant on Civil and Political Rights and the
International Covenant on Economic, Social and Cultural Rights.
THIS YEAR'S DEVELOPMENT
The RTO technology was successfully commissioned in March 2012 and Wesfarmers
subsequently confirmed in September that this had widened its phosphate rock sourcing
options. Accordingly, the company will not purchase any phosphate rock from Western Sahara
for at least the next production cycle. These are commercial decisions, however, and so the
company doesn't rule out sourcing rock from the territory again in the future. In Wesfarmers'
opinion imports of phosphate rock from Western Sahara do not break international law and
CSBP continues to follow Australian government's guidance on trade with the region. The
focus of the engagement has been turned to the company's approach to ethical sourcing and
human rights, at least while Wesfarmers' imports from Western Sahara are halted.
Folksam
Bohusgatan 14
106 60 Stockholm, Sweden
www.folksam.se
Ilmarinen
Porkkalankatu 1
00018 Ilmarinen, Finland
www.ilmarinen.fi
KLP
Dronning Eufemias Gate 10
0191 Oslo, Norway
www.klp.no
GES
Kungsgatan 35
111 56 Stockholm, Sweden
www.ges-invest.com