Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment

News Review: July–September 2006

Stephen Frost*Department of Asian and International Studies, City University of Hong Kong

FOR THIS QUARTER’S NEWS ROUNDUP, I HAVE CLASSIFIED STORIES INTO FOUR CATEGORIES THAT

appeared to be the most widely reported: the environment, workplace practices, the business envi-ronment (business scandals and corruption etc, and also good practices, such as reporting onsocial and environmental performance etc) and product responsibility (which is increasingly a

major CSR issue in the region).

Environment

A number of important environmental issues either continued or surfaced during the quarter.In Thailand, Thai energy firm MDX Group and the junta in Myanmar agreed on a US$6 billion

hydropower project to build a dam on the Salween River, the longest non-dammed river in SoutheastAsia. The Electricity Generating Authority of Thailand (EGAT), the country’s largest state company, alsoannounced plans to build a hydropower dam worth US$1 billion on the river, which runs alongMyanmar’s eastern border to Thailand. An EGAT official said ‘Hydropower is cheaper than oil andnatural gas. After the construction of dams, we don’t have to pay costs for fuel. It’s water. It’s free’(Channel NewsAsia, 2 July).

In Malaysia, water turned out to be anything but free. The government reported that would have tospend RM1.2 billion (US$328 million) to RM1.5 billion (US$410 million) to rehabilitate and clean upthree polluted rivers, up from the RM800 million (US$219 million) estimated in 2002. UniversitiTeknologi Malaysia Institute of Environment and Water Resource Management deputy director, Pro-fessor Marketab Mohamad, said the longer the government delayed the rehabilitation, the higher thecosts would be. The three polluted rivers named were Sungai Segget, Sungai Tebrau and Sungai Skudai.The main source of pollution in the three rivers was the discharge of untreated effluents from residen-tial and industrial estates (The Star, 7 July).

Perhaps all is not lost, however, as in India the quality of the Ganges, which was affected by decadesof polluting activities, demonstrated improvement after an ambitious action plan to clean the river wastaken up. Despite an increase in population in the urban centres located upstream, reports stated thatthere was a clear improvement in terms of biochemical oxygen demand of the river during 1986–2005at Kannauj, Kanpur, Allahabad, Varanasi and Patna (Navhind Times, 10 July).

China’s State Environmental Protection Administration (SEPA) announced in mid-July that nearlyhalf of China’s chemical plants pose ‘major environmental risks’. SEPA warned of an increase in pollution incidents if safety was not improved. Gas or chemical leaks blamed on poor construction or

* Correspondence to: Stephen Frost, Department of Asian and International Studies, City University of Hong Kong. E-mail: s.frost@cityu.edu.hk

Corporate Social Responsibility and Environmental ManagementCorp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)Published online in Wiley InterScience(www.interscience.wiley.com) DOI: 10.1002/csr.134

News Review 307

maintenance are not uncommon in China. The report came only days after a chlorine gas leak left 160people in hospital in the north-western city of Yinchuan. Forty-five percent of the country’s chemicaland petrochemical plants posed ‘major environmental risks’, SEPA said. In January, Chinese environ-ment chief Zhou Shengxian said the government’s priorities were changing: ‘The Chinese governmenthas made a very timely and determined decision to stop the conventional approach of development,which could be characterized as ‘pollution and destruction first, treatment later’ (BBC, 11 July).

As part of response to this problem, Harbin named and shamed 46 companies along the SonghuaRiver for causing serious pollution. The companies are the first group of polluters to be exposed andhave been ordered to clean up their act immediately, according to Harbin Municipal Environmental Pro-tection Bureau. According to Meng Fanfeng, director of the bureau’s information office, this move toexpose polluters is just the start. ‘The 46 companies are the first batch, as more companies still need tobe inspected’, he said. ‘By exposing these companies in the media, we hope that it will raise people’sawareness of river protection and we invite the public to keep an eye on the companies’ (China Daily,10 July).

In India, Coca-Cola and PepsiCo were targets of widespread criticism after the Centre for Science andEnvironment (CSE) in India released a new report on the levels of pesticides in soft drinks in India. Keyallegations include the following. (1) Heptachlor, banned in India, was found in 71 percent of thesamples, at levels four times higher than Bureau of Indian Standards (BIS) requirements. (2) Coca-Colabought in Kolkata exceeded the BIS standards by 140 times for the deadly pesticide Lindane, a confirmedcarcinogen. (3) A Coca-Cola sample manufactured in Thane contained 200 times more of the neuro-toxin, Chlorpyrifos, than the BIS standard. (4) The average amount of pesticide residue found in all thesamples was 11.85 parts per billion (ppb), or 24 times higher than the BIS standards for total pesticidesin soft drinks (0.5 ppb). Pepsi Cola contained 30 times higher residue on average, while Coca-Cola contained 27 times higher on average (The Hindu, 3 August).

The story continued to gather steam after the southern state of Kerala banned outright the sale ofCoke and Pepsi, which was overturned in late September. Although a relief to the companies, local left-wing youth went on the rampage, attacking warehouses and destroying products. The Chief Minister ofKerala (Communist leader V. S. Achuthanandan) suggested that such behaviour was natural given thesituation.

Elsewhere in Asia, the news was perhaps not so negative. In early July, China announced it had begunbuilding the nation’s biggest wind power plant, which will generate enough electricity for 400000homes. A unit of the Shenhua Group, the country’s biggest coal producer, will build the 200MW plantat a cost of 1.7 billion yuan (US$210 million) in the eastern coastal province of Jiangsu. Shenhua sub-sidiary Guohua Energy Investment Corp said it planned to expand the capacity at its Dongtai plant to1000MW over the next 10–15 years (Channel NewsAsia, 4 July).

In Hong Kong, on the same day as the above announcement, Hong Kong Electric asked the govern-ment for permission to build 40 triple-blade windmills, which will eventually generate 100MW of power,enough energy for 50000 homes. The company said in a statement that the farm could be built on oneof two leafy islands off the territory’s main Hong Kong Island. The proposal follows the success of ayear-long pilot project in which a single turbine was built on Lamma Island and has so far producedmore than a third of a million units of power (Hong Kong Electric, July).

Also in Hong Kong, Chief Executive Donald Tsang called on the community to combat air pollutiontogether with the government during the launch of the Action Blue Sky Campaign. He urged people toset their air-conditioners to 25.5°C to save about 1 billion units of electricity every year. He said ‘My goalis to reduce electricity consumption in government offices by at least another 1.5% this year. I hope thatevery commercial building management will consider measures to save energy – they will also be savingmoney and the environment’ (news.gov.hk, 25 July).

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)DOI: 10.1002/csr

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Workplace Practices

Perhaps the biggest and ongoing workplace story of the quarter concerned Bangladesh and garment fac-tories. In early July, factory owners declared suspension of work at apparel manufacturing units amidescalating labour unrest that led to at least 100 people injured and 20 vehicles damaged. The crisisstarted as workers of Irish Fashion demonstrated in front of the garment factory over a rumoured murderof a co-worker and the closure of the factory for an indefinite period since then. The angry workers wenton strike, clashed with police and damaged about 20 vehicles, including two staff buses of a factory. Toavoid further vandalism, the authorities announced the closure of over 50 factories located in the areasadjoining to the Dhaka Export Processing Zone for an indefinite period. Within a few minutes of theannouncement, a majority of workers of those factories joined together with their agitating fellows andbrought out a procession (New Age, 5 July).

By mid-July the situation had worsened. At least 30 people were injured when garment workersclashed with law enforcers and blocked the Dhaka–Mymensingh highway for three hours after theyheard rumours that three colleagues had died in a road accident. The angry workers set three buses onfire, destroyed 12 vehicles on the highway and attacked policemen and fire engines that went there tobring the situation under control. The workers also threw bricks at several garment factories when lawenforcers took shelter there in the face of the workers’ attack. The incident forced eight factories to stopproduction for the whole day (The Daily Star, 10 July). Protests and riots continued during August andSeptember, with major protests erupting again in late September, when workers reacted violently to arefusal by employers to raise wages as outlined in their list of demands.

One of the ongoing workplace issues plaguing Japan is compensation claims over asbestos-relateddisease. From mid-April to early July, 4000 people applied for financial relief under new legislation tosupport victims of asbestos-related diseases and their families. Seventy percent of claims were lodgedby people who live near plants that produced or used asbestos. So far, 320 people have been recognizedas eligible to receive medical care allowances or condolence money for deceased relatives. Recognizedvictims are eligible to receive a monthly allowance of 103870 yen (US$900) in addition to medical costs.Relatives of deceased victims qualify for a one-off condolence payment of about 3 million yen (US$26000) (Asahi Shimbun, 1 July).

In India, child labour continues to be a source of concern. According to the Haq Centre for ChildRights, the number of child labourers in the state of Madhya Pradesh has reached 1065259, but of the1700 cases registered under the Child Labour (Prohibition and Regulation) Act 1986 there have beenonly 35 convictions. The state’s labour laws prohibit the employment of children below the age of 14 infactories, mines and hazardous employments (India eNews, 28 June).

The issue of workplace conditions is also an ongoing concern, particularly in Southeast Asia. Malaysiaand Indonesia met on 20 July to look into the finer details of the memorandum of understanding signedbetween the two countries earlier, which will see major changes to current practices of employing maids.Under the MoU, employers will be required to sign personal contracts with their maids, which will stip-ulate the wages to be paid to the maid. It was reported that employers would also be barred from deduct-ing the entire month’s pay for the first four or five months as was common practice (The Star, 6 July).

Workplace practices, as the story above shows, are often not confined to a single country; in the eraof globalization and greater movement of workers it is not uncommon to find multiple locationsinvolved. In one of the more interesting cases in the period under review, it was reported in early Julythat Zambian authorities had suspended operations of Collum Mining – a Chinese-owned coal mine –over safety concerns. Zambian newspapers had reported two weeks previously that the mine also paidlow wages to its Zambian staff, leading to a government order that Collum raise salaries (Reuters, 7 July).

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)DOI: 10.1002/csr

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One of the assumptions about Chinese factories is that a risk to women workers is company securityguards who keep them virtual prisoners. This may be true, but security guards can also play a positiverole, i.e. can also keep out people who pose a threat. In July, this view seemed to be demonstrated whena woman employee in a factory was killed in her dormitory in the early hours of the morning. The factorywas located on the outskirts of Guangzhou, and several roommates were injured. News reports suggestthe murderer was a previous employee and had his advances to one of the women rejected. The factoryboss posted a 10000 RMB (US$1250) reward for information leading to the arrest of the attacker. Security, it goes without saying, arrived too late (Nanfang dushi bao, 10 June).

One of the biggest local stories in the Chinese press this summer (which was particularly hot in someareas) was the death by heatstroke of several young, woman workers. For example, Liu Yunfang diedfrom heatstroke on 3 July in a textile factory in Fujian. Her death elicited either responses or visits tothe company from authorities at the development zone in which the factory is located, the local bureauof social security and the local trade union. The crux of the problem in this case was threefold: whetherthe death could rightly be classified an industrial injury; the level of compensation due to Liu Yunfang’sfamily (the family wanted 300000 RMB (US$37568) but the factory only wanted to pay 100000 RMB(US$12522)); and complaints from some of the 1000 workers that the workplace was very hot indeedand heat stroke is not uncommon (with temperatures reportedly reaching 50°C and stories of workersdrenched in sweat to the extent that they appeared to have been pulled out of water) (Dongnan kuaibao,8 July).

In another almost identical case, on 17 July, Zhu Longmei, an 18-year-old female worker employed atthe Tai-Ocean International (Nanjing) Company, died suddenly at work. Zhu was a frontline workerresponsible for assuring the quality of glass bottles produced by Tai-Ocean. Zhu’s family believed herdeath was due to high temperatures in the factory. Workers claimed that they have to work overtime frequently (up to 11 hours per day), and more than 6 days per week (Xiandai kuaibao, 16 July).

In other news less widely reported, and involving female workers, the media in the Chinese coastalcity of Xiamen published a story about industrial action in an NEC factory in the southern city. Thepaper reported that 1000 female workers from the NEC Tokin Electronics (Xiamen) Corporation refusedto go to work over medical fees and improvements in working conditions. The action was the result ofworkers receiving information about chemicals they used every day, some of which showed that a number of chemicals were irritants for the skin, eyes and respiratory system. Some female workerssaid their colleagues exhibited such symptoms and they believed that the problems were caused by chemicals (Dongnan kuaibao, 15 July).

However, the biggest news in China (and perhaps the region on workplace practices) was theannouncement in late July that the first trade union at a Wal-Mart store in China had been set up inQuanzhou, Fujian. The union, a branch of the state-controlled All-China Federation of Trade Unions(ACFTU), was established by 30 employees of the store one month after their application. 29-year-old KeYunlong was elected as the union chairman (Xinhua, 30 July). 47 of the company’s 59 mainland storeshad followed suit by the end of September (South China Morning Post, 30 September). Wal-Mart, whichis perceived by many critics as actively engaging in union-busting activities, has seemingly done an aboutturn. The ACFTU has also apparently done an about face, with the Wal-Mart organization being the firstof its type. The question now is whether the state-run union will follow this up in other foreign MNCs.

Business Environment

Throughout the third quarter, the country in which problems in the business environment were mostwidely reported was Japan. In early July, the Organisation for Economic Cooperation and Development

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)DOI: 10.1002/csr

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(OECD) released a report that said the government had to do more to combat the problem of bribery bybusinesses, and that it had ‘serious doubts’ about Japan’s commitment to tackling the issue. Usingunusually blunt language, the OECD pointed to a lack of prosecutions since Japan signed up to an anti-corruption convention in 1999. In a separate report, anti-corruption group Transparency Internationalestimated that two-thirds of the 36 nations that signed up to the convention had done little to ensure itwas being enforced (BBC, 29 June).

Some of the major scandals in Japan from July to September include the following cases.The former chairman of major credit guarantee company Zenkoku Hosho Co. gave 8 million yen

(US$69873) in cash to a Liberal Democratic Party Diet member and a Kanagawa prefectural assem-blyman during a dinner last year to seek help in avoiding tax inspections by the Tokyo Regional Taxa-tion Bureau. Several employees of the Tokyo-based credit firm said the dinner and political donationswere provided to prevent a tax investigation. The company was found to have concealed about 126 millionyen (US$1.1 million) in income for the business year ending in March last year and was slapped withabout 60 million yen (US$523,860) in penalty taxes, including corporate taxes. However, House of Representatives member Kazunori Tanaka, who is vice secretary general of the LDP, and Kanagawa prefectural assemblyman Nobuo Sugiyama, denied having been asked to influence tax inspections ofthe company (Daily Yomiuri, 3 July).

The former chairman of Mizutani Kensetsu Co., Isao Mizutani, was arrested for alleged tax evasion.Investigators said Mizutani Kensetsu had purchased a 300000 square metre land plot in Iwaki,Fukushima Prefecture, in 1998 for about 100 million yen (US$868058), but it listed the transaction as800 million yen (US$6.9 million) in public. In 2003, it allegedly sold the plot to Obi Kensetsu KK, aconstruction firm, for 20 million yen, thus faking a financial loss of more than 700 million yen. Thecompany allegedly understated its profits by about 760 million yen, thus evading about 230 million yenin corporate taxes (The Asahi Shimbun, 13 July).

Japan, or course, was not the only country to play host to business scandals and corrupt activities.In Vietnam, a national legislator was interrogated over a fraud scandal in early July. Mac Kim Ton,

director of the Thai Binh province’s education department, was accused of helping a woman pocket aUS$37500 commission for brokering shady computer deals for his agency. Ton allegedly helped TranThi Anh to his department as a state official, where Anh brokered a deal in which the agency bought269 computers at inflated prices from a company that paid her commission and committed VAT fraudat the same time. Though Ton denied the allegation, he could not explain why such a large contractworth US$118750 was done quietly, without bidding as required by the laws, and with Anh as the onlyprovider (Tuoi Tre, 4 July).

In Indonesia, the Indonesian Corruption Watch cited the increase in corruption cases committed bystate-owned enterprises (BUMNs) or provincial-owned enterprises (BUMDs) during the first semesterof 2006. Provincial governments and provincial legislative councils (DPRDs) still dominate as the insti-tutions that are the most involved in criminal acts of corruption (Tempo, 21 July).

On the positive side of the business environment category, mid-July saw the first CSR report by aChinese bank. The Shanghai Pudong Development Bank (SPDB), with 26 branches and 350 ATMs, totalassets of 573.1 billion RMB and foreign currency reserves of 377.2 billion RMB, published its 26-pagereport in Chinese online with little fanfare. As far as CSR reports go, it does not break any new ground(far from it); but it does provide some small insight into how Chinese banks may understand CSR andwhat reporting might look if other mainland banks start reporting. The report was divided into five sec-tions: an introduction from the chairman; history of the bank; bank values including CSR; past experi-ences of the bank on implementing CSR and the bank’s future plans and intentions on CSR. Much ofthe bank’s focus was on philanthropy, but there was a strong strand of encouraging staff to participatein all kinds of community service (CSR Asia Weekly, 12 July).

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)DOI: 10.1002/csr

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In the ambiguous category (where diverse parties will perceive costs to the business environment dif-ferently), business costs went up in Guangdong. The Chinese province announced a raise in minimumsalary levels for September in mid-July: an attempt, the government said, to make the province a moreappealing destination for migrant workers. After the new standard came into effect on 1 September,workers in Guangzhou earned a minimum monthly wage of 780 yuan (US$97.50). In Shenzhen, theincrease was to 810 yuan (US$101.25), while in Zhuhai, Foshan, Dongguan and Zhongshan theminimum was set at 690 yuan (US$86.25). The increase is on average 17.8 percent. It is worth notingthat this is the seventh time that Guangdong has raised its minimum salary in the past 12 years, andthat this is the biggest increase ever. For comparison, the minimum monthly salary in Shanghai is 690yuan (US$86.25), higher than the 640 yuan (US$80) in Beijing. Both cities are also reported to be con-sidering an increase (China Daily, 13 July).

In Malaysia, logging company Rimbunan Hijau commissioned a report to counter claims made byGreenpeace against commercial logging and export operations in Papua New Guinea (PNG). AustralianAlan Oxley of ITS Global called the study a sham and said that ‘most logging in PNG is legal, and thenation’s forests are in no danger of being wiped out’. The study concluded that Greenpeace’s goal wasto stop commercial forestry in PNG, and if it succeeded 10000 people in the country would lose theirjobs, the country would lose US$250 million (RM923 million) in exports and its gross domestic productwould fall by 5% (The Star, 21 July).

Product Responsibility

Product safety was a key issue during the quarter, not least in China. In early July, a product called‘Bolibao’ (or ‘stay fit’ in English), which has been marketed in China as a slimming and beauty enhance-ment product, came under scrutiny for its outlandish claims. Most incredibly, the makers claimed thatBolibao will move fat from thighs and stomach to the breasts and thus make them bigger! Unfortunatelyfor consumers who believe this sort of thing, the product does nothing of the sort. In fact, it more likelythan not simply leads to vomiting. The product was extremely popular (Beijing yule xinbao, 3 July).

It was no surprise that shortly after the airing of the Bolibao case, the Ministry of Economic Affairsin Taiwan asked local consumers to avoid buying and using daily commodities made in China afterfinding that many of them do not meet Taiwan’s safety standards. It found that 89 percent of productsmade in China failed to pass safety requirements. Bureau Director-General Chen Chien-shan cited twobrands of disposable underwear, which contained excessive amounts of phosphor that may cause skincancer, and two wallets that contained around 550ppm of lead, which are much higher than the 90ppmallowed by the law. He suggested that local consumers buy Taiwan made products, even if they costmore than those produced in China, for health reasons (Taiwan News Online, 4 July).

In China, again, nearly 80 citizens who claimed they had suffered eye infections caused by a contactlens solution made by Bausch & Lomb announced plans to sue the company in the United States. HaoJunbo, the lawyer representing the group, believed the company had made a mistake by not informingChinese consumers of the quality problem after it recalled products in Singapore in February (Xinhua,11 July).

In mid-July, Toyota in Japan was forced to defend three officials under police scrutiny for allegedlyhiding product defects for eight years, saying they had acted ‘appropriately’. Toyota said it was cooper-ating with police, who suspect the officials failed to announce a recall after they learned the Hilux Surf,made in 1993, had a defective relay rod, which connects the steering wheel to the front wheels (ChannelNewsAsia, 12 July).

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Dell Inc. is likely to face fraud charges in China on account of its substitution of CPUs in their laptops.In late June, Mr Zhang Min, an IT engineer from Shanghai, tried to upgrade his Dell laptop computerthree days after it was bought. He discovered that the computer’s central processing unit was an IntelT2300E although it was supposed to be an Intel T2300 according to his order. Zhang approached thecourt and received a letter from a local court in Shanghai stating that his case would be heard on 26July. Zhang said that at first Dell would not admit the CPU had been changed and told Zhang that theonly difference between the two processors was a technology that his laptop could not use. Dell apolo-gized and promised to exchange the laptop. Zhang disagrees and is disappointed with the response fromDell, and intends to pursue this further in the courts (Renmin ribao, 2 August).

The other major product safety story in China, and the one that received the most attention, wasrelated to Japanese company SK-II. In early September, China’s General Administration of QualitySupervision, Inspection and Quarantine announced on its website that it had found a batch of the Japan-ese cosmetic SK-II containing chromium and neodymium; both of which are potentially harmful mate-rials banned from use in cosmetics. SK-II (distributed by Procter and Gamble (P&G)) was in themainland press last year over false advertising allegations and accusations that the company did notinform consumers about the substances in its products. P&G has denied that SK-II products containany harmful substances, but some Chinese retailers took the product off the shelves.

The government eventually asked for a product withdrawal, but only after consumers had vented theiranger over a mismanaged cash return scheme that started and then stopped after unruly crowd scenes.The company was accused in the Chinese press of ‘arrogance’ (Nanfang dushi bao, 23 September), andas of writing this (in early October) SK-II products are still not back on the shelf.

Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 13, 306–312 (2006)DOI: 10.1002/csr