Thursday, November 02, 2006

Best in class

One of the way to put pressure on misbehaving corporations is through the ethical investment sector.

There is a growing amount of money sloshing around looking for a home where it can multiply without harming peopleùs lives or the planet. I have an ethical investment pension, which means the money paid in is only invested in companies that meet certain criteria. So armaments companies are off the list. Companies against which there are charges of human rights abuses or environmental destruction are out. And a standard exclusion for many such pensions is no companies that break the rules for the marketing of baby foods.

How to judge whether companies comply or not is the task of teams of investigators or the consultants they employ. Often they come to us asking for evidence for their reports. These are not only used by pension funds, but other investors interested in evaluating companies against ethical criteria.

I am aware of no credible ethical investment listing that includes Nestlé and only one incredible listing that does. That is the one Nestlé talks about in lobbying policy makers and in its letters to the public. Why is Nestlé included in this one listing? Because of the slackness of the criteria, which basically means asking companies if they are complying or not, while refusing to consider evidence our partners and others gather on the ground. So the criteria used are very important. You can find more information on our site.

Ethical investment listings are useful for campaigners in exposing companies that don't make the grade, but they are created for investors. And investors want to have companies to invest in. Which in some approaches means going for the best of a bad bunch. It is accepted that a selected company may still have problems, but by marking it out as better than the rest, the rest have something to aspire to, so the theory goes. The bad are supposed to improve to the level of the not so bad, with a gradual edging up of standards and performance over time. 'Best in class' it is called.

So which are the best baby food companies?

For us that is a difficult concept and I will explain why.

Companies can comply with the marketing requirements adopted by the World Health Assembly. It is important to remember that the rules are not impossible to meet.

They do comply where given no choice because of enforced regulations. And we are seeing marked increases in breastfeeding rates in some countries already, partly as a result (there also has to be efforts put in to regaining a breastfeeding culture). When breastfeeding rates rise, sales of breastmilk substitutes are pretty much guaranteed to fall. In 2005 we reported how sales were falling in Ghana, the year after IBFAN successfully campaigned to stop Ghana's strong law from being overturned. In 2005, India's law was saved from being struck down. It was clearly working, as the Indian press reported in 2004 after it was reported:

"a wide-ranging ban on advertisement and promotion of infant foods and milk substitutes, which took effect from January this year, has forced Nestlé to look for alternate distribution channels for the business - hitherto its key cash cow. The company has embarked on a revamp of its distribution. But given the wide-ranging restrictions on promotions and even point-of-sale displays, pushing sales growth in this category may prove a challenging task."

Companies can comply when forced to. What makes it difficult for them is it hits their growth and profit targets. Hence all the big baby food companies break the rules and the likes of Nestlé oppose legislation and invest heavily in public relations claiming they do nothing wrong.

We do rate them and, yes, some are worse than others. Nestlé is the worst in terms of number of violations and their type .. that is the number of articles of the marketing code it breaks. That is why Nestlé is the target of the boycott.

NUMICO, which makes Nutricia, Milupa and Cow & Gate formula is a close second on types of violations and growing fast with the quantity as it expands in to Asia. Wyeth, makers of SMA is not much different. And so on. Even Hipp with a veneer of goodness because it has an organic range is abysmal to the point of being worse than Nestlé in some parts of Eastern Europe.

So which is the best in class to invest in?

It's rather like asking a parent to choose their baby sitter from a bunch of child abusers. Do you really go for the one guilty of the less serious crime? Or do you reject the lot and look elsewhere?

Which brings us to other questions. How can a company that wants to genuinely make the change and fufil its obligations to abide by the marketing requirements globally do so? What does it have to do to be credible? What do we have to do to be sure infants and mothers are genuinely protected?

These and other questions will be answered in the next edition.

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