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January 16, 2003
Corporate Responsibility Ratings and SRI Screens Sometimes Differ
    by William Baue

A new report from Oekom Research criticizes IT network and component company performance based on the companies' own disclosure, while the Calvert Group's screens assess companies' actual practices.


In its latest corporate responsibility industry report, Munich-based Oekom Research assessed the social and environmental performance of the networks and components segment of the information technologies (IT) industry. The report examined 15 of the 19 largest companies in this worldwide industry, which concentrates on the manufacture of memory chips, semiconductors, and mobile phones (four companies failed to provide sufficient data to be rated.) Oekom's Corporate Responsibility Rating grades companies' social and environmental performance from A+ (best practice) to D- (worst practice).

"Overall, the average grade of C in the Corporate Responsibility Rating indicates that there is a lot of room for improvement," wrote Evelyn Bohle, the Oekom analyst who authored the report. "[O]nly a limited number of companies are applying the principle of sustainability comprehensively. The majority exhibit a lack of transparency both in social and environmental areas."

The German company Siemens (ticker: SIEG) earned the top Corporate Responsibility Rating with a B, while the Swedish telephone manufacturer Ericsson (ERIC) and the U.S. computer components producer Intel (INTC) earned B- grades. The U.S. companies Qualcomm (QCOM) and EMC Corporation (EMC) turned in the worst performances with D grades, mostly due to their lack of transparency in their environmental reporting.

"Qualcomm does not publish any environmental information at all," wrote Ms. Bohle in the report. "EMC and Qualcomm did not provide any information on environmental requirements of their suppliers." The report revealed similar lapses in social practices and policies. "The study revealed four companies (Alcatel, EMC, Texas Instruments and Qualcomm) that did not explicitly refer to a specific policy to guarantee freedom of association, EMC even stated that none of its employees is unionized."

Qualcomm did not respond to requests for their commentary. However, EMC defended its social and environmental performance by invoking a comparison.

"I was surprised to learn of our low overall rating considering the high standards we have set as a company on both the social and environmental fronts," EMC Director of Public Relations Michael Gallant told SocialFunds.com. "In fact, the Calvert Group named EMC to the 2002 Calvert Social Index, which consists of companies that meet Calvert's 'strict social responsibility criteria.'

"Apparently, Oekom rated us poorly in . . . areas where our disclosure did not meet the survey requirements, thus significantly skewing our results to the negative," continued Mr. Gallant. "It's disheartening that two reputable organizations can look to measure the same attributes of a company and yet conclude with polar opposite findings."

Calvert Group Senior Analyst Nikki Daruwala explained why EMC passed Calvert's screens.

"What Oekom has done is just look at the policies. What Calvert does is look at policies, compliance, performance, and other indicators as well," Ms. Daruwala told SocialFunds.com. "Our criteria do not eliminate a company just because of a lack of complete transparency, or just because there is no unionization at the company."

"There has been no evidence with EMC, if you look at unfair labor practices data from the National Labor Relations Board, which supports this argument regarding freedom of association," Ms. Daruwala explained. "They may not have a policy for it, yet they don't have a problem."

The Oekom report stresses policies and transparency in its rating, but it is not blind to practice. For example, the report criticizes the industry for its continued use of harmful substances such as PVC, heavy metals, and halogenated substances.

"Apart from Qualcomm, all companies state that they will reduce the use of these substances," states Ms. Bohle in the report. "To achieve this, the majority of companies have introduced internal regulations to handle and reduce harmful substances. However, comprehensive programs or deadlines and measures regarding the full elimination of several substances (e.g. lead, chrome VI, mercury or cadmium) are generally lacking."

Oekom's report underlines the fact that if companies do not disclose their social and environmental policies and practices, there is a potential for those companies to be viewed as poor performers. Calvert's screening process reveals that a lack of disclosure does not necessarily mean a company is not performing well.

 

 
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