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July 31, 2002
Computer Sector's Social and Environmental Performance Needs Upgrade
    by William Baue

A recent report from Oekom Research identifies shortcomings in the corporate responsibility performance of IT and computer companies, particularly concerning social issues.

Many social investors generally consider companies in the information technology (IT) and computer sectors to be better-than-average social and environmental performers. However, the recent Corporate Responsibility Rating from Oekom Research AG, a Munich-based social and environmental rating agency, calls this assumption into question. The report covered eight prominent IT/computer companies, grading them from A+ to D- on 200 environmental and social criteria. While the industry's overall Corporate Responsibility Rating of C+ means that it performed well in comparison to other sectors, the report identifies many specific shortcomings of IT and computer companies.

Hewlett Packard (ticker: HPQ) topped the group with an overall grade of B-. Apple (AAPL) was close behind, also earning a B-. NEC (NIPNY) came in third with a C+. Other companies assessed included Dell (DELL), Fujitsu (1ITSUz.DE), IBM (IBM), and Sun Microsystems (SUNW). Gateway (GTW) did not provide any information. Oekom chose companies listed on prominent indexes such as the Morgan Stanley Capital International (MSCI) World Index or the Dow Jones Stoxx 600. It examined the social and environmental performance of these companies on a separate basis, weighting both equally to arrive at a combined corporate responsibility rating.

"The sectoral average score of C in the social part of the rating leaves a lot of room for improvement," said Evelyn Bohle, analyst at Oekom.

Oekom examined how companies treat both internal stakeholders, namely staff, and external stakeholders in calculating the overall social rating.

"The performance in the 'Staff Relations' section is poor, with an average grade of C-. Generally companies failed to provide comprehensive information on their staff relations," said Ms. Bohle. "The poor results in this section have also been affected by the fact that almost all companies heavily reduced their workforce and employment contracts in the sector but often have no adequate arrangements for cutting jobs in a socially acceptable way."

IT and computer companies' treatment of external stakeholders was also found to be lacking.

"One outcome of the survey is that supply chain management is not satisfactory," said Ms. Bohle. "None of the companies has implemented detailed measures to monitor basic labor conditions of its suppliers, for example in terms of local working hours or wages. Furthermore, the companies assessed have not implemented measures to assess the human rights situation in non-OECD countries."

However, the report did identify some positive trends in the social performance of the sector. Six IT and computer companies are addressing the so-called digital divide between those who do and do not have access to the technologies that help create wealth. For example, some U.S. companies provide schools in the U.S. with computers free of charge. However, the industry has shown less commitment to addressing the global digital divide between developed and developing countries.

IT and computer companies scored slightly better in the overall environmental rating, earning a sector-wide grade of B-. However, the companies continue to use harmful substances such as PVC, heavy metals, and halogenated substances. Oekom finds this surprising, as the European Union and Japan are implementing laws requiring manufacturers to take back and recycle their products.

"Only selected examples of eliminating such substances were provided by some companies," said Ms. Bohle. "However, all companies still use heavy metals and six companies have not implemented comprehensive programs nor deadlines and measures regarding their total elimination. Thus, the overall problem of toxic materials contained in computers is far from being resolved."

Oekom also assessed companies' eco-efficiency as part of the environmental rating.

"Five companies got poor results in the eco-efficiency section, mainly due to missing information," said Ms. Bohle. "Four of them did not provide comprehensive data on water and energy consumption, carbon dioxide and waste composition in recent years."

It is important to consider Oekom's ratings in context to understand the implications of its grades.

"To receive a grade of A or A-, the companies would have to show best practice in almost every criteria of assessment," explained Ms. Bohle. "Our requirements are very high, and therefore the leading companies in our Corporate Responsibility Rating, such as Ricoh, Toshiba, and BASF, have received a B+ or B so far."


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