Public Relations

The Collapse of Wal-Mart’s Social Responsibility Charade

For the past eight years, Wal-Mart has pursued an image campaign apparently inspired by the Marx Brothers line: “Who you gonna believe, me or your own eyes?”

Despite the preponderance of evidence of its unenlightened practices, the company has tried to give the impression that it is really a model corporate citizen. Recent events suggest that the giant retailer’s social responsibility charade is now crumbling.

Through all of its scandals and controversies over the years, Wal-Mart could at least count on the support of its institutional shareholders, which for a long time turned a blind eye to the company’s transgressions and focused on its growth. Now even that is changing. The recently released results of voting at the company’s annual meeting indicate unprecedented discontent with its leadership. Not counting the large bloc of shares controlled by descendants of founder Sam Walton, more than 30 percent of the votes were cast against CEO Mike Duke, board chair Rob Walton and former CEO and board member Lee Scott. In the past, Wal-Mart board members typically had approval rates close to 100 percent.

The high degree of no-confidence this time around is largely attributable to the fallout from an 8,000-word exposé by New York Times alleging that high-level executives at the company quashed an internal investigation of foreign bribery. Before the annual meeting, the California State Teachers’ Retirement System filed a lawsuit against current and former Wal-Mart executives and board members for breach of their fiduciary duties in connection with the bribery scandal.

That scandal also appears to have played a significant role in Wal-Mart’s decision to cave in to calls to suspend its membership in the American Legislative Exchange Council, which is under siege for its role in promoting “stand your ground” laws such as the one in Florida linked to the shooting of Trayvon Martin. In the past, Wal-Mart, long a stalwart member of ALEC, would have ignored pressure of the kind being exerted by the anti-ALEC campaign.

By all rights, the disintegration of Wal-Mart’s responsibility image should have come from its retrograde labor and employment practices, which were the main reason for the public relations effort but which didn’t substantially change during the campaign. The company has never strayed from its uncompromising opposition to unions (except for toothless ones in China). The Organization United for Respect at Walmart is not a conventional union-organizing effort, yet the company recently fired several activists in the group in an apparent act of intimidation.

In its 1.4 million-employee U.S. retail operations, Wal-Mart has maintained a low-road approach of meager wages, inadequate benefits and overuse of part-timers. Workers at its more than 100 distribution centers had enjoyed somewhat better conditions, but it appears that is no longer the case. A new report from the National Employment Law Project finds that the company is increasingly using logistics subcontractors and temp agencies that engage in rampant wage-and-hour abuses and other labor-law violations.

In the latest in a long line of its own fair labor standards cases, Wal-Mart was recently forced by the U.S. Labor Department to pay $5.3 million in back pay, penalties and damages for violating overtime rules. Although the U.S. Supreme Court came to Wal-Mart’s rescue last year by blocking a massive class-action sex discrimination case, several non-class actions have been brought in recent months making the same allegations on behalf of thousands of women.

One area in which Wal-Mart believes it has attained a measure of legitimacy is environmental policy. It has succeeded in winning over some green groups, which cannot resist the temptation of working with such a mammoth company to change industry standards.

Yet the funny thing about Wal-Mart’s green initiatives is that most of them involve changes that the retailer is requiring from its suppliers, who are expected to bear the costs of altering their products and their packaging. This is consistent with Wal-Mart’s longstanding practice of forcing suppliers to cut their wholesale prices to the bone. When Wal-Mart does take steps on its own, such as in reducing energy usage in its facilities, those reforms are ones that reduce its operating costs and thus add to its bottom line.

Even if you believe it is okay for Wal-Mart to boost its profits while pressing suppliers to be more environmentally responsible, it’s important to remember that many of those suppliers are in countries such as China where oversight is difficult. A recent investigative report in Mother Jones found that Wal-Mart’s monitoring of Chinese plants left a lot to be desired and that this is causing frustration among some of the environmentalists who have been working with the company.

A report by Stacy Mitchell of the Institute for Local Self-Reliance finds that Wal-Mart’s domestic green initiatives, such as using more renewable energy sources, are also faltering, while the company ignores the detrimental environmental impacts of its land use practices. All this is compounded, Mitchell notes, by Wal-Mart’s extensive political contributions to candidates who are global warming deniers or otherwise have poor voting records on the environment.

The demise of Wal-Mart’s phony social responsibility initiative poses a fascinating question: Can the company return to its old critics-be-damned stance, or will it finally have to make some genuine reforms in the way it does business?

Wal-Mart Plays the Victim

In the mid-1990s business groups such as the American Trucking Association – then led by Thomas Donohue, currently head of the U.S. Chamber of Commerce – launched a crusade to ban union corporate campaigns. The effort fizzled out, but now Wal-Mart may be trying something similar to thwart site fights pursued by community groups opposed to the opening of the giant retailer’s stores and distribution centers.

The company is pouncing on a story published in the Wall Street Journal in June reporting that rival grocery chains such as Safeway and SuperValu helped to pay for the services of a firm called Saint Consulting Group, which has worked with community groups around the country in campaigns against Wal-Mart projects. The article also reported that Saint’s fees are sometimes paid by the United Food and Commercial Workers. The UFCW does not hide the fact that it works with community groups opposed to the virulently anti-union Wal-Mart, whose expansion threatens the jobs of UFCW members at unionized competitors. The UFCW confirmed to the Journal that it has funded Saint and insisted it had every right to do so. The newspaper said that the rival chains declined to comment.

In a just-published follow-up article, the Journal reports that Wal-Mart is asking courts to compel its opponents to disclose who is paying their legal bills in various environmental lawsuits challenging the company’s expansion. This could be the first step in an effort to get courts and perhaps friendly legislatures to put restrictions on site fights and their funding. While Wal-Mart claims to be most upset about the involvement of its competitors, the company may try to use this issue to weaken community groups and the UFCW, its long-time nemesis.

It is the height of hypocrisy for Wal-Mart to complain about collusion among its adversaries. The beast from Bentonville has never hesitated to use every trick at its disposal – including the funding of front groups – to advance its expansion efforts. Over the summer it succeeded in getting permission to build a second store in Chicago by using tactics such as creating fake community groups and hiring low-income people to pose as demonstrators supposedly eager to get a Wal-Mart job. The company also pretended to have seriously negotiated with unions on wage rates for the store.

Several years ago, Wal-Mart sought to defuse criticism of its detrimental impact on local businesses by launching an “Opportunity Zone” program that amounted to little more than bribing small firms to back its agenda. In 2006 it came to light that two blogs that appeared to be written by independent supporters of the company were actually created by Wal-Mart’s public relations firm, Edelman. That was in addition to reports that the company was cultivating real bloggers, some of whom were repeating company talking points verbatim.

The amount of money Wal-Mart’s competitors have contributed to site fights probably does not compare to what Wal-Mart has spent itself. Apart from the direct costs of those site battles, the company cultivates political support through direct means such as campaign contributions and is believed to make wide use of indirect means such as giving consulting contracts to relatives of public officials.

State and local governments end up paying for the company’s campaigning through the economic development subsidies (estimated at more than $1.2 billion) they give to Wal-Mart and the forms of tax avoidance (estimated at billions more) that the company arranges for itself.

Wal-Mart may feel that the likes of Safeway and Supervalu are violating some unspoken rule by supporting site fights, but it has broken every rule in the book itself in pursuit of endless expansion. But rather than defending those rivals, the most important thing is to be sure Wal-Mart does not exploit this issue to put shackles on community groups and unions, which are often the only forces working against the company’s quest to take over everything.

Villainous Visionaries

It is tempting to refute the new book on business ethics by Andy Wales, Matthew Gorman, and Dunstan Hope with two letters; BP. The oil giant’s record of negligence in connection with the Gulf of Mexico disaster, its refinery accidents and its pipeline leaks in Alaska flies in the face of the thesis of Big Business, Big Responsibilities: that large corporations are in the vanguard of efforts to address the planet’s most pressing environmental and social problems.

The text of the book appears to have been completed before the blow-out of BP’s Macondo well this spring, but it is likely that the incident would not have merited mention if the timing had been different. Wales, Gorman and Hope seem to live in a world in which corporations act nobly and business crimes such as bribery, price-fixing, toxic waste dumping, mistreatment of workers and disregard for safety norms are either a thing of the past or are rare enough to ignore.

The authors – two of whom work for large corporations while the third (Hope) is on the staff of Business for Social Responsibility – would have us believe that many major companies have in a short period of time evolved from villains to visionaries.

To their credit, Wales, Gorman and Hope do not claim that this transformation happened spontaneously. They fully acknowledge the role of environmental and social justice campaigns in highlighting harmful and unfair business practices. Yet they fail to address corporate resistance to these campaigns, making it seem as if top executives promptly renounced pollution and exploitation as soon as an objection was raised.

Wales, Gorman and Hope admit that the initial boardroom motivation was to protect brands damaged by aggressive campaigners, but they insist that many large companies have gone beyond that defensive posture and are now engaged in a “proactive search for opportunities to improve social well-being and achieve corporate financial success at the same time.”

Their outlook is representative of the new corporate utopianism – the notion that the profit motive can be made to align perfectly with the public good, thus making global companies the perfect vehicle for reshaping the world.

It is easy to see why Wales, Gorman and Hope, who have built their careers on promoting corporate social responsibility, would embrace this view, and its appeal among the companies they advise is obvious.

But it is not clear why those of us with no vested interested in corporate canonization should go along. Even if we admit that some companies are doing some socially beneficial things, what took them so long? Are we expected to forget their decades of rapacious behavior?

It is also unclear how far should we trust companies that began to act responsibly only after being pressured to do so by outside forces, which according to Wales, Gorman and Hope include not just corporate campaigns but also growing consumer preference for ethical and sustainable goods and services. The only internal impulse that seems to be at work in socially responsible companies is the desire to make a buck from these new market opportunities.

So let me get this straight: responding to external pressures, giant corporations are doing the right thing, which turns out to be highly profitable – and we are supposed to believe this is some kind of great moral awakening?

Before passing judgment on the intentions of companies professing a commitment to social responsibility, perhaps we should take a step back and ask how real is the purported transformation. And this brings us back to BP, which is repeatedly praised by Wales, Gorman and Hope for its forward-thinking stance on issues such as climate change.

Given what we now know about BP’s reckless actions, as opposed to its high-minded principles, it is likely that its commitment to social responsibility is a smokescreen. Wales, Gorman and Hope don’t consider the possibility that many of the laudatory policies adopted by BP and other corporate leviathans are nothing more than greenwashing.

Big Business, Big Responsibilities could be dismissed as a work of corporate propaganda, but what makes it more insidious is the appeal the authors make to non-governmental organizations. The last page of the book calls on NGOs to be less suspicious of corporations and to accept them as full partners in environmental and social campaigns. I read this as an effort to bring about a unilateral ceasefire by watchdogs groups, which would lose their independence and start functioning as appendages of corporate public relations departments.

While a few NGOs have already moved in this direction, it would be foolhardy for serious campaigners to abandon their adversarial posture toward corporations. Without such pressure, big business would inevitably return to all its old tricks.

Corporate Social Irresponsibility

The catastrophic Exxon Valdez oil spill of 1989 gave rise to the modern corporate social responsibility movement; the current spill in the Gulf of Mexico marks its collapse.

The past two decades have been an experiment in corporate behavior modification. An array of well-intentioned organizations such as CERES promoted the idea that large companies could be made to do the right thing by getting them to sign voluntary codes of conduct and adopt other seemingly enlightened policies on environmental and social issues.

At first there was resistance, but big business soon realized the advantages of projecting an ethical image: So much so that corporate social responsibility (known widely as CSR) is now used as a selling point by many firms. Chevron, for example, has an ad campaign with the tagline “Will You Join Us” that is apparently meant to convey the idea that the oil giant is in the vanguard of efforts to save the earth.

What also made CSR appealing to corporations was the recognition that it could serve as a buffer against aggressive regulation. While CSR proponents in the non-profit sector were usually not pursuing a deregulatory agenda, the image of companies’ agreeing to act virtuously conveyed the message that strong government intervention was unnecessary. CSR thus dovetails with the efforts of corporations and their allies to undermine formal oversight of business activities. This is what General Electric was up to when it ran its Ecoimagination ads while lobbying to weaken air pollution rules governing the locomotives it makes.

Recent events put into question the meaning of a commitment to CSR. The company at the center of the Gulf oil disaster, BP, has long promoted itself as being socially responsible. A decade ago it adopted a sunburst logo, acknowledged that global warming was a problem and claimed to be going “beyond petroleum” by investing (modestly) in renewable energy sources. What did all that social responsibility mean if the company could still, as the emerging evidence suggests, cut corners on safety in one of its riskiest activities—deepwater drilling? And how responsible is it for BP to join with rig owner Transocean and contractor Halliburton in pointing fingers at one another in an apparent attempt to diffuse liability?

BP is hardly unique in violating its self-professed “high standards.” This year has also seen the moral implosion of Toyota, another darling of the CSR world. It was only months after the Prius producer was chosen for Ethisphere’s list of “the world’s most ethical companies” that it came to light that Toyota had failed to notify regulators or the public about its defective gas pedals.

Goldman Sachs, widely despised these days for unscrupulous behavior during the financial meltdown, was a CSR pioneer in the investment banking world. In 2005 it was the first Wall Street firm to adopt a comprehensive environmental policy (after being pressured by groups such as Rainforest Action Network), and it established a think tank called the Center for Environmental Markets.

Even Massey Energy, which has remained defiant in the face of charges that a preoccupation with profit over safety led to the deaths of 29 coal miners in a recent explosion, publishes an annual CSR report.

When the members of a corporate rogues’ gallery such as this all profess to be practitioners of CSR, the concept loses much of its legitimacy. The best that can be said is that these companies may behave well in some respects while screwing up royally in others—the way that Wal-Mart is supposedly in the forefront of environmental reform while retaining its Neanderthal labor relations policies. Selective ethics, however, should be no more tolerable for corporations than it is for people.

Heaven forbid that we violate the free speech rights of CSR hypocrites, but there should be some mechanism—perhaps truth-in-image-advertising laws—to curb the ability of corporations to go on deceiving the public.

Shades of Green

Michael Moore may be on all the talk shows these days touting his new film on the evils of capitalism, but elsewhere in the mainstream media the celebration of big business continues apace. Especially when it comes to the environment, we are meant to believe that large corporations are at the forefront of enlightened thinking.

This is the implicit message of the cover of the new issue of Newsweek, which is filled with leaves to promote its feature on “The Greenest Big Companies in America: An Exclusive Ranking.” The list itself, however, has more validity than the usual exercises of this sort, which tend to take much of corporate greenwash at face value.

The Newsweek rankings are based on what appear to be solid data from KLD Research & Analytics, producer of the reputable (but expensive) SOCRATES social investing database, along with Trucost and CorporateRegister.com. Each company in the S&P 500 is rated on its environmental impact, its environmental policies, and its reputation among corporate social responsibility professionals, academics and other environmental experts. The ratings even take in account a company’s “regulatory infractions, lawsuits and community impacts.”

Not surprisingly, those at the top of the list are high-tech companies—such as Hewlett-Packard (ranked No. 1), Dell (2), Intel (4), IBM (5) and Cisco Systems (12)—which have never had quite the same pollution problems as old-line industries and which in many cases have made themselves “cleaner” by outsourcing their production activities to overseas producers. Dell, in particular, is on its way to becoming a hollow company by selling off its plants.

More interesting is that supposed sustainability pioneer Wal-Mart comes in at No. 59, behind old-line industrial companies such as United Technologies and Owens Corning. Whole Foods Market, purveyor of over-priced organic groceries, is a bit lower at 67. Oil giant Chevron, which urges the public to “join us” in its supposed commitment to energy efficiency, is ranked 371, not much better than long-time global warming denier ExxonMobil (395).

Since the Newsweek list covers the entirety of the S&P 500, we can also look at what is probably the most significant group: those at the very bottom. The harm that these companies—especially utilities such as American Electric Power and Southern Company with lots of fossil-fuel-fired power plants—do to the environment far outweighs any good done by those at the top of the list. Also among the laggards are agribusiness giants Monsanto (No. 485), Archer Daniels Midland (486), Bunge (493) and ConAgra Foods (497).

But special mention must be given to the absolute worst company of all: mining giant Peabody Energy. On a scale of 0 to 100, Peabody is awarded all of 1 point, presumably reflecting its single-minded dedication to climate-destroying coal and its support for groups fighting the climate bill now in Congress.

Newsweek deserves credit for undertaking a serious evaluation of corporate environmental performance. The web version even has a nice sidebar on green fakery. But the magazine could have easily turned the list upside down and headlined its feature “The Biggest Environmental Culprits of Corporate America.”

The Times Falls for Wal-Mart’s “Authenticity”

The New York Times gave a boost today to Wal-Mart’s effort to raise its coolness quotient. Its account of a new blog that the giant retailer is allowing some of its merchandise buyers to produce was filled with references to “candor,” “speak[ing] frankly,” and “uncensored rambling.” Much is made of the fact that the posters have made unflattering comments about some of the offerings of Wal-Mart’s suppliers. Wal-Mart is said to have learned its lesson from earlier disasters with blogs created in the name of bogus front groups. This new initiative, the Times assures us, is the real thing.

It is indeed the case that the site allows reader comments that are critical of certain company practices. For example, a posting by an “associate” named Alex saying he might use spend his federal economic stimulus check to purchase a TV or a laptop was followed by comments on how that would do more to help the foreign economies where such products are made. One person asked: “what happened to the campaign WalMart used to run advertising its committment to support American manufacturers?”

Yet, it appears that the Times was hoodwinked by Wal-Mart. The appearance of authenticity and candor is just another technique used by advertising agencies and public relations consultants to win over skeptical audiences.

As for those critical comments, it’s significant that “Alex” thanked all those who had corrected a spelling error in his post but had nothing to say about the company’s sourcing practices. In fact, that the only real topic covered in the posts apart from product assessments is “sustainability.”

Those items are posted in the name of Rand Waddoups, who is no lowly buyer but rather the company’s senior director of business strategy and sustainability. His part of the blog, at least, fits in neatly with the company’s dubious campaign to depict itself as the environmental leader of the corporate world.

As I have previously noted, Wal-Mart’s green crusade places all the burdens on its suppliers, while the moves taken by the retailer itself (improving energy efficiency, etc.) are in fact nothing more than cost-cutting measures that boost its bottom line. Until Wal-Mart makes some hard choices itself—such as paying all its workers a living wage—nothing it does in the blogosphere or elsewhere is going to be very authentic.