Examination of Witness (Questions 540
- 553)
TUESDAY 20 OCTOBER 1998
MR ROBERT
DAVIES and DR
CHRIS GIBSON-SMITH
540. On the micro level, there is always
a conflict between, for instance, ambitious doctors who want high
tech modern equipment to do clever things that they see their
peers in the West and the developed world do and the much greater
benefit often of spending that money on very simple, boring, highly
effective medical or dietary or whatever operations. Now when
you have that kind of dilemma, how do you resolve it?
(Dr Gibson-Smith) In our own instance, we are
broadly attempting to conform to global standards. We are broadly
opening our standards to investigation by third parties. The World
Bank has done an assessment of our own performance in Colombia
which will be published shortly. In technology we find advanced
technology—and we pay for all this—is almost always
the most efficient technology in terms of both economics and environmental
standards. The latest technology industry like mine is not designed
to be expensive, it is designed to be extraordinarily efficient
in its environmental control and in what it does. One is transferring
the very best one has to these countries.
541. I am sorry, I am not making myself
at all clear. It is an important question I think. What I am saying
is that there is often a very wide international belief that,
for example, money spent on Vitamin A supplementation or money
spent on very simple durable education or equipment reaches more
people and does more lasting good to a country than producing
the kinds of things which ambitious educators and ambitious ministers
and so on want. What I was asking was not only your company but
companies in the Forum what do they term the reference point?
Is it what the minister wants or is it what would actually be
probably most effective?
(Dr Gibson-Smith) Broadly we tend to be governed
by what the community wants and we get the community to take advice
from the World Bank or the UN or NGOs. They generally choose NGOs.
(Mr Davies) Could I take the question of standards
that was raised, and make a general point. Of course I am not
aware of the use of standards for benchmarking regimes. Although
the point I would make is that many long term investors such as
natural resource companies or people involved in power or infrastructure
make long term investments. One of the greatest problems is that
unlike, say, someone who is going to go in there and sell a particular
product just using a warehouse, that you discover you are locked
in and 20 years later suddenly the regime changes. Nigeria is
a very interesting case in point. There has been a recent innovative
introduction of the concept of social impact assessments right
at the very start which includes very often a conflict assessment
element. BP have done it in Angola; other companies have done
it elsewhere. You weigh up the risks. Obviously that is a much
better starting point for looking at how you contribute to nation-building
and civil society which can play a critical role in monitoring
risk and other sorts of things than when you are already in the
middle of a 30 year game and suddenly you are surprised. I am
much more hopeful of companies now, say, going into the Caucuses,
as tough as that place is, because rules do not seem to run there
and we are talking of areas covered by gangs largely because at
least you can assess it at the start. In my experience most international
companies are now looking for international standards and actually
conforming to that and changing. But, of course, it does not do
much for the large numbers of smaller, medium sized companies,
indigenous companies, non public companies. Some were mentioned
in the previous evidence given to you this morning where the writ
of standards of the ICC charter or the OECD charter just does
not run. That is a place where large companies can work with governments
to set a standards consciousness. I would just draw attention
to two small things on the end. One is—standards are no
good without verification ultimately or at least authentication.
Verification is difficult. It took a long while for accounting
standards to be done. We now know that HSE standards are just
about near there. But a number of companies, not all but a small
number, are pioneering authentication and verification. And that
is a very, very important one, and again another area where NGOs,
Chambers of Commerce, civil society organisations, churches, etc,
play an important role. BP amongst others, including some of our
members, are experimenting with that. The important element in
this is a very imaginative DFID policy tucked away in the White
Paper which, if I may say is one of the most innovative White
Papers in terms of the role for business in development. The concept
of country partnerships where the DFID, inter-governmental organisations,
business and others can work together on certain types of basic
standards, such as corruption, such as labour standards and so
forth could well be a very good framework for tackling the standards
issue which also brings in the public procurement side as well.
Many companies will always be outside that net.
Tess Kingham
542. Excellent news on social impact assessments
and the fact everybody is working together to try and get mutually
beneficial aid, I am very supportive of that. One bone of contention
though which I have just got to come back to. This issue that
does not seem to be addressed anywhere of security firms. A lot
of concern has been expressed over the last year about these very
unaccountable security firms often employing ex mercenaries, or
occasionally working on both sides of the conflict, providing
people on both sides of the conflict with personnel, some of the
very unsavoury characters indeed which in my mind would negate
a lot of the work that is being done on social impact assessment.
Why do companies use these kinds of firms? Why is no effort being
made to come up with a more ethically sound way of finding security
for companies? What vetting procedures are used by firms? I think
this will increasingly become an issue, it is certainly one which
concerns me. It will just wipe out the good work that is being
done at the end of the day when these atrocities keeping rearing
their head.
(Dr Gibson-Smith) A good question. Clearly a key
source of public concern. I think there is a spectrum which goes
from mercenary in all its worst image to some companies which
are actually providing very sound security advice. You have to
be very careful how you choose. Can I run the risk of using a
real example, which is ourselves in Colombia? The standards of
the Colombian Army do not even come close to the standards of
the British Army. We work with a security company which is largely
made up of members of the British Armed Forces of one sort or
another.
Mr Canavan
543. You mean "former members of the
British Armed Forces"?
(Dr Gibson-Smith) Yes, former members. This same
company provides security——
Tess Kingham
544. Is this a British company?
(Dr Gibson-Smith) It is UK with some American
connections.
545. I just wondered if you could tell us
because nobody else seems to know!
(Dr Gibson-Smith) They provide security for the
UN, security for NGOs, security for some embassies, so they have
a whole range of actually very proper and benign information because
they have these extraordinary skills. They give us advice, that
is all they do. They do not carry arms. They are limited to the
perimeters of our operations and they get us advice on how to
interact with the army, what standards we should accept——
546. Sorry, what is the name of this company?
(Dr Gibson-Smith) DSL. I would say, one, let us
vet like crazy, let us be really concerned, the spectrum runs
all the way to mercenaries but in here there are people who are
quite responsible but we need to make sure that is true.
Mr Canavan
547. I understand there may be some internal
enquiries going on within BP and within Defence Systems Limited
about the operations in Colombia and the very serious allegations
which have been made, particularly in the Guardian newspaper.
Will these findings, if you do have internal enquiries of that
nature, be made public and would it be possible to send a full
report to our Committee?
(Dr Gibson-Smith) While I think about that, I
will tell you what we have promised so far. I am responsible for
the enquiry, so I am probably the right person to ask. We believe
at the moment we should make whatever result public in some way.
We have promised Oxfam we will go through in detail, because they
are part of one of the NGO groups on the ground, and show them
the data, the information in our thought-chain and give them the
opportunity to comment on that. In principle, I see no reason
why we should not share the conclusions of our investigation with
you. Can I leave it at that standard? I see no reason why in principle
we should not.
Ms King
548. I think we have covered the questions
we had, but could I just ask if the Prince of Wales' Business
Leaders Forum is taking any specific steps or looking at the subject
of eliminating the use of unaccountable security police amongst
its members? Is that something you are considering?
(Mr Davies) In fact it was only when I was reading
the evidence—this is another part of our learning curve,
reading the evidence—that it made me think even more broadly
about what are some of the key issues, and clearly it would be
easy for me to say, "Yes, we do not have any defence companies
or arms traders within our membership", but that is an easy
way forward. Almost any kind of product, right down to a piece
of hosepipe, at some stage can be used in a way which can cause
abuses of human rights. We have research going on at a number
of levels. We looked at how our members are involved in things,
and it is only relatively recently that we have looked at the
coincidence of our members in some of the least hospitable parts
of the world and what we could deduce from that, and whether we
did, in an immensely complicated field, have any role to play
at all, and we concluded we possibly did. Secondly, we share information
on examples of good practice, what could be done to analyse—we
talked earlier about the social impact assessments—what
could be done to mitigate it when you see it, what could be done
to build capacity verification, post-conflict reconstruction.
Also, we have a piece of research with International Alert and
the Council for Economic Priorities where we are looking generally
at the role of business in conflict but specifically at examples
in the Caucasus, and we would like to add to that our own experience
in South Africa and the Philippines where there are some creative
examples of the role business has played at various points. I
add into that experience of trying to engage the business community
in capacity-building with the police force in South Africa, also
Eastern and Central Europe around the drugs issue, which we have
not published because it is incredibly sensitive. Having said
that, I think there is a case for us to look at this, because
in a way it is almost part of sub-contracting as well; it is part
of quality mix and therefore it is part of responsible business
behaviour. The point we have been trying to get over is that the
aim of business is not just what they do in their community programmes,
important as those are, and they are critical, it is also about
how they go about their business, and sub- contracting to security
firms is one, and I very much picked that up from the evidence
and I would like to take that away and think about it because
I do not know the answer. The other point I would also make is
that it is the way you go about things. I know it is not answering
your question now but if I could just tuck this last point in.
Business involvement in social development, yes, sure, that has
been going on ever since business existed and there are patronising
ways of doing it, there are indifferent and bad ways of doing
it, and there are ways which build capacity. One of the exciting
things is what is happening in some of the companies we work with,
not all companies but quite a few, and if I may say, the Casanare
Region of Colombia is quite a good example of this, where I and
others have visited and made our own way around, without BP's
minders. We have talked to micro-credit groups and housing groups
and so forth, and what is absolutely clear is that it is the method
that companies use to support social development which is important.
Chris was asked earlier a question like, "Do you go in and
set your own standards or do you use lower, irrelevant standards?"
I think the exciting thing about some companies now is the consultative
approach, instead of building the fire station, the school, the
ten scholarships to send the best kids to western universities,
which was the classic formula in the past, there is a feeling
now, "How can we work to build capacity, to support civil
society organisations, so we do not end up holding the baby or
having a sense of ownership 20 years later", and this non-patronising
form of social development, where there is another critical partnership,
is also very important. Britain, without making a chauvinistic
point, has a lot of excellent examples to draw on and I think
the new DFID policy of highlighting some of this, promoting good
practice is a really worthwhile thing to support.
549. This follows directly to the issue
of sub-contractors and I think everyone on the Committee genuinely
welcomes the leaps and bounds that have been made in this area
and the whole change of approach that we have seen. What responsibilities
do you feel the British private sector has to ensure that sub-contractors
and those they trade with in developing countries are also observing
appropriate business standards? If I could take you back to one
example which came up last year, Disney sub-contracted its Haitian
workers and was paying them £1.35 a day and they decided
it was not possible for them to raise the £2.5 million a
year it would have taken to raise those salaries to something
reasonable, but at the same time they were able to scrape together
an hourly salary for their chief executive, Michael Eisner, of
£6,250 an hour. Do you think businesses are starting to see
the links here and how it is difficult to divorce the reality
of those people on the ground working at one level or another
for private business who are being denied very fundamental human
and employment rights?
(Dr Gibson-Smith) It is coming, I think. It is
a real issue. Along with conflict and relationship with armed
forces, the second greatest area of exposure for us and our reputation
is the behaviour of contractors. We have created a policy where
we are absolutely clear that our contractors must behave to the
same standards as we expect of ourselves. How you set that up
in practice is a challenge because if you contract with a local
bakery firm to provide your food for you, what are they doing
when they are off in the next town doing their stuff? It is a
central issue, it requires a lot of attention and much management
control, and I agree with you it needs to be improved.
(Mr Davies) Could I just take the general point.
Our observation is that US companies are somewhat more unwilling
to get engaged in the minimum wage argument outside the USA than
some of the European companies are. This is a generalised observation.
It is not all bad though. If you take Disney, recently I was talking
with a T-shirt manufacturer in Southern China and they said that
Disney came to them five years ago and said: "Look unless
you meet our environmental guidelines you cannot source for Disney
any more". They hummed and hawed "Shall we drop, shall
we not". They said: "With the technical assistance we
will meet your guidelines". They did. They discovered they
were opening new markets because they could now source to Gap
and Fruit of the Loom and others who wanted the new standards.
Disney then came back two years ago and said: "We have now
got these human rights factors" and the Chinese manufacturer
said: "Great, as long as you give us the technical assistance
and the period to adjust". I think what is emerging is there
is a set of issues. Incidentally, the DFID—sorry this is
not a commercial for DFID—I did notice yesterday their review
of UK company codes of conduct which is quite interesting. What
is clear is that health, safety and environment is pretty universal.
When you come to other areas such as collective bargaining or
wages they are not. There is an incomplete element. In a way there
are multi-facets.
Tess Kingham
550. The Forum's memorandum looks at: "The
case for Indonesia—a possible case for partnership approaches".[13]
In that you say that in Indonesia: "... the business community
has a credibility problem due to its role in the support of the
former regime and the business practices associated with it".
What do you feel then the attitude should have been of the business
community to the former regime in Indonesia? What principles should
guide investment decisions in countries where the governments
have appalling human rights' records or are actively pursuing
policies which are obviously exacerbating or risking conflict?
(Mr Davies) Yes. In brief, there is a deafening
noise all over South East Asia of the doors being slammed now
the horse has bolted. I think a lot of institutions, not necessarily
the IMF, certainly the World Bank and others are recognising that
the so-called development model, which did deliver high levels
of development but without the building of civil society and without
the transparency, was something of an illusion. There is an appalling
social cost, not least because in Indonesia the threat of poverty
has gone from 16 million to 98 million people in the space of
just a few months.[14]
Clearly, looking forward, our argument has been that now is an
opportunity to engage business both in the dialogue as well as
the action—around things like distribution, partnership
with civil society organisations, sharing corporate governance
know-how. Because indeed there are lots of experts out there in
Indonesia—and now is the opportunity where the whole concept
of business standards, the interaction between business and civil
society, where the success of business was not cronyism or but
is a broader value. So I am very happy to make it available to
the Committee. We have sketched out almost a partnership thesis
which we have shared with the World Bank and a meeting will take
place quite soon in Indonesia to get all the key players together
to look at that. If business cannot be seen as a confident acceptable
player, Indonesian development has got a problem.
551. What about in general? Do you think
it is wrong for companies to be investing where there are obvious
gross violations of human rights because as we have just heard,
in a sense, take Colombia as an example, democratic government,
you said 85 per cent of your profits there go to the Colombia
Government, that must be the same in other countries around the
world so governments must benefit from that?
(Mr Davies) No, if I say it is right or wrong
I do not think it will have as much impact as if we try to draw
to the attention of potential investors that there are ways of
improving their risk assessments. And part of this is through
dialogue, part of it is through social assessments where they
are trading. Our answer, with a few exceptions, is to accept that
there is interest in investing around the world in very hostile
places that can change. Who would have ever thought that Russia
would be bad now, six months ago? Our role is to try and share
best practice and draw to the attention of companies how they
can take a more balanced view towards their initial risk assessment.
Mr Khabra
552. Do British embassies and high commissions,
in assisting British business in its contacts in developing countries,
advise on human rights abuses, on risks of conflict and on good
practice to reduce the risks of conflict in the country concerned?
(Dr Gibson-Smith) Yes, they do. One of the things
we are discussing with both Oxfam and Amnesty is the British embassy
information and the role the FCO could play in vetting, people
selection and advice. Wherever we go we have a very close relationship
with British embassies, and exchange a whole range of advice around
these issues.
(Mr Davies) We also have a very close relationship
with embassies and high commissions. The point I would make is
that because some of these ideas have been developing so fast—even
the use of some of the vocabulary like the talk of social impact
assessments and so forth, is so quick—there is a time lag.
And I think there is a case for looking quite seriously at almost
accelerated in-service briefing or training on this for people
around the world in British missions. Secondly, another point
to make is that we have noticed the massive attitudinal change
in the DFID towards the opportunity of engaging business in a
partnership. I think there are still some attitudes, in some bits
of government departments—and I would single out the DTI,
not at the top but there is a slight feeling in the middle—that
the idea of pressing companies to look at the societal dimension
is almost anti-competitive. But there is a really strong case
to say this is contributing, when it is done right, to competitiveness,
and I think there is a case for involving the appropriate NGOs
in trade missions and things like that, because I think that would
square the circle in a very important way.
Mr Canavan
553. Mr Davies, Dr Gibson-Smith, thank you
very much indeed for being so patient with us. As always, we seem
to go into injury time in these sessions, but we have learned
a lot and the evidence you have given to us this morning will
be very useful to us in the course of our inquiry. We look forward
to receiving the report on the internal enquiry which we referred
to earlier. Thank you very much indeed.
(Dr Gibson-Smith) Thank you for the opportunity.
13 See Evidence, p. 212, para 2.3. Back
14
Note by witness: In Indonesia the number of people experiencing
poverty has gone from 22 million to 96 million in the space of
a few months. Back
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