Saturday, 20 June 2009

Shame on Boots

A few years ago I was trying to get an event together about the ethical and environmental impact of private equity. On the positive side are groups like Generation who plan to use this mechanism to go further than any shareholder would allow in retrofitting major corporations for a low carbon economy. But on the negative side are the greedy bastards, pushing management to do anything to hype maximum short term growth so that their returns on equity (leveraged by bank debt) go sky high. The groups who I approached to host this event worried that since private equity firms are the dictatorships of business, no-one would dare speak out against them, certainly not as insider, but probably not in the media and consultancy realms either.

All of which is context for the announcement that Boots, a former quaker family business and always a benevolent presence on the high street, but now under private equity ownership has quit the Ethical Trading Initiative; a scheme set up after the wave of sweatshop and worker exploitation scandals in the 1990s, whereby most of the major UK retailers for instance guaranteed to only work with suppliers that pay at least the minimum wage.

Dan Rees, director of the ETI, said to The Guardian: "We are deeply disappointed that Boots have taken this decision, particularly at such a crucial time for the world's most vulnerable workers, who are bearing the brunt of the global downturn. The days when high-profile businesses could consider ethical trade as an optional extra are now gone. In our view, it is not the right time for major brands to be rolling back their commitments on labour standards, nor does it make good business sense."


Mallen Baker said...

Hi John

There's a bit more to it. Boots wanted their suppliers to be reviewed both on environmental and labour issues - ETI would only do labour issues. Boots is therefore paying Business in the Community to do both, using the money that they used to use for ETI membership.

I do worry when membership of specific groups like the ETI is equated with commitment to the issue, and when companies that were welcomed into a scheme are vilified when they leave - making it a higher risk proposition to join than to stay with those who do nothing at all.

You can argue about whether their choice of an alternative partner is right, or whether their decision is right. But this 'bad private equity cuts corners' line is jumping to conclusions that are not warranted in this case.

John Grant said...

Hi Mallen from your links you obviously know the BiTC side of the story.

First thing to note is that while this is a blog, the story about them bailing out was a direct quote from the ETI reported in the Guardian.

I'd like to know what public commitment, verified and inspected in sensitive developing world manufacturing locations will replace the ETI in Boots supply chain. The ETI was never fairtrade ('living wage' vs double market rates). But most of us out here were big fans of the scheme existing at all despite Tesco and various others being criticised for failing to honour their commitments to ETI, that was almost the point; get the whole British High Street to make a commitment and let NGOs police them on it. If they arent able to disclose these policies by the way it is a huge step back, because you knew where you were with ETI.

Do you have the technical spec of your BiTC standard? I am working with the guy who wrote the environmental component of Fairtrade and could give me a view on whether Boots are increasing their commitment or not? I'd be happy to write a glowing retraction if Boots are actually materially upping their game - but I'd also the advise sacking their PR team if so!

On private equity I've seen it first hand, it's very ugly, they are the Pinochet's of capitalism. There are good and bad in all sectors, but... - I've not heard many 'good' stories aboout PE outside Generation Capital - it is definitely something to be watching like a hawk and questioning any such move. Even just to remind them we are watching. You will remember the KKR/coal fired power station thing a few years ago? Was a useful warning shot across the bows in my view.

Libby Davy said...

Reminds me of the night I watched The Corporation and all those years of wanting to agit from within on triple-bottom line stuff feel by the wayside as the legal entity itself crippled my hope.

Now I look to the co-op movement for a structure that works, but hmmm... when exactly will Adam Smith roll over, and what's next!