The following article should answer your question. . . The New Brand Tax The Wall Street Journal 9/7/2004 by James Allen and James Root For famous-brand companies, it must feel like few of their good deeds count. Over the years, they've met demands for increased social and environmental responsibility within their operations. Now, activists say they're also responsible for what occurs outside -- everything from how independent contractors treat employees to the way suppliers extract raw materials. For CEO's of household-name companies, this starts to look like an added cost of doing business -- a brand tax, holding renowned firms accountable for links in their value chains that they don't control. Activists have a ready audience: An Environics study showed that at least two-thirds of 25,000 consumers in the U.S., Canada and Western Europe form impressions based partly on a company's ethics, environmental impact and social responsibility. As one Greenpeace member put it: "[Targeting brands] was like discovering gunpowder for environmentalists." Many brands find themselves on the defensive. Witness Gap Inc.'s recent analysis of the shortcomings at some of its 3,000 independent clothing factories. Gap was honoring a pledge to be more transparent about exploitive practices among its suppliers. Yet many companies avoid Gap's example, even when they wish to do the right thing, fearing added expense and self-inflicted criticism. How can companies deal with these growing pressures? There are two key ways. First, they can focus on values, not boycotts. One company doing this well is Unilever. The Anglo-Dutch concern monitors its global environmental and social initiatives and publishes yearly progress reports, explaining, for instance, that 90% of the energy used in its Indian tea factory comes from renewable resources, compared with just 14% in 1999. Yet Unilever's issue-management skills began in crisis. In the mid-1990s, Unilever and environmentalists shared a big problem: Marine fishing stocks were dangerously depleted. Nobody wanted over-fished seas -- not the World Wildlife Fund, which sought more stringent fisheries management, nor Unilever. At the time, Greenpeace was running a public-relations campaign against Unilever's practices in buying what today amounts to about 300,000 metric tons of frozen whitefish yearly. Unilever took bold action. It joined with WWF in 1996 to form the Marine Stewardship Council, today an independent certifier of 12 fisheries, from New Zealand hoki to Alaskan wild salmon. Certification organizations require that producers comply with environmentally sound processes. To obtain the MSC label, fish products must come from well-managed fisheries that preserve surrounding ecosystems. Today, more than 30 such international bodies certify products ranging from Fair Trade coffee to eco-labeled wood. Unilever demonstrates that greater accountability requires building values not "values departments." Assigning the task of monitoring and compliance creates the convenient excuse that someone else is handling the problem. CEO's must ensure that all employees feel empowered to resolve problems. The second key way companies can manage value chain issues is to pay most attention to those closest to "home." One effective approach assigns different actions depending on how close issues land to the core business. Dead-on concerns clearly associated with the company's brand require direct engagement with NGOs or consumer groups -- footwear suppliers to Nike, for instance, or coffee suppliers to Kraft. Unilever has also formed a Sustainable Agriculture Advisory Board comprising outside experts to assess its food suppliers. Issues just outside center can erupt when a company has knowledge of an issue, but limited direct involvement. Such issues are often best pursued in broad initiatives. De Beers' condemnation of "conflict diamonds" is an example. Unilever isn't the only company trying to ensure its principles among suppliers. But it will remain among the few until more companies see evidence that certified products can deliver a business benefit. Unilever's effort, explains Dierk Peters, the firm's international marketing manager for the frozen foods sustainability initiative, "is about reinforcing brand preference, which we see as a precondition for profitable growth." Consumer awareness of that effort "is only at the beginning," he adds. But trends look promising. By 2005, Unilever aims to source nearly three-quarters of its fish from sustainable sources, while the big European retailer Sainsbury's, which Unilever supplies, has announced plans to distribute only MSC-labeled fish by 2010. As such initiatives gather momentum, big consumer products companies need to be not only well known, but also well regarded.