The Sustainable Development Convention 02 – Turning Agenda 21 into Action, has been organized by Ibex Knowledge System and the Bellagio Forum for Sustainable Development in Geneva, 30-31 October 2002.
Covalence SA: Quoting business ethics.
1/2. Basic Project Identification
Highlight
Summary:
Covalence SA
has developed a system for quoting business contribution to human development. An
online system facilitates the analysis of ethical risks and issues generated by
the operations of multinational companies in developing countries. Simultaneously,
the system allows civil society organizations to influence financial markets by
providing information on business ethics. The system concepts, database, charts
and quotes address the information needs of various economic and social actors
such as investors, companies, consumers, NGOs, governments, universities,
media, citizens and financial institutions. The information includes
conventional reputation analysis as well as the unique information required for
ethical investments.
Project contact:
• Name: Antoine Mach
• Organization: Covalence SA
• Address: 7 Place des Augustins
• City, State:
Genève
• Zip Code: 1205
• Country: Switzerland
• E-mail: amach@covalence.ch
• Telephone: (+41-22) 800 08 55
• Fax: (+ 41-22) 800 08 56
3. Background,
Process, Innovations, Achievements
Background, Goals & objectives:
Changing
pension regulations and social concerns have opened up opportunities for
investment managers, banks and other service companies to build a new range of
products. These range from ethical funds, to sustainable indices and include
shareholder’s proxy voting, thus shaping a new face to the financial industry. Most
financial brands have sustainable investment products available to their
clients. While some people are still arguing whether all this is a trend and
whether to invest in such products, others question the risk implied in the
management of exclusion criteria as well as the very appealing question of
including social issues into conventional risk management practices.
The Socially Responsible
Investing (SRI) intermediaries today concentrate their resources and research
on environmental and northern social issues. The developing (southern) world
lags far behind. Little or no information on southern countries is directly
available to market operators. In addition to this, cultural diversity and
ethical pluralism makes it very hard to justify the top-down approach of major
methodologies that are in use today in the SRI community.
Covalence has developed a
system for quoting business ethics, or business contribution to human
development, via a combination of a concepts, database, charts and quotes. This
online system facilitates the analysis of risks and opportunities generated by
the operations of multinational companies in developing countries. It addresses
the needs for information of society at large.
The system is a
pluralistic and participatory platform that allows for every voice to freely
flow to a perceptual space and influence the assessment of corporate
sustainability. To avoid the risk induced by a rigid definition of a set of
ethical values; Covalence has built a methodology conceptualised as an ethical
information exchange.
The 15 largest
pharmaceutical companies worldwide represent the core of Covalence’s prototype
to be tested with first clients in 2002. Raw information, scores and charts
show how these companies have reacted to recent pressures related to access to
medicines in developing countries, e.g. the 2001 South African crisis, and how
they manage their image relatively to such global ethical issues.
Covalence has invested in
the development of links with many civil society organizations, among them the
biggest NGOs in Switzerland, such as Swissaid, PPP, Helvetas, local
organizations and international NGOs including Amnesty International and
Médecins sans Frontières. Covalence has also been working on the organization
of the World Civil Society Forum 2002[1], which gathered hundreds of
NGOs from the five continents. This was an opportunity to build up the
visibility of Covalence.
Technology/Innovation
component(s):
Covalence Information
System has been developed by Covalence SA in partnership with NGOs, the
Graduate Institute of Development Studies, and our IT partner Cyberpro in
Geneva. This project is coordinated by Covalence’s Antoine Mach, head of
research, and Marc Rochat, head of business development[2].
What a company does and
what society wants is not known (not only ahead of time : always !). Covalence’s
starting point for the measurement of business ethics is to consider the
company as a black box and to focus on information inflow and outflow, following
general systems theory. Covalence collects and receives information from a
variety of sources. (Companies, NGOs, trade unions, governments, international
organizations, media, consultants, academics). Relevant information is then
spread among 45 indicators of business contribution to human development, each
embedded in regulations and principles accepted by most countries and
international bodies , and coded as positive or negative for the company’s
reputation. The result is an evolutionary measurement of its perceived social
performance.
“More precisely, we
define Social Demand as information on what the company should do, and Social
Offer as information on what the company actually does. Social Performance
equals Social Offer minus Social Demand. This methodology is rooted in notions
of democracy, pluralism, uncertainty, diversity and complexity, suited to the
modern world. Through this participatory model, Covalence allows for each voice
to influence the quotation of corporate sustainability, avoiding subjective,
personalized ethical judgments while providing the market with more
transparency.”
Targeted Groups /
Beneficiaries
Covalence is
dedicated to enhancing information density on risks and issues generated by the
operations of MNEs in the developing world. The Covalence system addresses the
information needs of society at large:
|
Parties or
stakeholders |
Utility or
added-value |
|
Professionnal Investors |
System for ethical investment
products and risk analysis |
|
The public (consumers,
investors, students, jobbers, workers, pensioners) |
Free information for better
use of consumer power and best choices in private investment. Help to shift
public information from crisis to constituents Improved access to local information
and distant issues |
|
Companies |
Better internal transparency
and perception |
|
NGOs |
Monitor impact, touch public,
identify new goals |
|
Media |
Better access to local
information and ethical issues |
|
Academics (universities,
colleges) |
Free material for the
advancement of knowledge |
Achievements:
• Interactive
market study in Switzerland and Europe among professionals investors
• Prototype
covering 50 companies with more than 2000 data, ready for testing phase 1
• Brand
creation, positioning in civil society and academic communities, credibility.
• Growing
network of sources among NGOs, trade unions, universities and the media
• Several
publications in French, English, German. See Publications at www.covalence.ch.
Problems addressed/overcome
• Created
methodology for quoting business contribution to human development
• Identified
indicators
• Define
information accounting system
• Developed
information system, sourcing procedures, user interface
Verifiable indicators
• Interest
expressed by civil society organizations for Covalence
• Interest
expressed by several professional investors for Covalence’s model and analysis
• Growth
of assets and qualitative expectations in Socially Responsible Investing
4. Project organisation, Backing &
Economics
Owner(s) of project:
Covalence SA, Geneva
Owner, collaborators- further
information:
Covalence SA, collaborating with the
Graduate Institute of Development Studies, Cyberpro, ADAP, GRAD, Maneco,
Amnesty International – Switzerland, Swissaid, Pain pour le Prochain, Helvetas
and other NGOs
Submitting organization or person:
Covalence SA
Contact : Antoine Mach, head of research &
development, amach@covalence.ch
Location of project implementation
Geneva, Switzerland
Scale of project site:
Global
Start and/duration of project.
Start : 2000
Duration : 4 years
Economics/Finance, Cost of project:
250’000 Swiss francs have already been
invested by Covalence (independent company with 6 individual shareholders in
Geneva). For the operations of 2002-2003, need of external funding through
debt, equity or another form (600 000 CHF) to conclude development of product
and begin marketing in Switzerland and Europe.
Self-Sufficiency / Longer term
financial plan.
Revenues, self sufficiency and growth
expected through commercial model.
5. Lessons of the past & Looking
to the future
What next ?
• Negotiate
financial partnerships
• Conclude prototype
• Test product with advisers and
customers
• Publish results in academic, financial
and civil society communities
• Expand network of sources (NGOs,
universities, trade unions, local media)
• Go live (2003)
• Launch marketing phase
Potential for replicability:
As an instrument for evaluation on a global scale,
the Covalence model can be adapted to northern issues analysis and the coverage
of Small and Medium Enterprises. Possibly the technology may be adapted for
analyzing operations of non corporate actors (NGOs, governments, international
agencies, foundations)
Media coverage
(see also Publications at www.covalence.ch)
World Civil Society Forum 2002,
Coordination Working Group on Private Sector
http://www.worldcivilsociety.org/onlinenews/
Responsabilité sociale et marchés émergents,
Antoine Mach, Banco Hors Série No 3, juin 2002. http://www.bancoweb.ch/emerging_markets/fr/articles/p77.html
Quelques pistes pour évaluer le
comportement social et environnemental des entreprises, Le Temps, 29 avril 2002
; http://www.covalence.ch/html/publetemps.html
Swiss business and human rights:
Confrontations and partnerships with NGOs, Antoine Mach, Fribourg University
Press, 2001, http://www.unifr.ch/iiedh/publications/series/dt2.pdf
La nouvelle agence de rating
Covalence se concentre sur les comportements dans les pays du Sud, Le Temps, 30
janvier 2002 ; http://www.covalence.ch/docs/letemps.pdf
Des ONG et des entreprises au service
des droits sociaux, Vanda Janka, Radio Suisse Internationale, http://www.swissinfo.org/sfr/Swissinfo.html?siteSect=111&sid=819432
L'évolution déroutante de
l'investissement éthique, Antoine Mach, L’Agefi, 27 août 2001 ; http://www.covalence.ch/html/articleagefi.html
Le pouvoir des ONG sur les
multinationales : pression, partenariat, évaluation, Antoine Mach, Annuaire
Suisse Tiers-Monde 2002, Institut universitaire d’études du développement,
Genève.
http://www.covalence.ch/docs/annCHTMfr.pdf
[1] WORLD CIVIL SOCIETY FORUM,
Geneva 2002, 14-19 July (public), 8-20 July (participants) www.worldcivilsociety.org
[2] With Ngenda
Kigaraba, networking and finance ; Jean-Félix Savary, NGOs contacts ; Steven
Street, legal advisor.