As the webcast beamed out live to an audience of over a thousand viewers, thought leaders including The Economist’s Matthew Bishop, ThomsonReuters’ Chrystia Freeland, UN Global Compact’s George Kell, BSR’s Aaron Cramer, Campbell Soup’s Dave Stangis and GE Foundation’s Bob Corcoran argued about concept that evidently means different things to different people. As moderator of the debate, my intent was to “navigate” the conversation to the point where a “side” would “prevail.” But within the first few minutes, I realized why efforts in this direction were futile.

“What do we mean by corporate social responsibility (CSR)?” asked Karnani. “It’s not just that the terminology is clunky. It is also unclear.”

Indeed, it is unclear. According to a study published by Wiley InterScience, there are approximately thirty-seven different definitions of CSR floating about the business world. This problem is compounded by dozens of competing CSR or sustainability-related measurement and certification programs. Do well-meaning corporations adopt Cradle-to-Cradle or B-Corp standards? Should they join the Global Compact or Social Accountability 8000? Do Fair Trade or Ethical Trade models make the bigger difference? Who knows?

What we do know is that the old-school CSR rhetoric utterly fails to resonate. At least that was something both sides could agree on. “The problem with the rhetoric is that it can create confusion about what a business is doing in it’s core, versus what it likes to talk about or claim public credit for,” said Freeland, who pointed to campaigns issued by BP, PepsiCo and Goldman Sachs as examples of marketing hypocrisy.

Beyond the language and clear instances of greenwashing, however, there was a deeper point to be made, particularly by practitioners on the panel. When so-called CSR is most effective – when it generates so much value for stakeholders and shareholders that corporations cannot afford to stop investing in it – then it is no longer regarded as CSR, but good business strategy. GE’s multi-billion dollar investments in clean energy and affordable health care stand as a testament to this.

“If you label CSR or corporate citizenship as purely a philanthropic activity, then I agree that’s misguided,” said GE’s Corcoran. “[Authentic CSR] is about the core of what a business does, how it does that, and what it sells that is of value, that helps to meet unmet needs.”

Campbell’s Soup’s Dave Stangis agreed. “CSR is there [at Campbell’s] not because it’s nice to do, but because it makes the company better. It takes money from the supply chain, makes us more nimble and drives innovation.”

Still, despite the demonstrable move toward CSR-driven business models, Karnani insisted that corporations have no obligation to solve society’s ills. “That is the role of government regulation,” he said. “Governments are a far more effective protector of the public good than any campaign for corporate social responsibility.”

Here is where a second key distinction lies. It is one thing for corporations to conduct business ethically – trading within boundaries set by law. However, it is quite another thing for corporations to use laws as a strategic compass. Those that do will be playing catch up forever.

There is also the matter of our transformed society. “We don’t live in a world where government’s only job is to set and enforce rules and businesses only job is to sell products and services within those boundaries,” said Cramer. “We live in a transparent world, a globally connected world, a world where civil society plays a big role, where global markets exist but global governance does not.”  Despite the clunky language, today’s CSR is fundamentally about collaboration, which means getting to optimal solutions faster than if we waited around for regulation or business to advance independently, Cramer explained.

“What is really going on here is a struggle to determine what tomorrow’s markets are going to be in a world that’s changing very fast, where all the old boundaries are breaking down,” said Bishop. “Now we’re all workers, consumers, capitalists and voters. And we’re trying to work out the right institutional arrangements to govern in that new world.”

So where does the “Great CSR Debate” leave divided minds? Perhaps right back where they started, or perhaps pondering the following choice: respond to the new reality, or don’t. Stangis put it this way: “This isn’t a debate about right or wrong, winning or losing. For me, it’s about changing the world, one company at a time – or sitting on the outside describing why that can’t happen.”

When companies lose trust, they often lose capital. Case in point: Gulf disaster stocks BP, Halliburton, Transocean and Anadarko each sank between 25 and 45 percent during the past four months. The Goldman Sachs-SEC debacle pushed company shares down by 15 percent, and the Dow down by 130 points. Massey stock plunged 42 percent following a deadly string of safety failures. Toyota shares dropped 16 percent following its massive recall. And as of today, none of these companies has fully rebounded, indicating the markets grow slower to forgive.

“The last couple of years have provided plenty of reasons for a building sense of mistrust,” says Motley Fool’s Alyce Lomax. “Goldman Sachs and BP have become the most recent high-profile examples of the many big institutions whose highly paid managers seem to be only out for themselves. ”

Indeed, the lost faith Lomax describes seems to be the principle reason why many more investors demand greater honesty, disclosure, transparency, and professionalism from corporations – and flee stocks that don’t deliver. According to a recent Wall Street Journal article on the topic: “Small investors’ faith in stocks, which surged in the 1990s, has collapsed since the technology-stock debacle and the Enron and WorldCom scandals of 2000-2002…Investors talk of a growing disillusionment with big institutions, including corporations, government, banks and political parties.”

The reasons for today’s trust deficit are clear enough. What apparently isn’t as clear, particularly to the large corporations whose stocks are affected, is what to do differently in order to set things straight.

For the most part, the corporations mentioned above used a classic crisis management approach: deny, deflect, spin, repeat. Rather than open up, they withheld information. They denigrated critics, blamed others and refused to answer pertinent questions or engage in meaningful debate. They hid behind the veneer of canned statements and corporate rhetoric – with the occasional blunder thrown in.

There is “no evidence” that huge plumes of oil are suspended undersea, said BP. The charges against us will “hurt America,” said Goldman. The safety-related allegations against us are “a big lie,” said Massey. The independent research from Stanford University was “staged,” said Toyota.

When it comes to rebuilding lost trust, propaganda makes a bad problem worse. What improves situations is candor. Candor conciliates, clarifies and cuts through hype. Candor works. It’s the greed of the Twenty-first Century.

“Candor in business – or in any kind of organization – is a rare and wondrous thing,” write Suzy and Jack Welch in their book, Winning. “Rare because so few companies have it. Wondrous because when they do, everything just operates faster and better.”

Consider the success of online retailer Zappos, which grew its recently acquired, billion dollar business in under five years by forging open and honest relationships with people. From its standing invitation to the general public to come tour Zappos’ headquarters to its progressive use of blogs, videos and books – Zappos gives people outside the company an uncensored look inside the corporate culture. It even goes to so far as to share best practices with competitors.

“A lot of companies feel they need to guard the secret sauce,” said Zappos marketing executive Aaron Magness in a recent interview. “We’re very open to talking about our business model and plans with everyone. We’ve learned a lot along the way and made mistakes that a lot of other companies don’t need to make.”

Smart companies like Zappos don’t just aim for candor. They leverage it, invest in it, profit from it, and build new communities around it. For instance, Sun Microsystems CEO Jonathan Schwartz blogs freely about what his company and industry does right and wrong, engaging people on all sides of his business. Apparel company Patagonia tracks the social and environmental impact of its products from design through delivery, encouraging customers to buy smarter and contribute to rich discussions. Seventh Generation reveals the full list of ingredients used in its household products, earning customer loyalty and pressuring its industry to follow suit.

Candid companies help restore lost trust and balance to the markets. Rather than telling shareholders or stakeholders what to think, they allow the community to draw its own conclusions, which is precisely why people believe in them. As Seventh Generation’s Jeffrey Hollender said in a recent speech: “You can’t judge yourself to be sustainable or responsible. You can only be judged by others.”

“Company stakeholders from investors to customers to employees to regulators watch the 100 Best Corporate Citizens List closely, and are using it now more than ever to make important decisions,” said Corporate Responsibility magazine publisher Jay Whitehead in a recent press release. “As a result, making the List is worth millions or even billions in increased shareholder and brand value.”

This should be good news for Citigroup, Goldman Sachs, ExxonMobil, Chevron and Monsanto which, despite their notoriety, have been counted as “Best Citizens” by Corporate Responsibility numerous times. “When someone asks you to define corporate transparency, show them this list,” touts the magazine. But to an increasing number of observers, the transparency seems elusive – as does a clear indication of what the CSR industry stands for.

“Corporate Responsibility magazine’s so-called transparency only extends one layer deep,” observes Sea Change Media executive director Bill Baue. “We can see the categories and weightings, but we can’t see the rationale behind the decisions on actual scoring of company performance.” Baue notes that organizations including Corporate Responsibility collect data from business executives whose names and positions are not revealed, leaving questions about a company’s true impact on society unanswered. “Input from external stakeholders would make the methodology much more robust and credible,” he says.

Baue isn’t the only one questioning the value of CSR performance rankings. As evidenced by blogs and discussion boards across the web, a growing number of people are frustrated by CSR industry lists and the manner in which they are constructed. Some even perceive a pattern of favoritism. “Unlike programs like the Nobel prizes, Macarthur Fellowships, or Economist Innovation awards, the companies that run CSR awards and lists often have an incentive to fix the results,” says Martin Smith, founder and CEO of CSR industry website Just Means. “For instance, Corporate Responsibility magazine makes money from the companies that it rates in its annual list (through sponsorship, registration fees for events, and brand licensing arrangements). This, in any industry, would be seen as a conflict of interest, but in the realm of CSR and business ethics it is purely hypocritical.”

The backlash against CSR industry lists is nothing new. Last year, financial news site 24/7 Wall Street warned global equity investors to take Ethisphere’s results with a grain of salt, indicating: “the basis on which [the list] was put together is a bit naive and it appears to be troubled by several conflicts of interest.” In 2005, green business writer Joel Makower criticized Corporate Knight’s approach, saying: “The rankings only go so far. The whole exercise raises as many questions as it answers.” And when Corporate Responsibility magazine (previously called Business Ethics) first released its list, green media company AlterNet complained: “When one looks at this list, it is easy to be baffled at the real meaning of CSR. It is riddled with companies that have significant blemishes on their record when it comes to environmental matters, labor practices or treatment of customers. The likes of Wal-Mart and Big Oil have not yet made the cut, but that may be only a matter of time.”

Clearly the time has come, as many of the world’s most profitable oil, food, agriculture, pharmaceutical and retail companies are featured on the latest “most ethical,” “best citizen,” “greenest,” and “most sustainable” company lists. Given this fact, one has to wonder: Is the CSR industry completely missing the point? And if so, then so what?

Critics see several downsides to the muddle. “CSR is often too hard for the average consumer to grasp when making a purchasing decision, so companies use lists as stamps of approval,” says Smith. “But unfortunately, not only are the lists misleading for consumers, they actually bring an overall lack of credibility to the entire field of sustainable business.”

Given the importance of sustainable business practices to the future of the planet and its people, this lost credibility is a real concern. “The most vital CSR issue to measure is whether a company is operating sustainably, in the scientific sense,” says Baue. “Environmentally, for example, is the company using natural resources at a rate that allows for the planet to regenerate them sufficiently to provide for future generations?  Unfortunately, almost no companies [on the lists] fully integrate sustainability into their business models, and almost no CSR industry lists consider the sustainability context.”

What Next?

If inclusion on a CSR list translates to “millions or even billions in shareholder and brand value” as Corporate Responsibility magazine indicates, then it stands to reason that some investor and consumer wealth is being channeled in the wrong direction – toward companies that, to Baue’s point, may invest a few pennies in CSR, but make millions or billions of dollars in profits by selling things in ways that take a huge toll on society. This isn’t right. But are CSR industry lists entirely wrong? Not according to some profiled companies.

Dave Stangis, vice president of CSR and sustainability at Campbell Soup Company (which ranked number 12 on Corporate Responsibility magazine’s 2010 list) sees both an underlying purpose and a path forward. “No matter how bad a list is, there is something inherently useful about it,” he says. “It is easy to look at a list and poke holes in it, but what I’m trying to do is use the methodology and questions asked to determine what strategic elements I need to improve inside my company.”

Corporate Responsibility’s analysis, conducted by investment firm IW Financial, assesses 360 data points of public information across seven categories, including human rights, philanthropy and environment. But unfortunately, the same breadth of field that helps companies like Campbell’s to identify strategic weaknesses allows controversial companies to slip through the cracks. “People were up in arms this year, wondering how an oil company like Hess could be considered the tenth best corporate citizen,” says Stangis.  “But in terms of the questions IW Financial asks, such as: Does the company measure its carbon footprint? What violations occurred? How many people were injured? Hess fared well, since they got credit on the disclosures.”

Disclosures aside, many are wondering when CSR industry lists will get around to rewarding companies for creating positive value rather than merely mitigating risk. “These lists should showcase companies that are helping us innovative away from industries like oil, vertically integrated agriculture, and so forth,” Smith says. Stangis agrees: “I think the lists of the future are going to have to better address the issue of strategic opportunity. The real question is: can we finally come up with a list that rewards companies for producing products and services that meet unmet [social and environmental] needs, rather than just minimizing potential damage?”

Surely, that would be something worth recognizing.

“Most consumers don’t know where the gold in their products comes from, or how it is mined,” says NoDirtyGold.org, a group that encourages retailers to cease carrying gold that comes from illegal sources.  “Gold mining is a dirty industry: it can displace communities, contaminate drinking water, hurt workers, and destroy pristine environments.”

Dirty gold is no marginal issue. According to a recent 60 Minutes report, dirty gold mining is rather pervasive, and is also responsible for “the deadliest war since WWII.” Five million people have reportedly died in the Democratic Republic of Congo in a war primarily funded by gold mined in the country by warlords, and then smuggled out to be sold in retail stores around the world. Could that bracelet you just bought at Wal-Mart have come from illegal gold originated in Congo? According to 60 Minute’s findings, it is a vague possibility.

As part of an in-depth investigative research process, 60 Minutes talked to some of the Nation’s premier gold retailers in order to determine which companies could trace their gold back to a particular mine. One retailer, Tiffany & Co., said it could trace nearly all of its gold back to a particular mine in Utah. On the other hand, Wal-Mart, the nation’s largest purveyor of gold, was far less certain about the origin of its products. The company said it plans to trace the source of 10 percent of its gold products by 2010. But given the scope of the tragedy in Congo, critics say Wal-Mart’s plan leaves much to be desired.

“Wal-Mart has moved so dramatically and impressively on its sustainability initiatives, that it’s surprising, and disappointing, to see them moving so tentatively on dirty gold,” says Gil Friend, author of The Truth About Green Business and CEO of sustainability consulting firm Natural Logic. “Their goal is too low, and their pace is too slow.”

As Friend and 60 Minutes point out, if Wal-Mart were to demand traceability all the way back to the mine on all the gold that it sells, it could have tremendous commercial implications for the industry – not to mention help put an end to a tragic war. In appreciation of this fact, Wal-Mart just signed on to support NoDirtyGold’s “Golden Rules” of gold mining, along with retailers Kmart, JCPenny, Blue Nile, Van Cleef & Arpels and many others.

Grassroots campaign support is at least an optimistic sign. It represents a first step toward ethical gold sourcing and sends a message to the market that will hopefully help to kick off the process of purging illegal gold from the global supply chain. But as gold industry insiders point out, in order to successfully shift to a socially just and truly sustainable industry “gold standard,” there is still quite a distance to travel and also, systemic issues to consider. For instance, to what extent are communities around the world affected by gold mining? And what about the industry’s overall ecological footprint?

“Customers need to understand that the environmental impact of gold mining in our own country is quite devastating, even though the US is a developed country with strong environmental policies,” says Meghan Connolly Haupt, founder of San Franciso-based sustainable fine jewelry company C5. “The largest mine on earth is actually in Utah and measures 2.5 miles wide and one mile deep. It is visible from outer space. This is an important piece of information for consumers because it helps shatter the perception that the issues associated with mining are exclusive to developing countries.”

Haupt explains that no matter where it occurs, gold mining is associated with the destruction of habitats and volumes of waste. One gold ring results in more than 30 tons of mine waste, she says. And that’s a quantity that continues to go almost completely unchecked. Where are the industry standards and safeguards?

“The industry as a whole has operated in almost the same way for many decades with little regard for the environmental and social impact,” says Haupt. “Lack of customer demand is often quoted as the reason the industry has been slow to change. But mining is a global industry and there are no universally accepted standards or industry certifications at this time. Those companies with the resources to devote to promoting change are often those that are the most stifled by existing operations.”

Perhaps that’s why large retailers lag behind pure-play, sustainable jewelers like C5 in terms of sustainable performance. In C5’s case, the supply chain is miniscule by comparison, so clearly there is a built-in advantage. Innovative, sensible and sensitive methodologies are a lot easier to implement and achieve.

Haupt crafts jewelry made with either recycled or fair-trade metal, using processes with minimal social and environmental impact. As her company reminds consumers, every piece of jewelry purchased from C5 versus a mainstream jeweler is one less that contributes to pollution, destruction of habitats, forced labor, displacement of communities and other negative impacts.

“I started C5 company to help create a systemic change in the jewelry sector,” says Haupt. “By leading the sustainable jewelry movement, we are helping to raise the standard of business, which translates into positive economic development in some of the world’s most impoverished countries.”

C5 is just now launching its first two collections of finished jewelry, and according to Haupt the company will be expanding those lines in 2010. Though as a start-up C5’s financial future is somewhat uncertain, its value proposition is abundantly clear. Talk about your statement pieces.

In the midst of Hollender’s widely publicized transition (and on his way to holiday in Greece, in fact), I managed to catch a few moments of his time – along with a welcome burst of inspiration.

Q: You’ve lead Seventh Generation for more than 20 years, growing the brand from a fledging start-up to a household name. What prompted your decision to step down as CEO – and what’s next for you?

A: I decided to step down for two reasons. First, to continue to lead the business to its greatest potential in a highly competitive marketplace requires a depth of experience that I simply don’t have. A business of $150 million requires more than my intuition. Second, my passion for fulfilling Seventh Generation mission “to inspire a more conscious and sustainable world by being an authentic force for positive change,” can best be fulfilled if I now focus all of my time in it’s direct pursuit through speaking, writing, educating and influencing other business. I have two books in progress, a TV show (Big Green Lies) and a significant corporate educational program that we will announce in the next 30 days – so I won’t have trouble keeping busy.

Q: Seventh Generation has set a goal to grow its annual business from its current level of about $150 million per year to over $1 billion in the coming years. That’s aggressive. What are the keys to achieving this?

A: Remain radically transparent, stay true to who we are, pursue our mission with passion, hire the most talented people we can find, listen carefully to our customers and make sure we always have more capital than we think we need.

Q: Are you concerned that, with rapid growth, any aspect of the brand will become diluted? How will the company ensure that this doesn’t happen?

A: That will always be a critical concern. So far we strengthened our culture as we have grown by investing time and resources to ensure our community remains deeply connected to our mission. Personally, I will remain directly involved in ensuring that our purpose isn’t compromised as we grow. We have also developed some powerful institutions and rituals that help ensure we stay on course, from our annual all-company retreat to frequent meetings with senior management where staff members are encouraged to ask tough questions. The success and vibrancy of our brand in the marketplace and its impact and relationship with consumers is directly tied to the investment by the very people who drive, mold, invent and reinvent Seventh Generation day in and day out – their passion and authenticity is Seventh Generation’s vitality and this directly extends to our consumers. They relate to it.

Q: What do you say to those who those who worry that by bringing in Mr. Maniscalo, a Quaker/PepsiCo executive, Seventh Generation is “selling out?”

A: Chuck is here precisely so we won’t have to sell out. Most successful mission driven companies have been sold to large CPG companies because they couldn’t scale up independently. We’re acquiring the talent to ensure our independence and commitment to our mission.

Q: You’ve had an inspiring career and are credited not only for pioneering green cleaning products, but green business practices in general. What’s the greatest lesson you’ve learned — and if you could, is there anything that you would do differently?

A: I spend no time ever thinking about reinventing the past. There is much to much work to do that lies ahead of us. But the greatest lessons I’ve learned are that we need revolutionary, not incremental change. Businesses and NGO’s must cooperate more effectively. We need to move from being less bad to being truly good, and we need to recognize that the goal of sustainability is not enough. We must regenerate our planet. Human development represents unlimited potential, and anything is possible.

Amen to that.

Kozlowski is absolutely right.

The premier financial institutions of today – AIG, Barclay’s, Bank of America, Merrill Lynch,Citigroup, Goldman Sachs – make Enron’s 2001 accounting scandal look like child’s play. After taking $17.5 trillion in taxpayer money (in the form of loans, guarantees and bailouts), top-tier US banks Goldman Sachs, J.P. Morgan Chase and others experienced record earnings in 2009, prompting them to dole out an unprecedented $29.7 billion in executive bonuses. Citibank and Bank of America increased interest rates on credit cards and basic checking, boosting fees by as much as 50 percent. Meanwhile, the industry as a whole remains staunchly opposed to consumer protection reforms of any kind, raising serious ethical questions.

Have mainstream banks learned a single lesson from Enron’s past mistakes? Apparently not. And what’s more, the Sarbanes-Oxley Act (SOX) – which was created in an effort to improve disclosure provisions, ensure auditor independence and strengthen corporate governance procedures – hasn’t made a drip of difference. There seems to be less financial transparency and oversight today than there was before SOX was instated in 2002. Big banks want SOX overturned, and they might have their way.

But even as legislation flounders and banking giants stay their course, the public moves in a new direction. A record number of people are flocking toward reputable and transparent companies like Boston-based Wainwright Bank & Trust and Bristol-based Triodos Bank.

Here are two community banks that, albeit on a smaller scale, manage to thrive despite the ongoing credit and investor confidence crises. While Triodos experienced 8 percent growth during 2008, Wainwright’s first quarter 2009 profits increased an impressive 33 percent.

“All this turmoil in the financial markets has continued to create opportunities for us to capture additional market share,” says Wainwright founder and co-chairman Richard Glassman. “We are pleased that there continues to be a market for our products and approach.”

The “approach” of which Glassman speaks is key. In fact, both Wainwright and Triodos sell the same products that you can find at any big bank – checking accounts, savings accounts, loans, etcetera. That’s not what drives their performance. It’s how they sell their products, how they conduct business overall, that sets them apart from their peers.

At Wainwright a socially progressive agenda represents an ever-important second bottom line to the company. “One platform sustains the other,” Glassman explains. “Our business success is fueled by the difference we make in our community.”

To date Wainwright has issued over $700 million in loans to community development projects like affordable housing and HIV/AIDS services. Remarkably, it has experienced virtually no defaults on those loans. In addition Wainwright has the highest level of customer loyalty and lowest rate of employee turnover in its industry.

Triodos also thrives by helping to improve people’s lives for the better.  “We want to act as a bridge between savers and investors on the one hand, and sustainable companies and projects that need financing on the other,” explains board Chairman Peter Blom. “[With us] savers and investors know what happens with their money. In this respect, the banking sector has failed badly in recent years.”

Wainwright and Triodos aren’t the only ones profiting from systemic failures on Wall Street. Community banks across America and Europe are benefiting, as customers seek institutions they can trust.

At the UK’s Co-Operative Bank for instance, pre-tax 2008 profits increased 69 percent from 2007. At  California Community Bank, first quarter 2009 growth increased 26 percent from 2008. And at Liberty Bell Bank in Cherry Hill, N.J., first quarter 2009 growth increased 14 percent.

A recent survey conducted by Independent Community Bankers confirms that these results are not atypical. Community banks are getting new customers at a faster rate than in the past, with 57 percent experiencing an increase in new retail customers and 47 percent seeing an increase in new business customers compared to last year.

Though not immune to the challenges facing all financial institutions, community banks do offer realistic and profitable alternatives to traditional banking methods.

To start with, rather than serving the narrow interests of a few shareholders, community banks acknowledge wider stakeholder communities. As opposed to treating lower-income customers and charitable organizations as a liability, they view them as a worthy opportunity. Instead of hiding risk, they openly disclose their investments and methods. As an alternative to pushing product, they prioritize people and relationships. And in lieu of imposing pre-set terms, many community banks structure loans around the needs of individual borrowers.

“When Wainwright was founded, it was one of fourteen thousand banks in an undifferentiated industry with fungible products and commodity pricing,” says Glassman. “Now we’ve ended up as one of our region’s best-known banks with a constituency that knows exactly who we are and absolutely loves what we do differently.”

The fact is that community banks are genuinely different, which is why they are the preferred choice by more people around the world. Their lessons turn conventional banking wisdom on its head. Let’s just hope it stays that way.

Last week three Shell executives – Bjorn Edlund, Executive Vice President of Communications, Nick Welch, Head of Policy and External Relations and Nick Wood, Vice President of Communications – joined the Justmeans community for a provocative conference call about the Wiwa v. Shell case and the company’s recent $15.5 million human rights settlement.

“We are trying to make ourselves available by using different avenues of social media to reach out to more people with a response,” says Shell’s Welch. “It’s our goal to respond as human beings, not as some big corporate machine. If this conversation stimulates people to want to learn more, then that will be all the better.”

The conference call was illuminating for those participating, and also timely. Just hours before the call took place, news broke of a terrorist attack on a major oil pipeline supplying Shell’s Bonny export terminal in Nigeria. In an e-mail sent to various news organizations, the militant group claiming responsibility, the Movement for the Emancipation of the Niger Delta (MEND), described their motive:  “The region where the wealth within the city has been built remains mired in poverty and lack. The people who own the resources have no stake in it, for which we have now waged a war to emancipate.”

Seemingly unruffled by the transpiring drama, Shell executives explained why this is only the latest in a string of similar attacks against the company’s Niger Delta facilities. “There is unrest because people see oil and gas operations generating billions of dollars in revenue, but people aren’t getting any of the benefits from that,” says Wood. “Communities are targeting companies such as Shell because they want a greater share.”

As with most oil rich Nations, Nigeria’s oil resources are controlled by the Federal Government, which then issues oil exploration and production rights to corporate partners in exchange for a share of profits. Oil presently accounts for 95 percent of Nigeria’s earnings and 80 percent of the government’s total revenues. But most of Nigeria’s 30 million citizens live below the poverty line, with no access to electricity, clean drinking water or other amenities enjoyed by Westerners. To add insult to injury, citizens living close to Shell refineries can plainly see the gas flares that contribute significantly to local air and water pollution, as well as global warming. These variables converge to create a terrible tension.

“What started as action by communities has over the years grown into a criminal movement,” says Wood. “[MEND] is heavily armed. They steal our crude oil, they attack our facilities and they pose a large threat to our staff working in the Niger Delta.”

According to Shell over the past three years 133 company employees and contractors working in the Niger Delta have been kidnapped, and five have been killed in assaults. Attacks from MEND are estimated to have forced oil companies including Shell to shut down at least 133,000 barrels per day of oil production in the last month, diminishing corporate profits and reducing Nigeria’s oil output by as much as 40 percent. That lost income creates a big incentive for military government intervention.

In mid-May the Nigerian military launched an offensive against MEND, bombarding rebel camps from the air and sea and sending in three battalions of ground troops to hunt them down. The offensive is said to have done little to quell the group’s resolve, however. Military attacks such as this one are known to sometimes displace villagers from their homes and also prevent people from accessing humanitarian aid. If anything, the Nigerian military’s notorious “kill and go” strategy potentially encourages some elements of the insurgency to become even more determined. Given MEND’s motives and the remote mangrove creeks of the Niger Delta, industry and security experts say that it is virtually impossible to guard against future attacks.

With no end to the violence in sight, Nigeria’s president, Umaru Yar’Adua, offered amnesty to militants in the Niger Delta this past Friday as part of his strategy for helping to protect national security and oil industry interests. For its part, Shell says that it is placing more emphasis on community outreach initiatives that create economic, social and environmental benefits for Nigerian citizens, but at the end of the day there is only so much the company can do.

“When it comes to [establishing] law and order, that’s not a Shell issue. This is not the sort of situation where we can get reasonable thinking people in a room and talk about it and sort things out,” says Wood. “The long-standing feuds between different groups of people, the huge economic interests on the legal and illegal side of things, makes this quite an intractable situation and a very difficult area to be in.”

Facing serious economic and ethical challenges, Shell is in a tight spot. Should the company decide to withdraw from Nigeria, then it would lose one of its most important markets, as it controls almost half of the 2.5 million barrels of oil that Nigeria exports daily. On the other hand, should Shell remain in Nigeria, then it will continue to come up against the nearly insurmountable struggles of staying ahead of security risks and also, reframing the past.

The Ogoni Legacy

Ogoniland, the 404-square-mile area off the coast of the Gulf of Guinea, is where Shell’s troubles in Nigeria all began. The Ogoni people, who represent less than two percent of Nigeria’s population, rose to international attention after a massive public protest campaign against Shell was led by the Movement for the Survival of the Ogoni People (MOSOP).

MOSOP’s campaign is ongoing, although it is not a terrorist group and is in no way affiliated with MEND. Founded in 1990, MOSOP’s mandate is to use non-violent protests in order to promote democratic awareness; protect the environment; seek social, economic and physical development for the region; protect cultural rights and practices; and seek appropriate rights of self-determination for the Ogoni people.

Activist and author Ken Saro-Wiwa served as founding member and president of MOSOP until 1995, the year he died. According to the website www.wiwavshell.org, in 1994 Saro-Wiwa and eight other Ogoni leaders were prevented by the Nigerian military from attending a protest gathering which left four Ogoni chiefs dead. The bodies of the four chiefs were never found. Despite the lack of evidence, the military government accused Saro-Wiwa and the eight other MOSOP members of causing the deaths, and arrested and detained all nine men. Eighteen months later, Saro-Wiwa and five others – John Kpuinen, Saturday Doobee, Daniel Gbokoo, Felix Nuate, and Dr. Barinem Kiobel – were executed. The military also conducted raids on 60 towns in Ogoniland and detained and beat several hundred men suspected of involvement with MOSOP.

Saro-Wiwa fought vigilantly for human rights and environmental justice for most of his career. He was nominated for a Nobel Prize and awarded the Right Livelihood Award and the Goldman Prize. Reportedly, his last words were: “Lord take my soul but the struggle continues.”

The lawsuit Wiwa v. Shell was filed in 1996 on behalf of 10 plaintiffs, who include family members of the deceased victims. According to the complaint, plaintiffs allege that Shell officials helped to supply Nigerian police with weapons during the 1990s, that they took part in security sweeps in parts of Ogoniland, and that they hired government troops that shot at villagers who protested against a pipeline. They also allege that Shell helped the government to capture and execute Saro-Wiwa and the other MOSOP members.

Shell firmly denies these charges and also says that it tried to get clemency for Saro-Wiwa and the eight other men. “What happened in Nigeria in 1995 was terrible. It was just the beginning of the problems we’ve had there,” says Edlund. “It has become a reputational burden for us.”

Shell hopes that its $15.5 million human rights settlement will help set a new tone for the future and provide the Ogoni people with some relief. An out-of-court settlement wasn’t necessarily the easy route, the company explains, but the most sensible one for all parties involved. “We were quite prepared to go to court and wanted to clear our name. We were confident that there was no evidence to show that we colluded with the government in any way, in any of the allegations that have been made as part of this case,” says Wood. “On the other hand, you look at the thirteen years that it has taken to get this far in the case. We were all looking forward to moving on, and this settlement seemed the best way to maximize the chance for reconciliation in Ogoniland.”

Lessons Learned

Regardless of what people believe about Shell’s history in Nigeria, one thing is absolutely certain. This is a company with a truly global perspective and a wealth of expertise that very few other companies have. These corporate assets could prove invaluable to the global community in years to come.

“There is something we can do so that something good comes out of this,” says Wood. “Even if you learn the painful way, you do learn, and you can pass that information along to others.”

At present Shell is engaged in a number of initiatives designed to ensure that its insights and experiences will not go to waste. Through the Voluntary Principles for Security and Human Rights, Shell shares its framework for maintaining safety and security of its operations, while also acknowledging the fundamental freedoms of its stakeholders. Similarly, through theExtractive Industry Transparency Initiative, Shell shares best practices with governments, companies and civil society, also holds itself accountable to certain ethical standards. “We publish what we pay,” says Wood. “We make it clear what the revenue stream is, and how the share of income is distributed throughout the countries where we operate.”

With the confluence of political, economic, social and environmental forces simultaneously working for and against Shell’s interests, the company says it has learned why it is essential to build a business that is a welcome partner to people. The more Shell is embraced by local citizens, the lower its risks and operating costs will be, and the higher overall value the company stands to generate. Striking such a balance is complex, particularly in countries like Nigeria. Still, Shell seems determined to establish the necessary foundation.

“We haven’t got all of the solutions for improving local conditions in the areas where we operate, and neither have governments or NGOs,” says Edlund. “The game plan is to have a clear set of principles, clear governance within the company, and to recognize that [we] don’t live in a bubble, that [we] have to collaborate with other people that you can make some progress with.”

What do these companies have in common? According to CRO magazine (formerly Business Ethics), they are among the world’s Best Corporate Citizens, setting the gold standard in governance, ethics and corporate social responsibility (CSR).

“When someone next asks you to define corporate transparency, show them this list,” touts the magazine. “[Our] 2009 CRO 100 Best Corporate Citizens List is the world’s best-known apples-to-apples comparison of Russell 1000 companies’ performance in environment, climate change, human rights, employee relations, philanthropy, financial and governance.”

While the CRO’s leading “apples” might have done laudable things, several are also involved in ongoing legal and public relations scuffles stemming from alleged ethical breaches and poor business judgement. For these “top 100” firms, that’s nothing new:

• Merck, whose Vioxx product gave rise to class action lawsuits over allegedly deceptive marketing practices in 2006, is once again accused of engaging in similar deceptive practices

• Monsanto, which Amnesty International calls a “global corporate terrorist,” is using litigation as a tool to protect its market share and has filed dozens of lawsuits against family farmers across North America, alleging they “stole” airborne seeds

• ExxonMobil, which has a history of environmental and human rights lawsuits, has yet to pay $92 million worth of Valdez spill-related damages to plaintiffs in Alaska

• Chevron, which also has a history of environmental and human rights lawsuits, now argues that renewables “are not a mainstream business”

• Citigroup, which in 2002 faced FTC charges for abusive lending practices,  was recently accused of lying to investors and its own employees about the risks inherent in several speculative, mortgage-backed securities funds. It also froze customer lines of credit after receiving $20 billion in government bailout money

• Goldman Sachs, which in 2002 faced SEC lawsuits for securities fraud and conflicts of interest, recently changed accounting rules in order to hide December losses. It is also accused of being a serial violator of SEC regulations prohibiting long-outlawed “naked” short sales of stock

• Smithfield Foods, which recently faced multiple environmental lawsuits, runs slaughterhouses in Mexico that some experts have linked to diseases like swine flu

CRO’s Best Citizens list sheds light on a critical problem that keeps CSR on the sidelines of many corporate agendas: the industry is too ambiguous for its own good. As Paul Hawken argued several years ago in his critique of the $2.7 trillion socially responsible investment (SRI) industry: “The term ‘socially responsible’ is so broad it is meaningless…There are no standards, no definitions, and no regulations. Anyone can join; anyone can call his or her fund an SRI fund.”

To be sure, the CSR industry’s lack of universal standards and criteria leave many questions unanswered. But research indicates that it doesn’t need to be this way.

Companies that dabble in every conceivable CSR facet (community, diversity, environment, human rights, etc.) tend to be less effective than companies that pursue deliberate strategies in a focused area – both in terms of making a substantive social and environmental impact, and in terms of generating a financial return on their corporate responsibility investment. That was a key finding of my 2007 CSR effectiveness study, and it runs contrary to the way that companies are rated on “Best Citizens” lists.

According to the CRO’s methodology, Best Citizens lists are compiled by quantitatively rating companies across a breadth of performance dimensions:  environment, climate change, human rights, employee relations, philanthropy, financial performance, governance andlobbying activities. Scores are assigned to each category (some categories count more than others) and those companies with the highest cumulative scores win. Though the CRO suggests that this breadth approach to CSR performance evaluation yields a more holistic view, the result is that any company, regardless of history or industry, can be included for consideration. Halliburton and Blackwater (Xe) have yet to make the cut, but that may only be a matter of time.

On the other hand, as mentioned above, my research clearly demonstrates that depth works better than breadth. Rather than taking on every CSR issue at once, the companies producing the best triple bottom-line results (High-Purpose Companies) go deep in one or two particular areas where they know they can make the biggest difference. They find common ground between their core strengths and a critical problem that needs solving – and thus develop profitable solutions to that end. High-Purpose Companies have the financial incentive to create social and environmental value. That’s not always the case at the firms making CRO’s cut, which is why the magazine risks missing the point.

If the CSR industry is to be taken seriously in the future, then it needs to reward companies for producing value, not just preaching values.  Now is the time for an industry makeover. Let’s start with objective standards, critical thinking and a much stronger voice.

A few months ago, SIGG was caught in a lie. Whereas the company built a profitable business in the US marketing metal, reusable bottles as a hip and environmentally sound alternative to plastic water bottles, it failed to inform its health conscious target audience that a large portion of its production line contained bisphenol A, a compound suspected to be hazardous to humans since the 1930s.

When initially asked by consumer-watch groups whether SIGG products contained any toxic ingredients, company CEO Steve Wasik assured people: “Very thorough migration testing in laboratories around the world is conducted regularly and has consistently shown SIGG aluminum bottles to have no presence of lead, phthalates, Bysphenol A (BPA), Bysphenol B (BPB) or any other chemicals which scientists have deemed as potentially harmful.”

It turned out this wasn’t the case. SIGG bottles did in fact contain BPA. After the truth leaked out, it became clear that a public statement from management was necessary, and Wasik issued a written apology:

“I am writing to apologize. As Chief Executive Officer of SIGG, a leading maker of reusable water bottles, I made a mistake when I decided not to announce that our old bottle liner contained trace amounts of bisphenol A. I learned about the liner’s content in 2006, when there was debate in the scientific community about the effects of BPA. Scientists lined up on both sides of the issue: Some said BPA posed potential health risks, others said BPA was perfectly safe…Today, the debate continues. Scientists are still split on the issue. But the consumer environment has changed. Because of the all the conflicting data, a growing number of people have decided to eliminate the concern from their lives by avoiding BPA. Given the situation, I recently decided that we had to tell everyone that bottles manufactured with our former liner (prior to August 2008) contained trace amounts of BPA.

We were right to make the announcement. But I was wrong to have waited this long. One of our primary goals at SIGG has been to help reduce unnecessary waste and to educate people on the environmental benefits of using a reusable bottle. With that objective in mind, SIGG has been labeled a “green” company.”

Wasik’s apology was too little, too late. Some even found it offensive. Elaine Shannon, editor in chief at the Environmental Working Group, told Advertising Age: “Americans want transparency, and this company doesn’t seem to understand that. It’s mystifying. [Wasik’s letter] seems to be talking down to people, and a lot of people won’t tolerate that tone.”

Judging from complaint associated with the lawsuit, which was filed on behalf of a nationwide class of consumers who purchased SIGG reusable aluminum bottles that unbeknownst to them contain BPA, the company’s lack of transparency amounts to serious business. The named plaintiffs allege breach of contract, breach of express and implied warranties, and violation of the Kentucky Consumer Protection Act. They seek a class certification order; compensatory, punitive and statutory damages; restitution and disgorgement of profits; attorney’s fees and costs; prejudgment interest; and the costs of suit.

The potential liability exposure for SIGG is significant, to say nothing of the added adverse publicity and wrecked credibility amongst the company’s own target market. Although it is possible that, as with many cases, this class action suit will settle before trial, even if it does the damage will have been done. Unfortunately, when something like this comes along, the negative impact on a company’s sales can be as profound as any adverse legal judgment.