Though the pandemic is undoubtedly the defining event of 2020, there were many other significant developments in the world of responsible business. Here, Andy Crane looks back at the biggest stories of one of the most turbulent years in recent memory.
- Coronavirus capitalism
No surprises here. Coronavirus dominated the news in 2020 but more specifically it dominated news about responsible (and irresponsible) business. In fact, we could have easily populated our entire top 10 with Coronavirus-related stories. But the overarching story here is the fundamental nature of coronavirus capitalism. Unusually, the pandemic has been replete with good-news stories of corporate good deeds. Probably the biggest these has been the super-charged and apparently successful development of various COVID-19 vaccines by companies – with support, expertise, or funding from governments, health institutes, and university medical researchers of course. What can beat the efforts of AstraZeneca, BioNTech, Johnson & Johnson, Moderna, Nonavax, Sinopharm, Pfizer, and others in developing products that can save millions of lives and return a massively disrupted world to something approaching normality? There have plenty of other heart-warming stories of corporate heroes during the pandemic, whether turning their factories over to producing sanitiser and PPE, giving mortgage and other payment holidays to customers, supporting locked-down workers, or going the extra mile to help the vulnerable and needy. On the other hand, there has been no shortage of corporate villains too, from companies price-gouging on masks and food essentials, to those that have put their workers at risk, renegaded on supplier contracts, and cut their workforces even while receiving government aid. The big test then will be whether the various ‘Build back better’ campaigns will see companies actually shifting gears on responsible business, and whether coronavirus will prompt the emergence of fairer, more enlightened compact between business, government and society in the years to come.
- Black Lives Matter
The protests about racial injustice and police brutality that erupted in the summer of 2020 following the killing of George Floyd were not focused on business, but it did not take long for companies to start realising that that they too needed to respond to the Black Lives Matter movement. A swathe of solidarity messages from big brands followed, along with a huge upswing in attention to how organisations could address racial inequality better in the workplace and through their products and advertising. While most corporate responses were predictably limited and vague, some succeeded in making rather more impressive stands with strong statements and meaningful commitments. Either way, 2020 was a defining year for raising racial inequality high up on the responsible business agenda.
- Trump’s social media warning labels
“Some or all of the content shared in this Tweet is disputed and might be misleading about an election...” So ran one of the ubiquitous Twitter warnings that were plastered over the outgoing US President, Donald Trump’s tweets during the 2020 election. It was in many ways one of the election’s most iconic images and represented a remarkable development with social media giants like Twitter and Facebook wading in to censor a sitting US President for the first time. It marked a major milestone in the ongoing debate about social media companies’ responsibility for the content on their sites. Facebook had already suffered an embarrassing, if not particularly financially damaging, boycott from advertisers during 2020 organised by civil rights groups frustrated at the company’s lack of action over hate speech and misinformation. The warning labels and restrictions imposed on Trump suggested that the tide was turning. However, social media companies continued to struggle to deal appropriately with the tidal wave of misinformation around the election from Trump’s supporters and their adversaries. Clearly the broader story here is one that will continue to occupy the headlines – and will undoubtedly feed into further debates about possible regulation of big tech under the new US administration.
- Wirecard fraud scandal
Although it had rapidly become one of the most valuable companies in the country, the German payments company, Wirecard, was relatively unknown to most outside its home country. But all that changed in 2020 when the firm spectacularly collapsed as a result of a huge accounting fraud. Billions of euros in cash and loans were discovered to be missing from the firm’s accounts, with false accounts and shady business relationships set up to hide the huge scale of fraudulently inflated sales and profits. In reality the company had a huge hole in its balance sheet and once its frantic attempts to disguise the problem fell apart, it caved into insolvency. The CEO and other senior executives were arrested and the demise of ‘the German Paypal’ was complete.
- Uighur forced labour
The persecution of the Uighur people by the Chinese authorities has continued apace for years, but the issue became a huge responsible business story in 2020 when it was revealed that hundreds of brands were sourcing products and raw materials made by millions of incarcerated Uighurs and other Muslim minority people in conditions of forced labour. While “virtually the entire global apparel industry” was reported to be using cotton sourced from farms and factories using forced Uighur labour in Xinjiang province, many other supply chains had also been affected, including in electronics and automotives. The US Government responded by banning imports of certain products likely to have been made with Uighur forced labour, even in the face of lobbying from big brands trying to weaken the proposed legislation.
- Rio Tinto’s sacred site explosion
Mining companies have been no strangers to accusations of corporate irresponsibility but there have been some signs of progress in the industry’s approach to social and environmental issues in recent years. However, the industry’s reputation took a huge battering with the news about Rio Tinto’s deliberate destruction of a 46,000-year-old sacred Aboriginal site in Australia in 2020. Although the mining giant had received approval to destroy the site to expand its iron-ore mine, subsequent archaeological findings showed the site was much older than previously known and rich in artefacts including sacred objects. This made the caves one of the most culturally significant sites in the country. Rio Tinto ignored the objections of local Aboriginal groups and went ahead with the demolition – only to be met with a maelstrom of criticism from critics shocked at the cultural damage. Even Rio Tinto shareholders revolted, and within a few months had ousted the CEO and other senior executives responsible for the decision. As one report put it, “it was a rare admission that the mining industry, which has long propped up the Australian economy — often at the expense of traditional landowners — had gone too far.”
- Luckin coffee’s false accounting scandal
China has had any number of accounting scandals over the years, most of which barely register outside of the country. However, the exploits of Luckin coffee reached a much wider audience when it was revealed that the high growth, tech-based coffee chain had been artificially inflating its revenues to fuel its exponential growth. Luckin stood out because it was listed in the US, had almost tripled its share price in six months since its IPO in 2019, and was reporting six-fold increases in quarterly sales. If it sounded too good to be true, then that it is exactly what it turned out to be, with the firm eventually admitting to some $300 million of fabricated sales. Its shares were delisted in the US and its CEO and COO fired as part of the fall-out from the scandal. Chinese regulators then fined not only Luckin but also some 43 other firms which it said had helped Luckin inflate its earnings. The question that remains, however, is whether these actions will be enough to shore up confidence again in Chinese companies listed overseas – and indeed in the growth-without-profits business model of tech start-ups worldwide of which Luckin was but the latest casualty. We are also no closer to an answer of whether there really is a lucrative coffee market in tea-loving China.
- Purdue Pharma pleads guilty in opioids case
The ongoing opioids scandal in the US was our third top story in 2019, and so with investigations still rumbling on, it is perhaps not surprising that it features again in 2020. This year, the big story was the landmark guilty plea by the makers of Oxycontin, Purdue Pharma, which admitted to actions aimed at boosting opioid prescriptions, including conspiring to defraud officials and offering illegal kickbacks. The company’s admission of criminal conduct marked a major success in prosecutions against big Pharma for deliberately fuelling the opioid over-prescription epidemic in the US – and signalled the ignominious end of another major pharmaceutical company embroiled in the scandal.
- Boohoo working conditions
In the UK, the big corporate responsibility of the year was centred on Leicester and the UK garment factories making clothes for online fashion retailer, Boohoo. July 2020 saw the release of a major newspaper investigation into worker conditions in the factories, revealing significant levels of exploitation, unsafe working conditions, wages less than half the minimum wage, and serious breaches of COVID-19 safety protocols. The fall-out for Boohoo was rapid, with its stock price plummeting to less than half its previous value, and evidence emerging that company bosses were aware of poor conditions long before the media expose forced them to act. In fact, Leicester sweatshops had been an open secret in the UK garment industry for years, and so Boohoo’s sourcing strategy was always going to be risky. But with the promise of new and better checks and the news cycle swiftly moving on, sales still managed to rise by 45% and the firm’s share price quickly rebounded. So, despite its critics, low cost, fast fashion looks here to stay for a good while longer.
- Credit Suisse spying scandal
Swiss banking is known for being secretive but this year things moved to whole other level with the damning revelations of corporate espionage at Zurich-based Credit Suisse leading to the ousting of the bank’s CEO, Tidjane Thiam. The scandal had emerged in 2019 following revelations that the bank had hired private detectives to follow one of its former senior executives, Iqbal Khan who was suspected of stealing clients for a rival bank. When news of further espionage activities against another executive emerged, not to mention lurid tales of personal animosity between Thiam and Khan, Thiam’s position became untenable and he was forced to resign in February 2020. But that wasn’t the end of the scandal; the next month Thiam’s severance package was cut by £2m, even though he had been found to be not involved in the spying row, but was, the bank said, “accountable”. And then, later in the year, Swiss regulators opened enforcement proceedings against the bank, paving the way for a formal prosecution, and the prospect of the secretive Swiss bank having its dirty laundry washed in public.