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1.0% PROCESSORS
PERSONAL CARE & H'HOLD
0.8%
PRODS
CHEMICALS
0.6%
TRANSPORT
0.4%
SECTORS
FTSE 350 AVERAGE
0.2%

0.0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Gross (Inherent) Risk
Part C “ Overview of the Social Aspects of Business Risks
404



Examples of sector risks include the following:

Air travel and deep vein thrombosis (DVT): the first case was reported in a
medical journal in 1946. In 1986, another medical study showed that pul-
monary embolism was the second leading cause of in-flight or post-flight
deaths at London™s Heathrow Airport between 1979 and 1983. Only recently,
however, have DVT sufferers been encouraged by the US Supreme Court rul-
ing which held an airline liable for the death of an asthmatic passenger who
was seated near the plane™s smoking section (Wall Street Journal, 12 May
2004). Since most airlines don™t have a firm policy on instructing passengers
to stretch their legs, plaintiffs™ lawyers argue that passengers who suffer from
DVT as a result of sitting in an airplane can sue the carrier, claiming they
weren™t warned about the potential hazards (Wall Street Journal, 12 May
2004). Geroulakos of Ealing Hospital, London, presents additional evidence
in the European Journal of Vascular Surgery: ˜Long flights raise risk of strokes,
warn doctors™ (Sunday Telegraph, 28 March 2004);
Automobiles and parts: Mitsubishi™s 2.5 million vehicle recall has devastated
their bottom line. Another car manufacturer, Jaguar, have recalled all pre-
June 2003 luxury cars (in April 2004); a total of 68 000 vehicles, the cost of
which is being borne by the supplier of the parts in question (ZF are the mak-
ers of the gearboxes) or ultimately their insurance company;
Construction: house builders have sealed up houses tighter in order to prevent
energy loss, but they may have compromised air quality too much, according
to the US Environmental Protection Agency. The air that is breathed indoors
may be two to five times more polluted than the air outdoors (The Denver
Post, 15 February 2004);
The agriculture sector™s external health and safety problems (BSE/vCJD; foot
and mouth; Salmonella; and SARS) may be due to several key factors:
The people: there were no individuals ultimately responsible (the govern-
ment blamed the farmers; the farmers blamed the government and so on).
This has been partially addressed by the establishment of the bodies like
the UK™s Food Standards Agency (FSA);
Policies: the only policy was a short-term economic one (encouraged by EU
subsidies) to maximise output at the detriment of all other considerations;
Processes: there are few brands in farming and the lack of brand building
processes means the farming sector is less concerned about individual
organisation™s reputational loss (the sector consists of tens of thousands of
companies), thus their risk management processes are also less developed;
Performance: this overall performance has led to thousands of farmers going
out of business, incomes being slashed and a diversification of the remaining
businesses. Farmers are investing in creating stakeholder value again, by going
to meet the customers direct (e.g. farmer™s markets). There has also been a
change of direction in the government with the introduction of grant schemes
to support farmers who wish to have a lower impact of the environment;
Examples of incidents include: human health “ the European Community
banned imports of North American beef which it argues had been fed with
Chapter 17 “ Health and safety of stakeholders and customers 405



growth hormones which it viewed as not safe to eat. The US and Canada
took the EC to court and were compensated for lost trade but the EC still
imposed a ban; and
The European Commission banned four antibiotics as additives to animal
foodstuff on the basis that this would pose a risk to human health by
increasing resistance to antibiotics being transferred to humans through
the food chain. This was an application of the Precautionary Principle in
practice, as discussed in Chapter 18.
The food production, processing and retailing industry is susceptible to
changes in consumer preferences as well as the health and quality issues of
the products™ production. An example of rapid changes in the marketplace is
that UK drinks producer Britvic lost nearly a quarter of its value in a day after
it warned that trading had been affected by a customer switch away from sug-
ary carbonated drinks (which it produces) towards water and fruit-based
drinks (Financial Times, 3 March 2006);
Mobile communications industry: ˜Mobile phones reduce sperm count, say
experts™ is a sample headline that can fill tabloid papers with fear mongering
but the quote came from one of America™s top three hospitals in this instance.
The research suggests that men who use a mobile for over 4 hours a day had
a 25% lower sperm count than men who never use a mobile. In the past 10
years, the UK sperm count has plummeted by 29% but the causes are not yet
known;
Retail sector: the staff of suppliers from countries like China face different
standards of health protection. This is in part an exporting of the costs of
health and safety to other organisations indirectly. An example is that:
Workers employed in China™s jewellery trade for export to the US and
Europe are developing deadly silicosis as a result of poorly ventilated work-
shops, campaigners have warned. An alliance of groups including China
Labour Bulletin, the Hong Kong Christian Industrial Committee (HKCIC),
the Hong Kong Confederation of Trade Unions and others have been raising
the profile of this issue and say there has been extensive misdiagnosis of the
issue which hides the extent of the problem (˜China: Jewellery workers lung
payouts fight™, Risks, issue number 229, 22 October 2005).
Tobacco: smoking will no longer be allowed in offices, factories, shops, pubs,
restaurants, private members clubs, public transport and work vehicles used
by more than one person in England from 1 July 2007. Health Secretary
Patricia Hewitt announced that it was a triumph for public health:
Thousands of people™s lives will be saved and the health of thousands more protected
¦ This legislation will help to prevent the unnecessary deaths caused every year from
second-hand smoke and will provide a more supportive environment for smokers who
wish to give up.


Historical examples
Product safety “ radioactivity: radioactive materials were seen as beneficial
for a long while, as anything that energetic must have energising properties,
Part C “ Overview of the Social Aspects of Business Risks
406



it was thought. Radioactive materials were even placed into toothpaste and
laxatives and people could even bathe in therapeutic radio active springs.
Now the truth is known and even Marie Curie™s research notes from the 19th
and early 20th centuries have to be kept in lead boxes;
Product safety “ lead: in 1921 General Motors Research Corporation discov-
ered that the inclusion of lead tetraethyl reduced the knocking associated
with the combustion engine. Lead was also used in food containers as solder,
on fruit as a pesticide, as a lining for water pipes and water tanks to supply
and soften water, and as additions to toothpaste. With lead being a strong
neurotoxin it was not long before the first symptoms of its inclusion in prod-
ucts was when staff producing the additive began dying. It was also found
that atmospheric lead had almost not existed prior to industrialisation and
only started to become a risk management issue with the US Clean Air Act of
1970 and its eventual removal from petrol (in the US) in 1986. Lead has also
been banned in paint in the US, but 44 years after Europe banned it. There
has even been a raft of new class-actions lawsuits against paint manufactur-
ers and toxic paint use; and
Product safety “ CFCs: when refrigerators were first made they were very
dangerous if they leaked. On one occasion over a hundred people were killed
in a hospital in Ohio in 1929. The replacement miracle gas saved many lives
but endangered them in another way as the replacement chemical gases were
CFCs of ozone destroying fame. A kilogram of CFCs can annihilate 70 000
times its weight in atmospheric ozone and each molecule contributes as
much greenhouse gas heating potential as 10 000 time carbon dioxide mole-
cules. Apparently 27 million kilograms may still be used each year, even after
the introduction of the Montreal Protocol limiting or removing their use.


Company case studies
Boots Company plc: it has been reported that Boots Essential Styling Mousse
contained phthalates, chemicals suspected of endocrine disruption and
reproductive toxicity. According to the autumn 2000 issue of Women™s
Environmental Network News, Boots™ disposable nappies were found to con-
tain traces of tributyl tin (TBT) in parts of the nappy adjacent to the baby™s
skin. TBT is an endocrine disruptor potentially effecting human hormones.
The Food Magazine™s investigation into sugar in baby biscuits criticised
Boots™ Teddy Bear Biscuits for their 37% sugar content, which would be
damaging to newly emerging baby teeth (ENDS Report, November 2002);
British Energy: after two safety scares British Energy closed a nuclear plant.
They ran into credit problems and are surviving on a £400 million govern-
ment bailout, which is being challenged in the European courts;
Glaxo Wellcome (now GlaxoSmithKline plc): their Ulverston plant was third
on Friends of the Earth™s top 10 sources of cancer-causing chemicals.
According to an Ecologist report the same plant emitted 773 tonnes of car-
cinogens in 2001, which translates into 10% of the total carcinogens released
by large factories that year (ENDS Report, August 2000);
Chapter 17 “ Health and safety of stakeholders and customers 407



House of Fraser: the company was found to have been selling goods made
from PVC, which has adverse effects on human health and the environment;
Jarvis: suffered a 40% share value loss in about a week;
John Lewis Partnership plc: Friends of the Earth placed the company on their
˜red™ warning list due to the presence of brominated flame retardants and
alkyltin in their duvets and their refusal to answer FOE™s questionnaire and
address the issues raised (August 2000);
The operator of the Sellafield nuclear reprocessing plant has been fined
£500 000 following a radioactive leak. About 83 000 litres of acid containing
20 tonnes of uranium and 160 kg of plutonium escaped from a broken pipe
into a sealed concrete holding site;
Marks & Spencer plc: Friends of the Earth and Ethical Consumer (2001)
reported that M&S were one of the worst offenders among nine supermarkets
in terms of pesticide residues on fruit and vegetables. Sixty-three per cent of
fruit and vegetables contained residues. In response, M&S said they would
prohibit 79 pesticides and set targets to reduce residues. They have since
gone on to become an award winner for their organic food as well;
Mothercare plc: Friends of the Earth placed the company on their ˜red™ warn-
ing list due to the presence of brominated flame retardants and alkyltin,
phthalates, alkylphenols and bisphenol in their plastic toys, cots and prams,
and failure to respond to letters from Friends of the Earth;
Railtrack: suffered a 98% loss of shareholder value;
Safeway plc: Safeway came eighth out of 21 British cosmetics companies
surveyed for their responses to the presence of chemicals potentially harmful
to health and the environment in their products (ENDS Report, November
2002); and
Wyeth: a Texas jury in Beaumont awarded $1 billion to the estate of a
deceased woman after finding that a diet drug from Wyeth caused her death.
About $100 million was actual damages while the remainder was punitive
damages, although the damages are likely to be reduced to single figures.
There was a loss on the day as Wyeth was down 23 cents at $39.27. In after-
hours trading, it fell almost 4% to $37.75.


Risk management
Positive methods of risk management include having policies and systems for
managing upstream and downstream impacts, including supply chain manage-
ment as it pertains to outsourcing and supplier environmental and social per-
formance, and product and service stewardship initiatives.
Stewardship initiatives include efforts to improve product design to min-
imise negative impacts associated with manufacturing, use and final disposal.
Examples of practical risk mitigation by companies include the following:
Wilson Bowden provides training for children living near their building sites
and they are urged to stay off building sites as part of this safety initiative
(Liverpool Echo, 2 May 2002, p. 73);
Part C “ Overview of the Social Aspects of Business Risks
408



Hazardous substances: Philips notes that in line with the requirements of the
EU Directive on the restriction of hazardous substances in electronics, the
company has phased out its use of lead, mercury, hexavalent chromium, cad-
mium and two classes of brominated flame retardants: polybrominated
biphenyls (PBBs) and polybrominated diphenyl ethers (PBDEs); and
Obesity: companies are beginning to respond to the calls for regulation and lit-
igation with altered product ranges. Indeed McDonald™s recently announced
its healthier eating products, like salads, had improved its own profitability
waisteline (˜McDonald™s gets a lift from healthier eating™, Financial Times,
15 July 2004).

External safety issues: general public and customers
The results of SERM research indicate that:
External safety risks are 1.0% of market value of the top 500 US and EU
companies; and
This risk exposure has been reduced from 1.6% of market value by good risk
management techniques (the risk reduction/management factor).
This covers incidents resulting from a company™s operations or products which
cause members of the public injury, disability or impairment. It focuses on acci-
dents resulting from negligence rather than disease caused by the use of harm-
ful substances.
For example, a fuel company transporting petrol to a company bought the
least expensive and wrong size fittings for the taps on the lorry tanker. Over
time the nozzles wore down, leaked petrol, caught fire and exploded, resulting
in the deaths of two employees. Ten members of the public were killed
instantly and 30 were injured.
The following graph shows the external safety risks for customers and the
public by sector.
Safety External (public)
3.5%
TRANSPORT
3.0%
AEROSPACE & DEFENCE
PHARMACEUTICALS &
2.5%
BIOTECH
Net (Residual) Risk




CONSTRUCTION & BLDG
2.0% MATERIALS
ELECTRONICS & ELECTRICAL
1.5% EQUIP'T
FOOD PRODUCERS &
1.0% PROCESSORS
SECTORS
0.5%

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