hankyoreh

Kim Deok-jong

Last year, Reckitt Benckiser, the UK company that owns Oxy Reckitt Benckiser Korea, achieved the trifecta in corporate social responsibility. After being added to the Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index in short order, Reckitt Benckiser was a household products leader on the “Global 100” list of the most sustainable corporations selected by the World Economic Forum.

What is even more shocking about the scandal over humidifier disinfectants sold by Reckitt Benckiser’s Korean branch is the unusual degree of responsibility for its products that the company’s home office has shown its customers. Since 2001, it has maintained a list of materials to avoid out of concern they might have an adverse effect on customers. And last year, it created an R&D team called Consumer Safety and Medical Oversight with the goal of promoting customer safety by being transparent about product information.

How exactly was it that managers with such strong convictions about how companies should be socially responsible could have sold no fewer than 4.53 million units of a humidifier disinfectant with lethal effects on the human body over the past decade in South Korea alone?

To cut to the chase, this was largely the result of the double standards that the multinational corporation Reckitt Benckiser applied to its home office and to its branch office in South Korea. What this means is that the systems and principles that multinationals from developed countries use in their home offices are different from those that they use in their branch offices in other countries. These double standards arise because each country has different standards for handling chemicals, and multinationals choose the standards that are advantageous to themselves.

When the Hankyoreh Economic and Society Research Institute examined the sustainability report published by Reckitt Benckiser in 2015, we were able to discover such double standards in all areas related to corporate social responsibility, including the environment, society and governance structure.

We will begin with the environmental issue. At its home office in the UK, Reckitt Benckiser abides by REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), a regulation adopted by the EU in 1998 in order to prohibit the sale of unregistered chemicals. In South Korea, however, the company sold the humidifier disinfectant under the protection of South Korea’s Act on the Registration and Evaluation of Chemical Substances, which prior to its revision made it hard to hold companies liable for products even if they were proven to be harmful.

The home office and the branch office also had different standards for disclosing the raw materials that went into company products. In its 2015 sustainability report, Reckitt Benckiser’s UK home office announced that it would make public all of the raw materials used in its products by 2020, but this only applies to certain companies. While the company sells products in around 200 countries around the world, it only operates websites listing the raw materials in its products for Europe, North America, and Australia. It has not applied the program to other countries such as South Korea.

Reckitt Benckiser’s double standards are also apparent in its governance structure. In line with a 2014 resolution by the European Union that applies to companies with at least 500 employees, the company has published information about its governance structure, including the percentage of women on the board of directors (around 29%) and the number of nationalities represented by its managers (49).

But after the humidifier disinfectant scandal in 2011, the Korean branch rebranded itself as “RB Korea” and changed its legal status from corporation to limited company. With the establishment standards for limited companies being relaxed under the revised commercial code, the Korean branch has taken full advantage of its exemption from external oversight and disclosure requirements. The regulations about governance structure at the home office have become stricter, but during the five years since the scandal broke, the Korean branch has dodged its responsibility to disclose financial and non-financial information and has responded tepidly to demands that it address the scandal.

While South Korea’s Regulatory Reform Committee has recently recommended that limited companies also be subject to external supervision, such companies remain free of disclosure obligations.

So is there nothing that can be done to prevent or compensate for such double standards?

What is needed is for international guidelines and treaties to be created and for individual countries to pass laws that conform to these standards.

“Just as with the Basel Convention, which established international standards for managing hazardous materials, we need an international convention that can protect shared human values for environmental and medical products, too,” said Lee Jong-oh, secretary general of the Korea Sustainability Investing Forum. “The Basel Convention was inspired by a fire at a Swiss pharmaceutical company in 1986, and today it has become established as the international standard for forming policy about hazardous wastes.”

But on a more fundamental level, there first needs to be a change in multinationals’ attitudes about corporate social responsibility.

“Since international conventions are not as binding as domestic laws, if they are to be implemented properly, the most important thing is for the people at multinational companies to be committed to carrying them out,” said Lee Yeong-myeon, a professor of business management at Dongguk University.　

By Seo Jae-kyo, CSR team leader at the Hankyoreh Economy & Society Research Institute

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