How does ABB decide where to do business? The company took steps in 2006 to strengthen and fine-tune the process it uses for deciding whether to be involved in a particular country or project.
A new Group-wide protocol, designed to evaluate different types of risks in countries, was introduced based on five factors: Financial considerations, legal constraints, security assessments, human rights issues and potential reputation risks. This complements existing detailed economic analyses of individual countries and markets, and legal regulations.
At the same time, further social, environmental and human rights criteria have been added to the existing checklist which managers use when tendering for particular projects.
The aims are clear: To ensure ABB is only involved in countries or projects where potential risks are low or non-existent. Easy to say, sometimes difficult to manage – particularly for a company with highly diverse business activities in some 100 countries where risks may not be immediately apparent.
Where to draw a line? Many countries, for example, have an imperfect human rights record but at what stage does a company decide the line has been crossed?
At the start of 2007, ABB added Sudan to a short list of countries – comprising Myanmar and North Korea – where the Group is not undertaking any new business activities. In Sudan, ABB is reviewing existing contracts on a case by case basis.
After lengthy consideration, ABB cited political, legislative and economic reasons for its decision on Sudan. The risks outweighed the benefits, even though ABB maintained that its business activities in the country – primarily involving much-needed electrification projects in northern Sudan – supported important infrastructure development.
ABB also seeks to proactively manage its risks in projects. One example is the oil pipeline development on Sakhalin island in the Russian Far East where ABB was criticized – and rejected that criticism – for supplying control systems to the project.
There are other countries of operation where ABB keeps a daily watch on political, security and human rights developments. The difficulties in evaluating whether to work in sensitive countries – those with weak governance – underline the need to improve current practices by developing a voluntary common framework on standards, agreed with governments, investors, civil society and NGOs, which can provide companies with the behavioral norms appropriate for a country, and help create a level playing field among businesses.
ABB is working with organizations such as the United Nations Global Compact and the Business Leaders Initiative on Human Rights with the aim of clarifying the conditions under which a company can convince itself and its stakeholders that it has earned the right to operate.
The increasing inclusion of non-financial criteria in business decision-making indicates a greater understanding of how these criteria can impact a business, and reflects the company’s desire to do the right thing within its spheres of influence.
The work is ongoing.
ABB works with a number of human rights-related organizations
- Amnesty International: ABB is a member of Amnesty International’s Business Group which gives advice to member companies on business-related human rights matters and organizes roundtable discussions for its members to share experience and best practice.
- Business Leaders Initiative on Human Rights: ABB was one of the founding members of this initiative, launched in 2003 to help lead and develop the corporate response to human rights. During 2006, ABB supported one of the key areas of BLIHR’s work – drawing up guidelines on good business governance in sensitive countries.
- International Committee of the Red Cross (ICRC), Switzerland: ABB was one of seven companies which joined the ICRC Corporate Support Group in October 2005.
- United Nations Global Compact: ABB was one of the 50 companies that supported the inaugural launch of the Global Compact in 2000.