Det Norske Veritas (DNV) has entered into close collaboration with one of the world’s largest freight companies, China Ocean Shipping Company (Cosco). Cosco was the first Chinese company to become a member of the UN Global Compact, an initiative to help companies to work more ethically and sustainably. DNV’s task is to help Cosco fulfil Global Compact’s requirements by, among other things, certifying Cosco’s yearly sustainability reports. DNV boasts about the collaboration and claims that it will cover the company’s “complete spectre of social responsibility topics”.
The Future in Our Hands has examined Cosco’s record for the past 4 years and found several serious accidents and strong criticism of the company. A review of Cosco’s sustainability reports from the same years shows that none of the internationally known episodes are mentioned in the sustainability reports.
Every year the reports contain a separate supplementary report in which DNV certifies and comments on the contents. Even though DNV has been aware of several of the criticisable conditions, it has chosen to approve the reports without commenting on the lack of a serious review of the accidents by Cosco..
Yearly Accidents and Criticism
• In 2008 Cosco transported arms to Zimbabwe in advance of the controversial and violent national election. When the dock workers in Durban, South Africa, refused to let Cosco’s ship An Yue Jiang unload the arms, Cosco claimed that the ship returned home, whereas it in secret unloaded the arms in The Republic of the Congo (Brazzaville). The incident attracted great attention in the international media.
• In the summer of 2009 Full City ran aground off Langesund in Telemark, Norway. Full City was part of Cosco’s fleet. The stranding resulted in a large oil spill in protected and vulnerable coastal areas, cleaning-up operations for more than 25 million euro and more than 6000 articles in the Norwegian media during the next 5 months.
• In 2010 another of Cosco’s ships ran aground at Great Barrier Reef, the world’s largest coral reef, off the coast of Australia.
• In 2011 Cosco was criticised for poor working conditions and for refusing to let workers unionise at the Cosco-owned harbour in Pireus, Greece.
• In 2011 Cosco was again accused of having transported arms to Zimbabwe. The company refused to answer queries about the delivery.
See further details on these incidents at the end of this report.
None of these episodes is mentioned at all in Cosco’s yearly sustainability report, which is a more than 300-page-long report on the company’s work for corporate social responsibility (CSR) and sustainability. Even though every single case involves central CSR questions, the environment and sustainability topics and has attracted international attention in the media, Cosco chose to avoid discussion or evaluation of the episodes in the sustainability report. Neither what caused the accidents nor how new accidents may be prevented is mentioned in the report. Communication with local societies hit by the accidents or with victims of the arms shipments is also absent.
DNV has certified and approved all of the reports without pointing out the company’s lack of examination or evaluation. In 2008 The Future in Our Hands confronted DNV with Cosco’s arms deliveries to Zimbabwe:
“This is something we shall keep in mind when we go through the certification of the reports the next time, and we shall bring this up in our discussion with the company. Then we shall see how they relate to deliveries that may lead to problems such as this,” Tore Høifødt, Senior Information Director in DNV, told Future in Our Hands.
There are no visible results of this either in Cosco’s report for 2008 or in DNV’s certification of the report. Today Tore Høifødt confirms that the arms delivery to Zimbabwe was discussed with Cosco.
“With reference to the media coverage, we took this up with them. It became clear that arms deliveries constitute a kind of issue they are not allowed to comment on. This is an issue that purely politically is perceived as a relationship between China and another state,” Høifødt told The Future in Our Hands.
The UN Global Compact requires that the companies that become members of the initiative comply with ten principles for responsible company governance. Principle 2 requires that businesses must “make sure that they are not complicit in any human rights abuse”. An elaboration of Principle 2 establishes that “complicity basically means being implicated in human rights abuses that another company, government, individual, group etc. is causing”.
Delivery of arms to Zimbabwe in 2008 was both very controversial and probably an abuse of Global Compact’s principles. The national election that year was characterised by extensive violence and encroachments against the opposition party and the voters.
Close Collaboration with DNV
DNV’s evaluation of the Chinese company was effected by DNV’s office in Beijing. Cosco is a Chinese state company, and DNV’s evaluation was carried out by DNV’s employees in Beijing. Six of Cosco’s approximately 300 subsidiaries are listed on stock exchanges. The Norwegian Government Pension Fund – Global has invested more than 50 million Euro in the various Cosco subsidiaries (see further down in the article).
On DNV’s web pages Cosco, one of the world’s largest shipping companies, is called attention to as “an acknowledged leader in sustainable development”. DNV is “honoured to be selected as the provider of this strategic programme covering the entire spectre of social responsibility topics for such a prominent company,” Henrik O. Madsen, CEO of DNV, stated in 2006.
DNV also emphasises its own role with regard to Cosco: “Cosco’s president and CEO, Captain Wei Jiafu, has set his company’s vision to establish a socially responsible culture across the entire company. DNV’s experience and expertise in this field constitute the key to realising this vision,” Madsen stated on DNV’s web site.
Despite the fine words on DNV’s web pages, Cosco has a special ability to create newspaper headlines all over the world. A common characteristic is that the company never comments when it is involved in an accident or exposed to criticism from parties that feel struck by the company’s activities.
Silent about Accidents
Cosco is proud of having been the first Chinese company to join the UN Global Compact, Ma Xin Ying, a proud Cosco manager, states on DNV’s web pages.
The UN initiative for a more ethical business practice emphasises dialogue between the companies and the surrounding society, so-called stakeholders. The participants are to “promote Global Compact and responsible business practice by influencing and active outreach towards other companies, partners, clients, consumers and the general public”.
This dialogue is also one of the conditions for the company being endorsed as a member of Global Compact. More than a thousand companies have been excluded from Global Compact because of abuse of the principles they had originally supported. There are also examples of companies that have been excluded from Global Compact because of lack of response to queries from organisations.
Three times during the past year The Future in Our Hands has sent a fax to Cosco with queries about its sustainability report. Cosco can not be contacted by e-mail. None of the applications have been answered. Even though DNV believes that Cosco shows a positive development with regard to stakeholder dialogue, the company has still not furnished an e-email or contact form on its web pages, and the company does not answer mail sent to the fax number given.
Silence about its accidents and controversial episodes has become a hallmark of Cosco. On delivery of arms to Zimbabwe in 2008 Cosco chose to be silent, whereas representatives for the Chinese authorities claimed the ship returned with cargo. Cosco remained silent during the massive coverage of the accident in which Full City ran aground off the Telemark coast. All information about the ship came from the captain, who, in addition, tried to destroy reports about dissatisfaction among the crew on the ship. In an article on the working conditions in the harbour in Pireus, Greece, which is operated by Cosco, the company refuses to answer questions from the media: “Cosco has refused repeated queries for an interview, both in Greece and in Beijing.” There are several further examples.
The only case we have found in which Cosco comments on an accident is an episode in which a ship named COSCO Busan collided with a bridge in San Francisco and spilled oil in San Francisco Bay. At that time Cosco sent out a short press release stating that the ship had no connection with the ship.
Global Compact asks companies that have embraced the initiative to comply with the ten principles on which Global Compact is based. The UN also requires that the companies answer queries from society about their activities. A Lithuanian company was excluded from Global Compact in 2000 after not having answered questions from the International Support Committee for Western Sahara.
DNV: “We See Positive Development”
“Our audit team, which has audited Cosco several years in a row, experiences that there is a positive development with regard to awareness in these questions,” Tore Høifødt, who today is Information Director for the Asia and Middle East Division, told The Future in Our Hands.
“When we see how many accidents Cosco has been involved in, and the lack of self-evaluation, it may seem more like a standstill than a development in a positive direction?”
“We do not agree that there is a standstill; rather, such things take a long time. In China things definitely take a long time,” Høifødt answered. “The question is whether what we do contributes in the right direction – or not. The feedback from our audit team in China is that the development is moving in a positive direction. There seems to be a gradual improvement.”
DNV nevertheless concedes that things could be better: “It is clear that some matters are still far from what we would call standard procedures,” Høifødt said on the phone from Singapore.
“It may seem as if you always accept Cosco’s sustainability reports without criticising or pointing out lacking evaluations?”
“It’s a little too simple to say that we accept a report. There are many comments in our report. There are comments on many points. We take up problems but have to do it in a manner that creates improvements and does not create a situation that reaches a deadlock.”
“Do you think that you are bringing about an improvement in Cosco?”
“We wouldn’t have done this if we could not accept responsibility for the work we perform. Then we would obviously have pulled out. The reason we believe this makes sense is that we have seen Cosco change in the course of these past few years, in a direction we believe is positive for increased transparency. We have some distance to go and will still have for quite a while. It is more important to be in on improvement that is taking the right direction than to criticise and say that all is not perfect.
CSR Transgressor in Hong Kong
In 2008 and 2009 Oxfam Hong Kong published two reports in which they examined the CSR of the largest companies on the Hong Kong stock exchange, known as the Hang Seng index. Of the 42 largest companies quoted in Hong Kong, Cosco Pacific was at the bottom in 2009. In 2008 the result was marginally better, at 38th of 43 possible. In Oxfam’s examination the companies were rated for strategy and reporting of social responsibility, relationship to the stakeholders, working places, the environment, delivery chain and investment in local society.
The Pension Fund Triples Its Cosco Shares
During the past 2 years The Norwegian Government Pension Fund has more than tripled its investment in Cosco. When The Future in Our Hands examined the Pension Fund’s investment in Cosco subsequent to the Full City accident in 2009, almost 22 million Euro was invested in Cosco and its subsidiaries. In 2010 the Pension Fund’s investment increased to more than 51 million Euro, and in 2011 to more than 70 million Euro. The Pension Fund’s biggest shareholding was in Cosco Pacific, which scores worst on Oxfam’s CSR listing of companies on the Hong Kong stock exchange.
Cosco’s Controversial History:Zimbabwe, 2008 and 2011
In 2008 Cosco had problems with the delivery of 77 tonnes of arms to Zimbabwe after the dock workers in Durban, South Africa, refused to unload Cosco’s ship An Yue Jiang. After a great deal of international attention Cosco gave notice that the ship had returned. In fact, the ship had sailed on and unloaded in Brazzaville, Democratic Republic of the Congo, from where the arms were flown to Zimbabwe. The 2008 election campaign in Zimbabwe was characterised by great violence on the part of Robert Mugabe’s government party, which secured re-election by a narrow margin.
In the autumn of 2011 South African Review reported that Zimbabwe had again ordered arms, also this time with Cosco as cargo supplier. In April of 2011 dock workers in Beira, Mozambique, identified two containers with weapons for Zimbabwe. Once more, Cosco was the supplier. The cargo contained ammunition for AK-47 machine guns and rocket-powered grenades. After the dock workers had notified the unions in Zimbabwe, the cargo is not supposed to have been picked up. Moreover, the same source reported that Zimbabwe was supplied with a new, large-scale arms load that arrived in the autumn of 2011. The Future in Our Hands has tried to obtain an answer from Cosco as to whether it is behind this cargo too but has not received an answer from the company.
The An Yue Jiang episode is not mentioned at all in Cosco’s sustainability report, even though the episode attracted international attention and denunciation from a series of stakeholders. Nor has DNV chosen to comment on this in its certification of the report. On the contrary, DNV wrote that “the report […] provides objective data that correspond with the most important concerns of the most important stakeholders”. DNV further claims that the report is “impartial and reflects a balanced view of Cosco’s social responsibility (CSR) performance”.
The Full City Accident in Telemark
During the stormy night of 31 July 2009 Cosco’s ship Full City ran aground by Såstein, not far from Langesund in Telemark, Norway. Large amounts of oil leaked out of the grounded ship. The accident attracted much attention in Norway and resulted in a large cleaning-up action with more than 250 people involved. The cost of the clean-up was, according to the Norwegian Broadcasting System (NRK), around 25 million Euro, whereas other estimates lie at 62 million. The accident received more than 6000 mentions in Norwegian media. NRK revealed that the ship had received more than 30 reprovals from port authorities all over the world during the past 11 years. After the captain had been detained, he telephoned the crew, using the police phone, and asked them to destroy documents aboard the ship. One of the documents is supposed to have been a letter to the shipping company in which the crew complained about having worked for more than a year without vacation.
When Full City ran aground, The Future in Our Hands was able to reveal that the ship was a part of Cosco’s fleet and that Cosco most probably was the true owner of the ship. The Pension Fund had invested more than NKR 174 million in Cosco and its subsidiaries.
Two weeks before the accident in Telemark a series of defects and deficiencies were found on Full City while it was lay alongside the quay in Russia. Tore Høifødt, Senior Communications Director in DNV, was interviewed by the newspaper Dagens Næringsliv about this inspection. Høifødt commented on an earlier inspection of Full City, which “showed that everything was not tidy on board Full City”.
Despite the extent of the accident and the enormous interest in the accident in Norway, it is not mentioned at all in Cosco’s 2009 sustainability report. Even though DNV was aware of the problems of Full City and the extent of the accident in Telemark, this was not mentioned in the certification of the sustainability report for 2009.
A picture of a little sea turtle swimming on a coral reef adorns the front page of Cosco’s sustainability report for 2010. In the background one of Cosco’s ships sails peacefully past. In 2010 Cosco’s ship Shen Neng 1 ran aground on the world’s largest coral reef, Great Barrier Reef offshore Australia. The ship had taken a shortcut through the coral reefs and got stuck. A gash in the ship led to a big oil spill and an outcry in the Australian press.
Several of the newspaper articles that covered the accident commented that they had been unable to obtain contact with or comments from the ship’s owner, Cosco. “The Chinese government and the ship’s owner, Cosco, a Chinese state-controlled giant, have been silent in response to the grounding of the Shen Neng 1, which occurred in a section of the reef designated as a marine park and subject to extra environmental protection,” the New York Times wrote about the accident.
Even after the accident Cosco would not make a statement about a fine from Australian authorities: “Chinese owners Cosco maintained their public silence yesterday but face fines of up to $1 million [Australian] over the incident, while the captain could be handed an individual penalty of up to $250,000. The Cosco group did not respond to inquiries from The Courier-Mail, but AMSA [Australian authorities] spokesperson Tracey Jiggins said Cosco was in regular contact with the salvage company Svitzer.”
In spite of the turtle on the front page, the accident is not mentioned at all in the 329-page sustainability report evaluating Cosco in 2010. In its certification DNV wrote that “the company has established a communications mechanism with stakeholders, so that they can receive sustainability information from the company.”
During the past few years Greece has been forced to sell off state companies in the hope of keeping the country afloat economically. In 2010 Cosco entered into an extensive leasing agreement with Greek authorities to operate parts of Pireus harbour for the next 35 years. Cosco paid €4.3 billion for the agreement.
Greek dock workers were less pleased with the agreement and feared that Chinese workers would take their jobs. Even though Chinese workers are not dominant in Pireus harbour, the local workers must now put up with Chinese working conditions. According to the news channel NPR, Cosco does not permit trade unions or collective bargaining. Both conditions are abuses of Global Compact and ILO’s international regulations for labour. The unions claim that those who work for Cosco in the harbour are mainly unskilled and are employed in short-term jobs and lack regular benefits.
NPR tried to obtain a comment about the conditions from Cosco but was, as usual, met with silence: “Cosco has refused enquiries for an interview, both in Greece and in Beijing.”
A Prologue: Burundi, 1995
It was discovered as early as 1995 that Cosco delivered controversial arms cargoes. The Future in Our Hands has previously revealed that a Cosco ship that helped the UN with food supplies to Central Africa simultaneously transported arms to Burundi. The Chinese operators had tried to conceal the transport by labelling the containers “agricultural equipment” and by marking the recipient country incorrectly. Like the neighbouring country Rwanda, Burundi experienced genocide, with several hundred thousand deaths in the middle of the 1990s.