FTSE4Good rules change to accept code breakers

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In September 2010, FTSE, the stock exchange listing company, weakened its Breastmilk Substitutes (BMS) criteria to allow companies to be included even while violating the International Code of Marketing of Breastmilk Substitutes and national legislation. Nestlé, was excluded under the previous criteria, but was added to the FTSE4Good Index in March 2011.

During his visit to the UK in February, IBFAN Asia’s Regional Coordinator, Dr Arun Gupta, came with us to discuss our concerns about the FTSE process with Mark Makepeace, the CEO of FTSE, following earlier correspondence.


Weakening the criteria 

FTSE now assesses companies against their stated policies rather than against the International Code and Resolutions. Nestlé considers that only 3% of the allegations in IBFAN’s Breaking the Rules, Stretching the Rules 2010 report require action, the rest it consider to be in compliance with its own policy. Page 19 has a comparison of Nestlé’s policy with the International Code, showing 12 key differences.

In June 2011, FTSE explained why the new standards made it easier for companies to be included in the Index: “In the infant food sector we were not able to engage the companies as they were all being excluded from the index.”  However, FTSE refuses to accept that this is a weakening, and promotes its criteria as almost stronger than the Code: “The FTSE4Good Breast Milk Substitutes marketing inclusion criteria build on the WHO Code, but in addition to criteria requiring company policies to be aligned with the WHO Code it goes further by assessing how a company implements this in practice.” 

We ask: How can FTSE claim to ‘build on the WHO Code’ when it is not using the whole Code as a minimum? 

On the advice of a commercial auditing firm and “those we are collaborating with” two countries with exemplary legislation were chosen for investigation and Nestlé was forewarned.  Mark Makepeace again explained, “we will not be asking the assessors to act as a judge with regards to specific allegations, but rather to assess whether the companies’ practices on the ground are in-line with THEIR stated policies.” [Emphasis added].

We ask: Why is FTSE looking in the wrong places, forwarning the companies and not assessing violations?


FTSE’s Conflicts of Interest

We also raised concerns that the BMS Committee advising FTSE has members with serious conflicts of interest. For example:

  • The Methodist Central Finance Board and the Church of England both have financial interests in the Nestlé’s business as shareholders and so profit directly from its business activities. In addition, they have faced criticism from their church members about these investments. Similarly, the United Reformed Church Mission Committee faced criticism from church members when it dropped its opposition to investing in Nestlé on the basis of the FTSE4Good listing. Organisations that may have an interest in having a company included in the FTSE4Good Index cannot be independent when it comes to defining the procedures for including that company.
  • The Public Private Partnership, Global Alliance for Improved Nutrition (GAIN), works with over 600 corporations and provides them with opportunities “to improve corporate reputation, increase their brand equity, and increase staff motivation...” GAIN part-funded FTSE’s assessments of Nestlé in India and Zambia (see below). See Page 16 for how GAIN tried to influence trade rules at Codex in order to allow promotional claims on baby foods - claims prohibited by Indian law - and funded a proposal for a bad monitoring scheme.
  • In 2007 and 2008 Nestlé was a participant and the “lead sponsor” of a conference on Corporate Responsibility instruments organised “as a joint venture between Chatham House and FTSE Group.”


Illegal sponsorship & labelling

Nestlé has been allowed by FTSE to get away with illegal sponsorship of health workers in India. In its response to FTSE, Nestlé defends the sponsorship, ignores the WHA Resolutions and the Indian Government which confimed on the 7th March 2012 that, “In our opinion, which has been clearly expressed in our letter dated 17 August 2010, such activities violate the Infant Milk Substitute, Feeding Bottles and Infant Foods Act 1992, and Amendment Act 2003”

Article 9.2 of the Indian Law states: “No producer, supplier or distributor referred to in sub-section (1), shall offer or give any contribution or pecuniary benefit to a health worker or any association of health workers, including funding of seminar, meeting, conferences, educational course, contest, fellowship, research work or sponsorship.”

 Nestlé infant formula currently on sale in India with claims and other illegal labellling

The Indian Law forbids “pictures or other graphic material or phrases designed to increase the saleability of infant milk substitutes or infant food.”

 Nestlé’s Nan 1 infant formula on sale now and at the time of FTSE’s research, claims to support ‘the immune system’ ‘healthy gut flora’ and ‘natural defences’ and ‘contribute to the development of brain and vision.’ Such labels are seen millions of times and hide the fact that the product will greatly increase the risk of ill health.


Misusing the FTSE4Good name

Nestlé misrepresents what inclusion in the FTSE4Good Index means. For example: Catherine O’Brien, Director of Communications, Nestlé Canada Inc. said in the Edmonton Journal, March 2012:

“With regard to breastfeeding, Nestlé is committed to fully complying with the World Health Organization’s code of marketing of breast-milk substitutes and applying it as a minimum standard in the countries defined by UNICEF with high child mortality and malnutrition rates. We have been independently recognized as having the industry’s toughest system to enforce the WHO code, and in March 2011 we were the first infant formula manufacturer to be included in the FTSE4Good index, which measures the performance of companies that meet globally recognized corporate responsibility standards.”

In March 2011 UNICEF UK said:

“The evidence available to us suggests that all breastmilk substitute manufacturers currently violate the International Code routinely. We are therefore following the inclusion of Nestle on the index carefully and will be looking for evidence that their marketing begins to comply with the Code.”

In April, a UNICEF HQ told Dairyreporter “I can confirm that Nestle violates the code.”

See Page 17 for Nestlé AGM.


IBFAN’s recommendations to the FTSE BMS Committee:

  1. Reconsider the decision on Nestlé on the basis of the evidence provided and Nestlé’s inadequate response.
  2. Review the criteria for membership to ensure that all members are free from conflicts of interest in relation to infant and young child feeding.
  3. Review the assessment process to ensure that companies systematically violating the International Code and Resolutions cannot be listed.
  4. Ask UNICEF HQ’s opinion on: the new FTSE criteria; whether GAIN should be excluded from defining the procedures for including companies in the index 
  5. Clarify the role of UNICEF UK and the appropriate use of the name UNICEF.  
  6. Make the Assessment Report public.
  7. In the meantime, make a clear statement that under the current criteria companies that systematically violate the Code and Resolutions can be included in the FTSE4Good Index.

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