Category: Consultancy

Fighting Corruption: a project with Russian wood suppliers

Traveling along supply chains

Much of my work since the early 1990s has been travelling along supply chains: from cotton field to T-shirt, from platinum mine to automobile, from palm tree to margarine, or from tree to newspaper. Actually I enjoyed very much walking through African villages in cotton producing regions, visiting Indonesian palm oil plantations or working on ecologically responsible sourcing for a Norwegian paper mill.

The responsible sourcing agenda has been continuously changing over time. In the beginning, it was all about ecological impacts, but gradually labour safety and human rights issues were moving to the foreground.

Including social  issues, labour safety and …. corruption

After doing some ground breaking work for Axel Springer and Norske Skog on responsible forestry and supply chain traceability in Norway, my next contributions were much more related to social issues, including labour safety. Axel Springer took the lead here, not on the basis of huge complex projects but through strategically important small and quick projects –Axel Springer’s sustainability officer, called them “fast horses” – to communicate a simple message and to invite others to follow in the same direction.

We made some attempts to work on labour safety with the Volga paper mill near Nizhniy Novgorod, but for some reasons we then increasingly concentrated on anti-corruption issues in close cooperation with the Finnish-Swedish paper company Stora Enso and their wood suppliers in Tikhvin. The leading global anti-corruption organisation Transparency International eventually joined as a critical and independent project partner.

 

The Tikhvin project: from Russia with Transparency

On March 4, 2004, we met in the St. Petersburg office of Stora Enso: the Russian director, Axel Springer’s sustainability officer, three ladies from Helsinki, some other managers and experts and myself. In close cooperation with the participants, I had prepared the agenda and a presentation.

After agreeing on a project outline and a basic idea of the project budget, we had dinner together. The following morning we drove to Tikhvin, a small town (60.000 inhabitants) somewhat more than 200 km East of St. Petersburg.

We arrived at the forest company’s office (Lespromkhoz) around 10 am.

Unfortunately I had to go to the toilet and what I saw there I did not like at all. Apparently, the water flow was blocked and the toilet was filled to the brim with an indescribable brown stinking substance, to which I delivered my modest contribution. Welcome to Russia![1]

After the meeting with the forest people, and the representatives from Stora Enso and Axel Springer, we did some interesting sight-seeing.

We walked through the snow to the beautiful Marian Tikhvin Assumption Monastery and later on we paid a short visit to the house where the composer Rimskiy Korsakov was born in 1844, now a museum. After a visit to the local wood processing company, we concluded the day with a copious meal in a good Russian restaurant. From that moment on, the project was called “From Russia with Transparency”, a variation of the 1963 James Bond film title (from Russia with Love with Sean Connery).

The next day we drove back to St. Petersburg. After these kick-off meetings, I was not very much involved until I facilitated a meeting at the IACC conference in 2008 in which the results were discussed (see below).

More on the project.

Corruption as a solution: a bribe at the airport

Smelly chairman

In September of the same year, I was participating in a study trip to the Russian forests near Novgorod, 195 km South of St. Petersburg. It was organised by the German Publishers Association VDZ. Representatives of paper companies and environmental NGOs (including WWF and Greenpeace) were among the participants. Before the trip to Novgorod, there was a meeting in St. Petersburg, which I had agreed to chair. I arrived five minutes before the meeting was scheduled to start. Actually, I should have arrived the evening before, but I had terrible problems in Moscow. First I lost my luggage, which had been deposited in a large lost-and-found storage hall (because I did not know that I was responsible myself to take the luggage to the airport where my flight to St. Petersburg would take off) and then the flight to St. Petersburg was cancelled.

I spent the entire night in the closed airport restaurant together with some Chinese travellers. Later on I discovered that there had been an announcement in Russian only in which a free night in a hotel near the airport was offered. But I don’t understand Russian. Neither did the Chinese. So when I finally arrived at our meeting venue, I had not had a shower, I had not brushed my teeth and I had not had an opportunity to shave. I was so happy that the little table, reserved for the chairman, was at least 2 meters away from the first person in the audience. Most probably, nobody in the audience could smell their chairman, I hoped.

Russian realities

After this memorable opening session, we left for Novgorod. It was a highly interesting trip, not only showing problems and solutions for environmentally responsible forest management, but also the absurdities of Russian forest law and its implementation.

I wrote an earlier blog about this subject (Stories from Russia).

After visiting the Novgorod forest, we were invited by an Austrian company that had started some operations in the wood processing industry in the region.

 

We learned a lot about doing business in Russia and about the unavoidable risks. Our Austrian friend told us that there are many factories that employ far more people for security than for production.

 

He then asked whether anybody of us knew why the shops are all open day and night. Nobody knew. The answer was simple: unattended shops will be robbed immediately. As there should be somebody in the shop at all times, why not keep it open?

The next day I had an appointment in Moscow. My colleague from the World Resources Institute in Washington, his assistant and I would meet with Greenpeace people there.

I went to the St. Petersburg airport, but when I tried to check in, I was told that the flight was fully booked and that I had to wait for another flight several hours later. I did not like it at all. I was desperate to meet my Washington and Moscow friends for discussing a very interesting project on ecologically responsible forest management in the Kirov region and FSC certification.

Socialising in Russia: a bribe at the airport

So I went to the check-in counter again and I only saw only one option to get on the reserved Moscow flight. I folded two € 20 banknotes into my passport and asked the guy in the check-in office whether he could organise a place for me. He did not look at me, but saw the Euro notes, which he immediately took from my passport. Two minutes later I had a boarding pass. I was well aware that someone else who had booked on this flight had now lost his or her place. So be it. After receiving my precious boarding pass, I quickly looked into the check-in office again. Behind the check-in guy’s computer, I saw a huge pile of banknotes. I suddenly realised how quickly I was socialising in Russian society. A little bribe here and there makes life bearable.

Almost two hours later, I arrived at the Greenpeace office in Moscow. I told my Greenpeace contact my story. He seemed to have mixed feelings. On the one hand, he was not surprised. This is the way it works in Russia. On the other hand, he did not entirely agree. The only thing he said was: “You should not have paid € 40. The current rate is € 20.” So even in bribery, there are transparent markets and fixed prices.

Corruption: an expression of intelligence

As mentioned, in the beginning of 2004, I played a role during the kick-off meetings of the Tikhvin project. Initially the project included many aspects of responsible sourcing. Gradually, especially after agreeing with Transparency International on their critical role, the emphasis shifted towards corruption and the private sector’s role in fighting it. Axel Springer’s sustainability officer started to frame the project in terms of ‘corruption free paper’. In 2008, Transparency International was planning their big international conference on Transparency and Corruption, which was going to take place in November of that year. The title was: “Global Transparency – Fighting corruption for a sustainable future.” In April, Transparency International’s EU Liaison office, with strong input from some German people, organised a discussion in Brussels to provide inputs into the November event.

I was invited as an expert on supply chains, private sector and sustainability. Half an hour before the meeting, I was asked to prepare a presentation about ‘sustainability’ and its potential links with Transparency International’s work, which perfectly made sense given the theme of the November conference.

At hindsight, I can say that I gave a pretty good presentation in which I stressed the utopian nature of the sustainability concept and made clear that there is no simple and obvious link between ‘sustainability’ and ‘anti-corruption’. The only linking pin I saw (and still see) is ‘good governance’. I don’t know how useful my contribution actually was at the time. I myself was deeply impressed by Albena Azmanova’s contribution. Professor Azmanova was (and still is) a professor in political science. She was strongly involved in the political transition in her home country (Bulgaria) and published her work, originally refused in Bulgaria, in the US and Europe.

Her presentation and her discussion contributions during our Brussels meeting were real eye-openers for me. In discussion the nature of corruption, she emphasised its intelligent nature. Corruption is of course a problem, but it only exists because it provides intelligent solutions to problems inherent to non-functioning social and political systems. My own translation: if you don’t know the problems for which corruption provides a solution, you won’t be able to effectively fight it. At least, my act of bribery had corrected my problem that was caused by the bad Russian booking and check-in system.

The need for transparency: the Athens conference

The International Anti Corruption Conference (IACC) is generally being held every two years. The 2008 conference, held in Athens, emphasised the need for good governance and building institutions that can be trusted. It explicitly formulated expectations to the private sector’s role.

“To restore peoples’ trust and rebuild the credibility of institutions, governments must move beyond expressions of political will to concrete action; private sector must put a check on bribery and fulfil their obligations as corporate citizens and civil society must demand accountability.” (from http://13iacc.org/ , my underlining).

During the conference, several workshops addressed the private sector’s responsibilities for fighting corruption. I happened to chair workshop 4.4: “The Private Sector’s Role in Fighting Corruption in the Wood Supply Chain: An Example from Russia”, which was entirely built around the experiences of the so-called Tikhvin project as mentioned above. After my introduction, Florian Nehm (Axel Springer) and Pirjetta Soikkeli (Stora Enso) were on the speakers list, followed by some critical remarks by Elena Panfilova from Transparancy International Moscow. In my introductory remarks, I stressed the business risk of weak governance in supply chains and optimistically said “fighting corruption is becoming part of supply chain management.”

Practical limits to transparency: getting things done in Athens

After my presentation, Florian Nehm wanted to show a video that was made in the context of the Tikhvin project. During our preparatory discussions, the conference management made clear that they were not in favour of showing the Tikhvin film. They thought it would not fit into the character of the conference. Maybe they suspected it to be too commercial or too superficial. In any case, the video proposal was declined and Florian Nehm was kindly asked to show a classical PowerPoint instead. In the morning before the presentation, the PowerPoint was delivered to the central conference desk, as agreed. However, one hour before the start of the workshop, Florian Nehm and I sneaked into the workshop room where we met the technical staff responsible for projecting slides and videos. We gave them a memory stick with the video and the instruction to disregard the material coming from the central conference desk.

After my introduction, Florian Nehm, much to the surprise of the conference management, showed his film. It proved to be a very good introduction into the subject, which was then further elaborated by the Stora Enso and Transparency International people. That particular day in 2008, we again discovered something everybody already knows. Sometimes, you cannot be too transparent about what you are doing or what you are planning to do. Even at the Transparency International Meeting, there were practical limits to transparency.

 

[1] I am not sure whether this experience was in the Tikhvin Lespromkhoz building or in Kovernino (Koverninskiy Leskoz, March 2003). Wherever it was, it was pretty awful.