What does ABN AMRO do in the area of sustainability? I'll be using this blog to answer that question. First of all, ABN AMRO wants to engage customers, NGOs and other stakeholders in a dialogue. We don't claim to have the truth, but we do want to take you with us on our journey, with all our successes and setbacks. This journey is peppered with dilemmas – and that's where I'd like to start.
Sustainable banking - nuances and dilemmas
Andius Teijgeler Director Communications and Sustainability
The bank is regularly confronted with the outspoken opinions of NGOs about our customers. They believe that everything can be classified as good or bad – a real black-and-white approach to the world. In my experience, our discussions are much more nuanced than you’d expect.
Dilemma: Cotton production in Uzbekistan
Take the example of cotton production in Uzbekistan. Governed with an iron hand by President Karimov, Uzbekistan is regarded as an ally in the war on terrorism. With an extremely weak economy, the country leans heavily on agriculture, such as cotton production. This industry is rife with problems, including the use of child labour and forced labour in the cotton harvest. The entire population has to contribute to the harvest.
ABN AMRO wants nothing to do with these practices. In the past, however, one of our customers – a trader – received a credit facility for purchasing cotton. The question is, what is our stance in this matter?
My first reaction was, stop! But that met with resistance, based on the following arguments:
The Netherlands put a stop to child labour under the Child Labour Act. Initially, however, this law excluded child labour in the agricultural sector. Sons of farmers worked on the family farm for many years after this law was introduced. So, when is child labour destructive for children, and when are children only ‘helping out’?
The Uzbek government has labelled cotton harvesting as ‘dangerous work’ and decreed that only children 15 years and older are allowed to ‘help out’ in this business. Working together with customers and traders, we have pressured the Uzbek government for several years to implement the International Labour Organisation (ILO) treaty that they have signed.
The ILO was permitted to conduct inspections for the first time last year and found no evidence of child labour, according to an interim report. The official report will be published in June 2014.
Various regulators and other parties have noted that Western organisations are pressuring the Uzbek government to change its policy, while non-Western organisations impose no conditions on cotton production.
A customer can finance this business with a generic credit facility obtained from a party that does not impose requirements or with its own resources. If we say ‘No’ and lose the customer, we can no longer call the customer to account or influence their practices in any way.
How much weight should we give to each of these arguments? The first year, we decided to renew the credit facility while engaging more actively with the customer and the government. The second year, we examined what we had achieved with this approach. On the one hand, there was good news: the ILO, which was allowed to carry out an inspection for the first time, found no or very little evidence of child labour. On the other hand, it did report back on forced labour: civil servants are obliged to work the land during the harvest. But even here there are grey areas, which came to light when, during a discussion on this issue, a student from the former Soviet state pointed out that the practice of compulsory military service could also be considered to be ‘forced labour’…
We will be taking a final decision on this issue in the coming weeks. I will keep you posted on the steps we plan to take.