SOCIAL TOPICS (Archive): INVESTMENT & ECONOMIC ANALYSIS

Published, Spring 2005

Human suffering and loss caused by HIV/AIDS is escalating at a catastrophic pace globally. Despite advances in treatment and prevention that may have lulled many in the United States into believing the pandemic is under control, a staggering 39.4 million people worldwide are infected, according to the United Nations Program on HIV/AIDS (UNAIDS). That includes more than 17 million women and 2 million children. The magnitude of a crisis that causes illness and death slowly can be difficult to grasp, especially compared to fast-occurring disasters such as last December’s devastating tsunami. Yet in 2004 alone, 4.9 million people were newly infected and there were 3.1 million AIDS deaths—more than ten times the loss of life attributed to the tsunami. Dr. Peter Piot, executive director of UNAIDS, stated ominously in a February speech at the London School of Economics that, “An ‘epidemic equilibrium’ or plateau is nowhere in sight.

Sub-Saharan Africa has suffered most from the pandemic and accounts for more than half of global HIV/AIDS cases, with some countries reporting prevalence rates among adults at 40 percent and rising. Simultaneously, HIV/AIDS is spreading rapidly through Asia, Latin America, and Eastern Europe. According to Piot, “Within the next decade, the Asia-Pacific region, with a population five times that of sub-Saharan Africa, could easily become the next epicenter of the epidemic, with every small increase in HIV prevalence translating into tens of millions of people infected.”

A business issue?

The enormous human hardship and damage to the social fabric of communities caused by HIV/AIDS are well recognized, as is its link to poverty. But should the global pandemic also be a business concern? The answer is an unequivocal “yes.” The disease disproportionately strikes men and women at the prime of their working lives. The depletion of human capital and diversion of resources is a significant business and economic risk in deeply affected areas. The negative impacts are many: a shrinking labor force; loss of productivity; diminished skills, experience and transference of knowledge; and increasing health care costs, among others. For example, in the absence of far higher treatment rates in Africa, Piot projects that by next year, 11 sub-Saharan countries will have lost more than every tenth person in their labor force to AIDS—and by 2010, five countries will have lost more than every fifth person in their labor force.

The British-South African mining conglomerate, Anglo American PLC, with its extensive operations in Africa, has had to tackle the HIV/AIDS crisis head on. Estimating that 30,000 of its 125,000 employees in South Africa are infected, the company implements its own treatment and prevention programs for workers and their families that, beginning in 2002, included providing anti-retroviral drugs (ARVs). And the program is working. At the International AIDS Conference last summer, Anglo American reported that program costs were “offset by the sharp decline in mortality—from 30 percent to 3.4 percent in the first year—and in absenteeism due to illness.” (Business Week, August 2, 2004.)

A crisis of this scale requires a global, multifaceted response involving governments and nongovernmental organizations, as well as the private sector. Pharmaceutical companies, with their life-extending drugs, have a unique role in helping provide accessible and affordable treatment, notwithstanding the complexities associated with intellectual property rights and the high cost of research and development. But what can be the role of major private sector employers?

A consensus on this issue is emerging, and perhaps is best embodied in the Global Reporting Initiative (GRI) HIV/AIDS Resource Document published in November 2004. (GRI is a multi-stakeholder independent organization working to develop and implement global sustainability reporting guidelines.) The HIV/AIDS Resource Document provides a standardized format for reporting on policies and practices to combat the pandemic. Reporting benchmarks also help companies, investors, research and advocacy organizations, and others to evaluate and assess a corporation and identify “best practice” responses to HIV/AIDS. GRI established performance indicators in four broad categories: 1) governance; addressing policies, planning, and risk management strategies; 2) measurement, monitoring, and evaluation of infection rates and costs, actual and estimated; 3) workplace conditions; management of HIV/AIDS programs, and respect for human dignity and legal rights; and 4) depth, quality, and sustainability of prevention and treatment programs.

A leader emerges

Religious investors, through the Interfaith Center on Corporate Responsibility (ICCR), were heartened last spring when Coca-Cola Company agreed to recommend that shareholders vote “for” ICCR’s proxy resolution which called for a public report on the impact of HIV/AIDS on its operations. Companies rarely endorse shareholder resolutions and Coca-Cola was the first to do so on this issue, which passed with 95 percent support. The Coca-Cola “system”—Coca-Cola Company’s 1,500 own employees and 60,000 employees in its bottling partner network—is the largest private sector employer in Africa. Late in 2004 the Coca-Cola Africa Foundation published Our HIV/AIDS Initiatives in Africa, which documents policies and initiatives for employees and their families, reaching 300,000 people across the continent. Coca-Cola’s programs include establishing local HIV/AIDS committees, training in-house peer educators, monthly prevention and awareness training, offering free condoms, providing confidential voluntary testing and counseling, employee assistance programs and, perhaps most importantly, ARVs and medical coverage for afflicted employees and their families. In the words of the president and chief operating officer of Coca-Cola Company in Africa, Alexander Cummings, “The moral and business imperatives are of equal importance as we mobilize the Coca-Cola system’s resources and those of the Coca-Cola Africa Foundation to help in this fight.”

—H. Soumerai

Side Bar

A Quiet Leader

For two years, Walden has been leading an investor coalition asking Colgate-Palmolive to report on the impact of HIV/AIDS on its global operations. We believe Colgate’s policies and practices show true leadership, and, more than most companies, it has adapted lessons learned in Africa to address HIV/AIDS proactively in other regions with rapidly growing infection rates. Unfortunately, the company has not made much information on this work publicly available.

Last May, Colgate executives arranged for us to meet in New York with Dumisane Khuzwayo, Director of Human Resources in South Africa. In some detail, he outlined the impact of HIV/AIDS on Colgate’s operations in Africa, and how the company responds country by country to complement local government responses (or lack thereof) to the pandemic. Its initiatives are multi-pronged, involving the formation of committees, education and awareness training, medical care and support, community outreach and collaboration with non-government and business organizations.

In January, Colgate’s President of Asia Pacific, Fabian Garcia, led a discussion with our investor group on the company’s progress to confront HIV/AIDS in his territory. He welcomed input from the investors and openly addressed Colgate’s progress, challenges and goals, also on a country by country basis. Colgate has plans to develop programs in other regions as well.

No doubt, advances at Colgate to tackle HIV/AIDS reflect the strong support of senior executives. Our meetings included representation from the Office of the Chairman and involvement at the board-level was apparent. The commitment and leadership shows in Colgate’s broad-based and expanding programs. Our challenge as investors is to persuade Colgate to be more public about its approach – to be a model for other companies that are less quiet but perhaps not nearly as far along.