The Ethical Council of the Swedish AP buffer funds is now putting a time limit on talks with companies that allegedly violate ethical conventions.

In its annual report for 2013, the Council, which consists of representatives from AP1, AP2, AP3 and AP4, said reactive dialogues with companies that had verifiably breached a convention would go on for no more than four years. 

After that, if there has been no improvement, the funds will divest the company, it said.

Until 2014, the Ethical Council had placed no time limits on the reactive dialogues it held since it was set up in 2007.

Chairwoman of the council Christina Kusoffsky Hillesöy said: “The reason for the new working method is that a number of dialogues have lasted for many years without resolution.”

She said this had not only used extensive resources but also attracted external criticism.

As an example, she said the council had taken part in a “resource-heavy” dialogue with Walmart for seven years before recommending in 2013 that the AP funds divest.

“We failed to achieve our objective and concluded that the probability of succeeding was not great enough to justify using additional resources,” she said.

The Council is also adopting a more flexible description of objectives in order to deal with companies where problems fall into a grey zone.

“We have realised it is difficult to stick to strict targets for a dialogue because the reality is rarely a matter of black or white,” Kusoffsky Hillesöy said.

The new engagement process consists of four types of dialogue that are colour coded according to the seriousness of the ethical concern.

The council said it focused last year on the areas of human rights, business ethics and environmental issues in the telecommunications, pharmaceutical, tobacco and cocoa industries. 

It concluded eight reactive dialogues, it said, with four ending in objectives being met.

The companies involved in these successful talks were AES, Toyota, Alstom and Veolia.

However, talks with Freeport McMoRan, Incitec Pivot, Potash and Walmart ended with the companies being recommended for exclusion by the AP funds.