CORPORATE SOCIAL RESPONSIBILITY
(A HUMAN FACE TO THE GLOBAL ECONOMY)
by
“Creating wealth, which is business expertise, and promoting human security in the broadest sense, the UN’s main concern, are mutually reinforcing goals. Thriving markets and human security go hand in hand. A world of hunger, poverty and injustices is one in which markets, peace and freedom will never take root” [4]
FIRST. RESPONSIBILITY TO SHAREHOLDERS OR TO STAKEHOLDERS
“The 21st century company will be different.
Many of the world’s best-known companies are already redefining traditional perception of the will of the corporation.
They are recognising that every customer is part of the community, and
that social responsibility is not an optional activity”[5]
During the second part of the 20th century two prominent positions have been held in regards to whom a corporation is responsible. Are corporations exclusively responsible to their shareholders and therefore their only objective is to make profits for them or are corporations responsible for all stakeholders- not just shareholders but also employees, suppliers, the ecological environment and the community in general?
The most clear exponent of the first position undoubtedly Milton Friedman, the Nobel laureate who in 1970 wrote that “the one and only social responsibility of business is to use its resources and engage in activities designed to increase its profit”and that “few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stakeholders as possible. This is a fundamental corporate doctrine” [6].
The second position is corporate social responsibility. Today, while there are still remnants of Friedman’s thinking around[7], most business leaders consider that, in addition to making profits for the shareholders, companies also have duties to the stakeholders, sustainable development and human rights.
As Ella Joseph has put recently, “profit is naturally the lifeblood of a business, but would people want to work for a company that deliberately set out to exploit its workers for maximum productivity at minimum reward? Would consumers work to do business with a company that was abusing human rights down its supply chain or polluting their neighbourghood?[8]
II.SECOND. CORPORATE SOCIAL RESPONSIBILITY (“CSR”)
“Corporate Social Responsibility is something that companies
operating internationally can’t ignore anymore”[9]
I. The concept of CSR
“The main purpose of the board of directors is
to seek to ensure the prosperity of the company
by collectively directing the company’s affairs,
whilst meeting the appropriate expectations of
its shareholders and relevant stakeholders” [10]
“The corporate sector need not wait for government to take decisions.
We realise that only by mobilising the corporate sector
we can make significant progress”[11]
Peter Drucker says that an important task for top management is the Next Society’s corporation will be to balance the three dimensions of the corporation: as an economic organisation, as a human organisation, and as an increasingly important social organisation[12].
The continued existence of companies is based on an implied agreement between business and society. In effect, companies are licensed by society to provide the goods and services which society needs. The freedom of operation of companies is, therefore, dependent on their delivering whatever balance of economic and social benefits society currently expects of them[13].
CSR is referred to by a variety of different terms, including: CSR, responsible business conduct, voluntary corporate initiatives, corporate citizenship[14], etc.
CSR can be defined as a concept whereby companies voluntarily decide to respect and protect the interests of a broad range of stakeholders and to contribute to a cleaner environment and a better society through active interaction with all. CSR is the voluntary commitment by business to manage its role in society in a responsible way[15]. CSR is the commitment of business to contribute to sustainable development working with employees, their families, the local communities and society at large to improve their quality of life[16]. CSR is cooperation between government, civil society and business.
CSR should not be mistaken with the recent efforts to restore “corporate responsibility” arising out of the traumatic events of Enron and Enron-like situations, which have shaken confidence in the effectiveness of the governance and disclosure systems of corporations and the laws and ethical principles governing the role of executive officers, directors, auditors, lawyers and other key participants designed to enhance the public trust in corporate integrity and responsibility.
The key issues of CSR are: workers’ rights, environmental protection, community involvement, supplier relations and human rights. CSR maintains that companies are not just profit-making machines and that they have wider responsibilities. They must treat employees with respect, limit damage to the environment and act with integrity to customers[17].
II. The precedents of CSR
“Corporate social responsibility is
now in every reasonable chief executive agenda
not always at the top but it’s there” [18]
CSR is not a new phenomenon. There are many precedents of corporations taking decisions not exclusively in the interest of their owners but in the interest of society.
An early example of CSR was the emergence of the sugar boycott in England. In 1790, Elizabeth Heywick whipped up the housewives of Leicester into a passionate protest against capitalist exploitation. Leaflets were distributed outside shops announcing that “we the people can over-throw slavery”. The target was that “bloody-stained luxury”: sugar. In those days sugar was brought into Britain from plantations in the Caribbean, harvested and produced by slaves. Within thirty years, the East India Company was satisfying the sweet tooth of British housewives with free-grown sugar from Bengal, and by mobilising public opinion behind anti-slavery.
This common boycott was the precedent of many other recent ones like Chilean Chardonnay, Nike trainers, Shell petrol, Nestlé baby milk, etc.[19]
Socially responsible investors have changed, with new people coming to the concept to make it less a protest movement and more an investment philosophy which, while not wanting to lose money today, allowes management teams the opportunity to think, plan and act for long-term success, sustainable success. However, the themes that have shown through the history of ethical money remain the same themes of decency, honesty, consideration and adding real value that were derived from the strong religious beliefs of early proponents of the idea [20].
Globalisation and the information technology revolution have resulted in increased competition, greater shareholders activism and wider access to information world-wide. The result is that many employees are seeking assurances that the goods and services they are producing, financing or purchasing are not damaging t workers, the environment or communities by whom and where they made[21] [22]
III. CSR and corporate governance
“In Shell, we believe that a responsible business must operate on the basis of core global values. It should listen to society’s messages, justifying its legitimacy in the eyes of society and business leaders, and regulate itself effectively and openly”[23].
In Europe there are two different approaches to corporate governance. Pursuant to the first one (in the US for instance), corporate governance only legally requires that directors owe their fiduciary duties to the company. That means that they are required to act in good faith in the best interests of their company, exercise their powers for the proper purposes for which they were conferred and not place themselves in a position where there is a conflict between their duty to the company and their personal interests or duties to third parties. In principle there is no legal duty to stakeholders such as employees, suppliers and the wider community. The longer term benefits to the company of making a decision that is prompted by the interests of other stakeholders may be difficult to quantify: indeed there may be immediately identifiable short term disadvantages to the company. In these circumstances, directors may be concerned that in the absence of any specific legal duty outside company law to act in a specific way, acting in the interests of stakeholders could give rise to a legal challenge that they have broken the fiduciary duties to the company.
In continental Europe, the situation is somewhat different. In Germany, for example, where companies have a two-tier structure, a supervisory board and a management board, the duty of directors to the company is more widely expressed to include employees and the public interest. In France, split boards with employee’s participation have been introduced as an optimal alternative to the traditional single board.
There exist then, two different attitudes. Those who believe that “the ultimate objective of companies as currently enshrined in law, i.e. to generate maximum value for shareholders, is in principle the best mean… of securing overall prosperity and welfare”[24]. And those who maintain a pluralist approach whereby “the ultimate objective of maximising shareholder value will not achieve maximum prosperity and welfare”, and that companies should be required to serve a wider range of interests, and that the interests of shareholders should not override those of the company’s stakeholders.
IV. Stakeholder symbiosis
In any case, there is a need to convey the wishes of all company’s stakeholders since all of them are vital in the progress of the company, which is at the basis of their success. This is defined as “stakeholder symbiosis”.
Stakeholder symbiosis is the belief in the multi-dependence of financial performance, customer loyalty, employee motivation and good corporate practice. Because of the competing nature of these groups (each one wants the best deal) many observers believe there to be a conflict. The research evidence so far seems to indicate otherwise[25].
V. The modern drivers of CSR
“Now will come the era of corporate image,
in which economies will increasingly make purchases
on the basis of a firm’s whole role in society:
how it treats employees, shareholders and social responsibilities”[26]
The debate about CSR is not new but it developed in the last half of the 20th century. There are 5 drivers of this re-emphasis:
- The globalisation markets;
- The establishment of the knowledge economy;
- The rise of global communication;
- The coalescence of power, and therefore responsibility, in the hands of a relative small number of international global corporations;
- The need for new social partnerships between corporations, states and civil society seeking solutions to local and global problems[27].
Globalisation is one of the reasons for the unprecedented interest in CSR[28]. In recent years, the scale of private sector overseas involvement has increased dramatically. Foreign direct investment has expanded 20 times in 25 years and is currently worth more than US$ 400 billion. To put this into perspective, in 1970, there were 7.000 companies operating internationally and today there are more than 50.000[29]. Transnational companies (TNCs) account for 30% of world output and up to 70% of world trade[30]. Business enterprises that operate across national boundaries have a tremendous influence on the modern world. 29 of the world’s 100 largest economic entities are TNCs[31]. If we compare the revenues of the 25 largest TNCs with the revenues of states, we see that only 6 states have revenues larger than the first 9 TNCs[32].
Globalisation has coincided with a decline in the influence of national governments. In an increasingly globalised world economy, the decisions of TNCs impact directly on governmental policies and on the enjoyment of human rights. Because of their enormous economic power, which can often be translated into political power, TNCs are sometimes beyond the effective control of national governments.
VI. Levels of corporate responsibility
It is possible to distinguish three levels of company responsibility. The first level is the company’s responsibility to its shareholders, employees, customers, suppliers, and creditors and to its duty to meet statutory or legal obligations. This primary responsibility is what is commonly known as “corporate governance” and is what the company must fulfil to avoid recognised sanctions, which are provided by law and by competition.
The next two levels go hand in hand and are what is commonly known as CSR. The second level is the company’s responsibility to the environment and making the most of its community’s human resources when carrying out its functions of the first level. There is no legal requirement at this level for the company to meet, however, due to the competitive nature of the capitalist system, it can be quantified and the boards of directors can define the issues in question and decide where to strike the balance between the different interests involved.
The third level is harder to define. While the fist two levels are internally specific to the company and estimates can be made of the costs/ benefits of the decisions taken in this area by the company’s board, the third level is much more open. It is the interaction between business and society in a wider sense. It is the responsibility of business to envisage the wider consequences of their decisions and to build that awareness into their decision making process[33].
While the second level is now being recognised and embraced by companies, through CSR statements, it is this third level, which companies must aim to achieve. The first two levels are internally focused on the current performance of the company, but more importantly is the company’s future impact on its stakeholders. Long term decisions and goals on the direction of a company must be taken in this aspect if CSR is going to become a reality and not just a mode or short-term fashionable expression of the late 20th century.
VII. No universal guidelines
“Civil responsibility, being a partnership between government, civil society and the private market, necessarily depends on the active collaboration of political leaders, citizens and business people” [34].
CSR affects all sorts of business, large and small, national and multinational, industrial and services[35].
However, as the decisions boards have to make take into consideration many factors there can be no universal approach as to how companies should take into account its CSRs. CSR definitions are broad guidelines as to what company boards should bare in mind when reaching their decisions. Depending on the state of the company, the company will have different priorities. If the company is doing badly its main priority will be to remain in business and its decisions will usually reflect that hard-line reality. However, if the company is successful, it will have more time and funds to devote to meet its CSRs.
In addition, the contents of CSR are not the same in different market economies because the relationships between business and society vary in different capitalisms[36].
VIII. Guidelines to be socially responsible
“Markets are good at creating wealth
but are not designed to take care of other social needs.
The needless pursuit of profit
can trust the environment and conflict with other social values”[37]
Keith Davis[38] discuses five guidelines business professionals should follow to be socially responsible:
- Business have a social role of “truster for society’s resonances;
- Business shall operate as a two way open system with open receipt of input from society and open disclosure of its operatives to the public;
- Social costs as well as benefits of an activity, product or service shall be thoroughly calculated and considered in order to decide whether to proved with it;
- The social costs of each activity, product or service shall be priced into it so that the consumer pays for the ………….. of its consumption in society;
- Business institutions as citizens have responsibility for social involvement in areas of their competence when major social leeds exist.
IX. Four social responsible roles
Joseph Weiss discuses social orientations of business towards society and distinguishes the Stockholder model (the primary responsibility of the corporation is to its economic stockholders) and the stockholder model (the responsibility to its social stockholders outside the corporation). Two sets of motives underlay these two orientations: self interest and social duty. The two stockholders orientations are productivity (which holds a free market ethic and views the corporation’s social responsibility in terms of rational self-interest and the direct fulfilment of stockholder interests) and philanthropy (who also has a stockholder view of the corporation and hold that social responsibility is justified in terms of a world duty toward helping law-advantaged members of society through organised, tax-deductible charity and stewardship. The two social responsibility model in the stakeholder model are progressivism (which between corporate behaviour is justified from a motive of self-interest but also holds that corporations should take a broader view of responsibility toward social change) and ethical idealism (which believes that social responsibility is justified when corporate behaviour directly supports stakeholders interests from model duty motives[39].
X. CSR a PR smokescreen
“CSR is a public relations device
designed to throw sand in your eyes”[40]
Some believe that the purpose of CSR is to avoid regulation because it ermits governments and the public to believe that compulsory rules are unnecessary as the same objectives are being met by other means. Of course, the great advantage of voluntary rules is that you can break them whenever they turn out to be inconvenient[41].
Others think that “there is still some cynism around CSR as it can be seen as a PR smokescreen for companies to hide behind”[42]. Not only that, it has been said that CSR has become a PR tool of TNCs to convince consumers it is all right to keep buying and that in reality TNCs have worsened conditions for workers and communities by pressing governments to rewrite labour and environment laws[43].
THIRD. CSR AND LABOUR STANDARDS
3.1.The UN Copenhagen World Summit for Social Development 1995
At this World Summit, governments reached a consensus on the need to put people at the centre of development. The objectives of the Summit were the conquest of poverty, full employment and stable, safe and just societies.
Participating countries recognised that globalisation creates opportunities for sustained economic growth and development of the world economy, as well as for sharing experiences and for cross-fertilisation of ideals, cultural values and aspirations. The Declaration contained 10 commitments to:
· Eradicate absolute poverty by a target date to be set by each country;
· Support full employment as a basic policy goal;
· Promote social integration based on the enhancement and protection of human rights;
· Achieve equality and equity between women and men;
· Accelerate the development of Africa and the least developed countries;
· Ensure that structural adjustment programmes include social development goals;
· Increase resources allocated to social development;
· Create an economic, political, social, cultural and legal environment that will enable people to achieve social development;
· Attain universal and equitable access to education and primary health care; and
· Strengthen cooperation for social development through the UN.
4.2.The OECD Study on International Trade and Core Labour Standards 1996
In 1996 (updated in 2000), the OECD carried out a Study on International Trade and Core Labour Standards. The Study provided an overview of key issues, aiming to provide a common basis for constructive policy dialogue among the concerned parties in the future. It focused on core labour standards, which differ in substance and in economic impact from other labour standards. The Study concluded that the absence or inadequacy of respect for core standards in a country is not a significant factor increasing that country’s competitive advantage in international trade or in attracting foreign direct investment, and that there is a positive interaction between the liberalisation of international trade and the application of core labour standards.
5.3.The Inter-American Human Rights Commission Report 1997
The Inter-American Human Rights Commission is one of two bodies in the Inter-American system for the promotion and protection of human rights. The Commission has a unique role to play in assisting the member states in their efforts to respect and ensure the rights of the individuals subject to their jurisdiction. The Commission passed a report in 1997 on the damage to indigenous peoples and their environment in the Amazon rainforest as a means of exploration by TNCs whereby fundamental human rights protected under the Inter-American Convention had been violated.
7.4.ILO’s Declaration on Fundamental Principles and Rights at Work 1998
The ILO plays an important role to target abusive labour practices. The ILO has developed reasonable standards concerning international labour rights, pertaining to a safe and healthy work environment, non-discrimination, fair wages, working hours, child labour, or forced labour, freedom of association, rights to organise and collective bargaining.
The 1998 ILO’s Declaration confirmed the 4 core labour standards as identified by the Copenhagen Summit:
· Freedom of association and the effective recognition of the right to collective bargaining;
· Elimination of all forms of forced or compulsory labour;
· Effective abolition of child labour; and
· Elimination of discrimination in respect of employment and occupation.
6.5.Building Partnerships 2001
The Building Partnerships (“BP”), based on the report Toward Global Partnerships submitted by the UN Secretary-General to the General Assembly in November 2001, is a comprehensive overview of cooperation between the UN and the business community. It makes a case that governments and inter-governmental bodies must work together with business and civil society to find solutions for poverty and injustice, environmental degradation and disease, and international terrorism. The BP aimed to addressing these challenges and included over 150 examples from around the world, such as private sector development and new forms of public-private partnership as essential elements of sustainable development, the creation of dynamic enterprises, and the ability to attract and retain foreign investment to harness the resources and to alleviate poverty.
8.6.The Johannesburg UN World Summit on Sustainable Development 2002
"A global human society based on poverty for many and prosperity for a few, characterized by islands of wealth, surrounded by a sea of poverty, is unsustainable" [44].
The World Summit on Sustainable Development took place last September in Johannesburg – ten years after the 1992 Earth Summit in Rio, which adopted Agenda 21, an unprecedented global plan of action for sustainable development. In addition to governments and NGOs, nearly 700 companies and about 50 chief executives attended the Summit.
The Summit resulted in a plan of action for the further implementation of sustainable development worldwide, which promised action on the following issues:
· Desertification: Combat desertification and mitigate the effects of drought and floods
· Water: Halve, by 2015, the proportion of people who are unable to obtain safe drinking water and do not have access to basic sanitation
· Energy: Improve access to reliable, economically viable, socially acceptable and environmentally sound energy services and resources, and develop alternative energy technologies
· Chemicals: Achieve, by 2020, that chemicals are produced in ways that lead to the minimization of adverse effects on human health and the environment
· Climate: Enhance cooperation at the international, regional and national levels to reduce air pollution, acid deposition and ozone depletion
· Biodiversity: Achieve, by 2010, of a significant reduction in the current rate of loss of biological diversity.
· Corporations: Improve social and environmental performance through voluntary initiatives, including environmental management systems, codes of conduct, certification and public reporting on environmental and social issues. Business Action for Sustainable Development welcomed “the growing realization that business is an indispensable part of the solution to the problem of the world” and said that the final document was a call to roll up sleeves and get down to work[45].
· Trade: Promote open, equitable, rules-based, predictable and non-discriminatory multilateral trading and financial systems that benefit all countries in the pursuit of sustainable development
· Debt: Encourage exploring innovative mechanisms to comprehensively address the debt problems of developing countries and countries with economies in transition.
· Partnerships: Business leaders launched a programme to promote greater investment by TNCs in the world’s 50 poorest countries. It is the foundation of a developing partnership between companies, governments and civil society and focused on ways businesses and governments could work together to spread prosperity in the developing world while protecting the environment. This initiative should put pressure on developed countries to give better market access for the developing-world’s products.
FOURTH. CSR AND THE ENVIRONMENT
“We believe that we can show… that the products
we supply contribute to a progressive improvement of
air quality without denying the people the freedom of mobility”[46]
I. Origin of the environmental protection
The UN Conference on the Human Environment in Stockholm 1972 was the first global environmental meeting of governments, which stated that long-term economic prosperity needs to be linked with environmental protection.
The UN Environment Programme (UNEP) has led international coordinated work on the environment since its inception in 1973. UNEP has provided leadership and encouraged partnership to care for the environment, for example, through multi-lateral environmental agreements, which have addressed all sorts of environmental issues.
The report “Our Common Future” produced by the World Commission on Environment and Development 1987 laid the foundations for the environmental principles. This landmark document highlighted that people needed to change the way they lived and did business or face unacceptable levels of human suffering and environmental damage.
The Declaration of Principles and the International Sector Plan that emerged from the UN conference on Environment and Development (The Earth Summit) held in Rio de Janeiro 1992 identified that the producers and operators of business and industry can play a major role in reducing impacts on resource use and the environment.
II. Key environment challenges
The previous initiatives identified the following main challenges: loss of long term damage to the ecosystem; pollution of the atmosphere and the emergence of climate change; damage to the aquatic ecosystem; land degradation; impact of chemical use and disposal; waste production and depletion of non-renewable resources.
III. Current initiatives
The UNEP 1973 worked to encourage sustainable development through sound environmental practices everywhere. Its activities cover a wide range of issues, from atmosphere and terrestrial ecosystems and the promotion of environmental science to an early warning and emergency response capacity to deal with environmental disasters and emergencies. UNEP’s priorities include environmental information, assessment and research, including environmental emergency response capacity and strengthening of early warning and assessment functions; enhanced coordination of environmental conventions and development of policy instruments; fresh water; technology transfer and industry; as well as support to Africa.
There are a good number of modern initiatives, such as, the ISO 14001. This is one of a range of voluntary industry standards produced by the International Organisation for, launched in 1996. The 1400D series, to which 14001 belongs to, provides a framework for the private sector and others looking to manage their environmental issues. Specifically, the standard describes how a firm might manage and control its organisational system so that it measures, controls and continually improves the environmental aspects of its operations.
III.FIFTH. CSR AND HUMAN RIGHTS (HR)
“All companies have a direct responsibility to respect HR in their own operations. Companies can no longer remain silent on HR issues. Their employees and other people with whom they work are entitled to rights such as freedom from discrimination, the right to life and security, freedom from slavery, freedom of association, including the right to form trade unions and fair working conditions”[47].
1.I. Promotion of HR by business
“Even though states have the primary responsibility to promote and protect HR, TNCs and other business enterprises, as organs of society, are also responsible for promoting and securing the HR set forth in the Universal Declaration of HR”[48].
Companies are a fundamental part of society. As such, they have a moral and social obligation to respect the universal HR enshrined in the Universal Declaration of HR. That does not mean that corporations have the same legal duties as states under international law. It cannot be expected that companies substitute the role of governments because governments still possess wide powers over and primary responsibility for the well being of their citizens and for the protection of HR.
Business should look to government and civil society to help define appropriate roles and responsibilities and welcome efforts to facilitate dialogue and cooperation[49].
According to the Amnesty International HR Principles for Companies, TNCs can improve their ability to promote HR by:
· Developing an explicit policy on HR;
· Providing effective training for their managers and their staff in international HR standards;
· Consulting NGOs on the level and nature of HR abuses in different countries;
· Establishing a clear framework for assessing the potential impact on HR as a result of the companies’ and their sub-contractors’ operations.
3.II. Respecting HR also crucial to business success
“After all we live in a global world. Unless we globalise HR, the global world will be perilous for business. We all know that HR are good for business because, without the rule of law, arbitrariness prevails, without HR political instability will be looming and with instability, investment will be at risk” [50].
In addition to moral and legal requirements, the reality is that respecting HR contributes to the success of business.
A universal acceptance of the rule of law, outlawing of corrupt practices, respect for the workers’ rights, high health and safety standards, sensitivity to the environment, support for education, and protection and nurturing of children are not merely justifiable against the criteria of morality and justice. These principles are also good for business and most business people recognize this[51].
A good reputation earns a company more customers, better employees, more investors, improved access to credit and greater credibility with government. The difference between a company with ethical capital and one with an ethical deficit – perceived or real – can even determine their ‘licence to operate’ in some emerging markets[52].
Although bottom-line evidence of (good) citizenship’s benefits is scarce, anecdotal validation in the form of enhanced corporate image, customer preference, strong employee relations and smoother regulatory approval is proliferating everywhere[53] [54].
Michael Porter, a professor of Harvard Business School[55] said, that in a more socially and environmentally aware world, corporate responsibility in this sphere will itself be a source of corporate advantage.
Then, there are many arguments for business to care about HR, including the self-interest argument:
· The moral argument,
· The legitimacy argument. People around the world are struggling to hold their governments accountable for the implementation of international law. HR is a matter of international law.
· The responsibility argument. TNCs have an enormous influence and power in the countries where they do their business. And with power comes the responsibility to contribute to the promotion and protection of HR.
· The Universal Declaration argument. The Universal Declaration of HR calls upon all organs of society to protect and promote HR.
· The self-interest argument. It is in the interest of business to see HR protected. A company tarnished by controversies around HR violations can see its reputation destroyed and its profitability threatened[56].
As Mary Robinson, former UN High Commissioner for HR, said:
“Some business leaders may think that the political and social environment of the country they are doing business in is none of their affair and that whether or not there are HR abuses is irrelevant. That is a short-sight attitude and one that is not borne out by experience. Successfully facing the corporate HR challenge will be crucial to business success nationally and internationally in the years ahead”.
IV.SIXTH. CSR IN DEVELOPING COUNTRIES
“We all pay for poverty and unemployment and illiteracy. If a large percentage of society falls into a disadvantaged class, investors will find it hard to source skilled and alert workers; manufacturers will have a limited market for their products; criminality will scare away foreign investments, and internal migrants to limited areas of opportunities will strain basic services and lead to urban blight. Under these conditions, no country can move forward economically and sustain development […] It therefore makes business sense for corporations to complement the efforts of government in contributing to social development”[57].
1.I. In general
Companies expanding into developing countries may conduct business in countries that are violators of HR. Companies may support political parties abroad or assist repressive regimes in violation of HR. In addition, companies may directly abuse HR by not respecting international minimum HR standards[58].
In the last decade, foreign direct investment in developing countries has increased ten fold and public development assistance has declined. Over the same period, governments have changed their investment regimes in order to encourage investment but at the same time have reduced their social welfare spending. Many of the world’s poorest countries are characterised by this conflict or are associated with HR abuses. There is also evidence to suggest that the poorest in those countries are becoming poorer and although economic growth prospects may be improving for some, there is growing inequity[59].
Corporations today must be vigilant in the way they deal with abusive regimes and ensure that their factories and contractors have defensible policies on child labour and working conditions[60]. Many TNCs have pulled out of countries in protest of HR violations[61].
Some industrial sectors, like the oil sector have a great impact on the development country due to the importance of the operations, the effect of open markets which needs to ensure that developing societies benefit too[62].
II.TNC’s complicity in HR’s violation
TNCs are sometimes guilty of complicity in HR violation perpetrated by governments. There are cases where businesses have, for example, promoted the forcible transfer of populations from land, which they required for business operations, or companies have unintentionally aggravated HR disputes in cases where minority groups have claimed autonomy over an area[63]. The notion of corporate complicity in HR violation is not only confined to direct involvement in the execution of illegal acts by others. Complicity also means the indirect involvement, or silent complicity[64]. As Sir Geoffrey Chandler, Chair of Amnesty International (UK) Business Group, said: “Silence is not neutrality. To do nothing is not an option”[65].
V.EIGHTH. WORLDWIDE INITIATIVES ON CSR AND HR
“We are not asking corporations to do something different from their normal business; we are asking them to do this normal business differently”[66].
I. The global eight
“It is our goal to be better contributors to the betterment of society
through our products and services and through the manner
in which we provide them to the markets. Balancing the expectations
of corporate responsibility is a challenge, but through this balancing process
we hope and expect that we will enhance the public respect for our company”[67].
Among the CSR initiatives, eight of them are the most prominent:
2.1. The ILO’s Tripartite Declaration of Principles 1977
The ILO adopted a Tripartite Declaration of Principles concerning TNCs and Social Policy in 1977. The Declaration was updated in 2000 in the light of the 1998 ILO Declaration of Fundamental Principles and Rights at Work. The Declaration’s value lies both in its comprehensive content, which covers all aspects of social policy from industrial relations to training and employment, and in the fact that it is addressed to a wide range of key economic actors: TNCs, governments, employers’ and workers’ organisations. However, the success of the ILO in the HR battle has been mediocre, because national business associations made up one third of the membership of the ILO, and because some western states did not favour the channelling of their major concerns through the ILO.
2. The Global Reporting Principles (GRI), 2000
The Global Reporting Initiative (GRI) was established in late 1997 with the mission of developing globally applicable guidelines for reporting on the economic, environmental, and social performance, initially for corporations and eventually for any business, governmental, or non-governmental organisation. The GRI's goals are to:
· Elevate sustainability reporting practises worldwide to a level equivalent to financial reporting;
· Design, disseminate, and promote standardised reporting practises, core measurements, and customised, sector-specific measurements;
· Ensure a permanent and effective institutional host to support such reporting practises worldwide.
3. The Global Compact 2000 (“GC”)
“Let us choose to unite the power of markets with the authority of universal ideals. Let us choose to reconcile the creative forces of private entrepreneurship with the needs of the disadvantaged and the requirements of future generations”[68].
A. The GC: an initiative to promote CSR. The GC was announced by the UN Secretary-General at the World Economic Forum in Davos in 1999 and formally launched in 2000 as one measure to respond to the challenges of globalisation. The GC is an initiative intended to promote CSR and citizenship in the new global marketplace. It brings companies together with UN organizations, international labour, NGOs and other parties to foster partnerships and to build a more inclusive and equitable global marketplace. It aims, in the words of Kofi Annan, to contribute to the emergence of “shared values and principles, which give a human face to the global market”.
B. The GC, a voluntary initiative. The 400 companies engaged in the GC are diverse and represent different industries and geographic regions. However, they all have two features in common: they are all leaders and they all aspire to manage global growth in a responsible manner that takes into consideration the interests and concerns of a broad spectrum of stakeholders (employees, investors, customers, advocacy groups, business partners and communities). Corporate leaders participating in the GC agree that globalisation, which only a few years ago was seen by many as an inevitable and unstoppable economic trend, is in fact highly fragile and may have an uncertain future. Indeed, rising concerns about the effects of globalisation on the developing world – be they related to the concentration of economic power, income inequalities or societal disruption – suggest that, in its present form, globalisation is not sustainable. The GC was created to help organizations to redefine their strategies and courses of action so that all people can share the benefits of globalisation, not just a fortunate few.
The GC is not a regulatory instrument, a legally binding code of conduct or a forum for policing management policies and practices. Neither is it a “safe-harbour” allowing companies to sign-on without demonstrating real involvement and results. The GC is a voluntary initiative that seeks to provide a global framework to promote sustainable growth and good citizenship through committed and creative corporate leadership.
C. The GC’s 9 Principles. Companies are asked to undertake 3 commitments: to advocate the GC and its 9 Principles in mission statements and annual reports, to post on the GC website all the steps they have taken to act on the 9 Principles, and to join with the UN partnership purpose of benefit to developing countries. The 9 Principles are:
Human rights
· Business should support and respect the protection of internationally proclaimed HR; and
· Make sure they are not complicit in HR abuses
Labour Standards
· Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
· The elimination of all forms of forced and compulsory labour; and
· The affective abolition of child labour
Environment
· Eliminate discrimination in respect of employment and occupation;
· Business should support a precautionary approach to environmental challenges;
· Undertake initiatives to promote greater environmental responsibility; and
· Encourage the development and diffusion of environmentally friendly technologies
4. The OECD Guidelines for TNCs 2000
The OECD Guidelines are a set of recommendations addressed by governments to TNCs operating in or from adhering countries. Although non-binding, they are supported by OECD countries from which most TNCs originate. Their aim is to help TNCs operate in harmony with government policies and societal expectations. In keeping with the notion of CSR and to promote the contribution of business to social development and the promotion of basic workers’ rights, the Guidelines provide voluntary principles for responsible business conduct in fields such as employment, industrial relations, HR, environment, competition, information disclosure and taxation, combating bribery, and consumer protection.
5. The ICC draft Guidebook on Responsible Business Conduct, February 2002
The Group on Business in Society has developed the ICC Guidebook on Responsible Business Conduct. Its main purpose is to make practical suggestions to companies on how to approach CSR issues in order to help position individual company principles within the existing framework of generic business principles, government codes of conduct and new initiatives, as well as broader social values. The Guidebook’s secondary purpose is to explain to those outside business how companies are addressing CSR issues. Reinforcing the positive role of business society through the encouragement of CSR and good corporate citizenship constitutes one of the ICC’s strategic priorities.
6. Draft UN Responsibility of TNCs and Other Business Enterprises with Regard to HR, August 2002
The Sub-commission on the Promotion and Protection of HR of the UN published a new draft Responsibility of Transnational Corporations and Other Business Enterprises with Regard to HR on 16 August 2002. According to it, TNCs shall:
· Ensure equality of opportunity and treatment and eliminating discrimination
· Not engage in nor benefit from war crimes, crimes against humanity, etc.
· Respect the rights of the workers, especially the rights of the children to be protected from economic exploitation and in particular the right of development
· Adopt, disseminate and implement internal rules of operation in compliance with theses responsibilities
7. Social Accountability (SA) 8000:
The Council on Economic Priorities Accreditation Agency has established SA 8000, a standard for assessing labour conditions in global manufacturing operations. SA 8000 addresses issues including prison labour, wages, child labour, and health and safety and relies on certified monitors to verify factory compliance with the standard.
8. Global Sullivan Principles
Aimed at promoting equal opportunity in South Africa and developed a set of Principles in 1999 to guide the global behaviour of TNCs on labour, ethics, and environmental practices.
II. Other initiatives which promote CSR and HR
- Principles for Global CSR, developed by the US-based Interfaith Centre on CSR, the Canadian-based Ecumenical Council for CSR and the UK-based Taskforce on the Churches and CSR, include principles based on international covenants regarding the rights of indigenous persons, employees and women.
- Declaration of Principles on HR and the Environment 1994, prepared by a group of experts on HR and environmental protection convened by the UN, was the first international instrument that addressed the linkage between HR and the environment. It demonstrated that accepted environmental and HR principles embody the right of everyone to a secure, healthy and ecologically sound environment.
- World Business Council for Sustainable Development is a coalition of 125 TNCs committed to the environment and to the principles of economic growth and sustainable development. It develops co-operation between business, government and other organisations concerned with the environment and sustainable development, encourages high standards of environmental management in business, and business leadership, undertakes policy development to create a framework for business, shares best practice, and has developed a global network.
- International Business Leaders Forum (IBLF) is an organisation that promotes international leadership in responsible business practices, to benefit business and society. It operates in over 60 countries and works with leaders in business, civil society and the public sector in transition economies in order to achieve social, economic and environmentally sustained development. The IBLF encourages continuous improvement in responsible business practices, develops geographic or issue-based partnerships, contributes to an enabling environment, and provides the conditions for these partnerships to flourish.
- Aarhus Convention - UN ECE is a new kind of environmental agreement. It links environmental rights and HR, and establishes that sustainable development can be achieved only through the involvement of all stakeholders. It focuses on interactions between the public and governmental
- UN Draft Declaration of Indigenous Peoples Rights has established provisions on ethnocide, cultural and physical genocide, protection from forcible land removal (displacement), cultural development, protection of cultural property, religious freedom and control of education. Arguably, the most significant right established under this regime is the right to self-determination, which encompasses the right to autonomous control over local territory and resources. Connected with this right, the draft declaration accords compensation to indigenous groups that have been deprived of their traditional means of subsistence.
- Apparel Industry Partnership (AIP) was initiated in 1996 to take steps to protect workers world-wide and to give the public the information it needs to make informed purchasing decisions. AIP is comprised of apparel and footwear companies, a university, HR groups, labour-religious organizations and consumer advocates. AIP released a historic agreement establishing a workplace Code of Conduct and Principles of Monitoring.
- Voluntary principles on security and HR 2000
“I hope these guidelines will greatly reduce the scope for HR abuses associated with the way companies protect themselves and their employees overseas. They demonstrate the UK’s commitment to put HR and conflict prevention at the heart of Britain’s overseas activities. The fact that all sides have agreed these guidelines shows what can be achieved when industry, NGO’s and Governments work together. Now we must ensure that they are put into operation effectively”.[69]
Some governments, companies in the extractive and energy sectors (BP, Shell, Chevron, Texaco, Conoco, Freeport, McMoran, Rio Tinto), and NGOs (HR Watch, Amnesty International, International Alert, Lawyers Committee for HR) have developed a set of Voluntary Principles to guide companies in maintaining the safety and security of their operations within an operation framework that ensures respect for HR and fundamental freedoms. These Principles are designed to provide practical guidance that will strengthen HR safeguards in company security arrangements in the extractive sector. They address three areas: engagement with private security, engagement with public security, risk assessment supporting security arrangements consistent with HR.
- Institute of Social and Ethical Accountability (ISEA), combines the terms “social” and “ethical” to refer to “the systems and individual behaviour with an organisation and to the impact of an organisation’s activity on stakeholders”. Its new international standard, AccountAbility 1000, has at its core the importance of stakeholder engagement in the social and ethical accounting process.
- US Sarbanes-Oxley Act July 2002. Although a rule on corporate
- New Partnership for Africa’s Development (NEPAD). Established in 2001 in Nigeria, is comprised of 15 African countries. The organisation is modelled
In the last years, HR organisations (Amnesty International, HR Watch, Lawyers’ Committee on HR), labour organisations (International Confederation of Free Trade Unions), corporate accountability organisations (Global Exchange, Clean Clothes Campaign, Global Witness), anticorruption organizations (Transparency International), religious, shareholder, student and environmental organizations have committed greater resources and attention to corporate action on HR.
NINETH. EUROPEAN INITIATIVES
“We need to move away from a time of awareness-suiting, to a time of stronger justification, which will provide us with the necessary credibility for CSR” [70]
Europe differs form some of the other models of capitalism. It has also been a fundament of the company’s duties to stakeholders’ doctrine.
1. Manifesto of Enterprises against social exclusion
At the EU level, the debate on CSR and HR dates back to 1995 when a group of EU companies and Jacques Delors, then President of the EU Commission, launched this Manifesto.
2. EU Lisbon Summit, March 2000
The Manifesto led to the creation of a European Business Network promoting the business-to-business dialogue and exchange of best practices on CSR-related issues. However, it was with the European Lisbon Summit in March 2000 that CSR was put at the top of the political agenda of the EU. For the first time, EU heads of state made a special appeal to companies’ sense of responsibility to help in achieving the new EU strategic goal of becoming the most competitive and inclusive economy in the world by 2010.
3. EU Commission’s Green Paper on promoting a European framework for CSR, 2001
The EU published a Green Paper in July 2001[71]. It covers a wide range of topics, including responsible actions during corporate restructuring, promoting of “work/live balance” and corporate codes of conduct and social rights. It is intended to function as a “launch-pad for debate”; encouraging companies to take the “triple-bottom-line” approach, i.e. giving attention to social and environmental concerns in addition to economic goals. The Green Paper consists of 2 sections: the internal section focuses on the CSR practice involving employees relating to issues, such as investing in human capital, health and safety, and managing change, while environmentally responsible practices relate mainly to the management of natural resources in production; and the external section focuses on CSR on a more wide range of stakeholders, including local communities and international communities, business partners and HR. The consultation process hopes to develop a new framework for the promotion of CSR based on European values.
4. Council Resolution, December 2001
The Council Revolution on follow-up of the Commission Green Paper recognised that the CSR can contribute to reaching the objectives laid down by the European Councils in Lisbon, Nice and Göteborg for the EU to become the most competitive and dynamic knowledge based economy in the world fostering social integration and sustainable development.
5. Communication of the EU Commission concerning CSR, July 2002
“CSR can play an important role in advancing sustainable development. Many businesses have already recognized that CSR can be profitable and CSR schemes have mushroomed. (…) CSR is no longer just a job for marketing departments”[72].
In July 2002, the EU Commission published a new strategy to promote business contribution to sustainable development. The policy paper calls for a new social and environmental role for business and sets up a ‘European Multi-Stakeholder Forum’ for all players, social partners, business networks, civil society, consumers and investors to exchange best practices, establish principles for codes of conduct, and seek consensus on objective evaluation methods and validation tools, such as ‘social labels’. The Commission’s strategy is designed to:
· Promote the business case for CSR in order to make it attractive to more companies, in particular TNCs
· Promote external evaluation and benchmarking of companies’ social and environmental performance in order to make CSR credible.
· Manage a European Multi-Stakeholder Forum in order to focus discussion on CSR
· Ensure that EU policies are CSR-friendly
6. European Parliament’s Code of Conduct, December 1998 and 2002
In 1998, the EP published a European Code of Conduct regarding the activities of TNCs operating in developing countries[73]. The EP passed a first resolution to promote the accountability of European-based TNCs by supporting initiatives in the field of codes of conduct. In the resolution, the EP states its support for voluntary codes of conduct substitute for international regulation. Furthermore, the EP calls upon the EU Commission and Council to come to terms with the subject of a "European Monitoring Platform" and proposes to organise hearings on the subject.
In May 2002, the EP voted for new legislation to require companies to publicly report annually on their social and environmental performance[74], to make board members personally responsible for these practices, and to establish legal jurisdiction against European companies' abuses in developing countries. The package is part of a new EU Framework for CSR, and represents a major step towards establishing international regulation for TNCs. The Parliament also voted to:
· Set up a European CSR Forum to give rights to stakeholders, such as consumer and activist groups, to oversee policies alongside business and trade unions
· Set up a European Social Label to endorse products where there is respect for human and trade union rights
· Introduce the wider social and environmental impact of companies' performance in European negotiations between employers and trade unions
· Make all EU financial assistance to business subject to compliance with basic standards, including setting up a blacklist against companies guilty of corruption
· Mobilise the EU's trade and development programmes to tackle abuses by companies in developing countries.
7. Council Resolution, February 2003[75]
This Resolution calls upon Member States to promote CSR national level by making companies aware of its benefits and highlighting the potential results ……………cooperation between governments, business and other societies; to continue to promote the dialogue with social partners and civil dialogue; to promote transparency of CSR practices; to exchange information and experiences, to integrate CSR national policies; to integrate CSR into their own management.
8. Other initiatives to promote CSR in Europe
· SustainAbility UK, an independent management consultancy to promoting the business case for sustainable development, with the mission to help create a more sustainable world by encouraging the adoption of practices, which are socially responsible, environmentally sound and economically viable – satisfying the triple-bottom line of sustainable development.
· UK Ethical Trading Initiative (ETI) 1998, focuses on managing an organisation’s supply chain in a socially responsible manner. ETI seeks to encourage a shared approach to the sourcing of goods and services that leads to a raised standard of living for workers around the world.
· CSR Europe helps companies to share their knowledge and experience on CSR. It is a business-driven membership network whose mission is to encourage companies to proper in ways that stimulate job growth, increase employability and prevent social exclusion thereby contributing to a sustainable economy and a more just society. CSR Europe’s Resource Centre includes a ‘best practice’ database, a publications list, links to related organisations and details of CSR Europe’s programs.
· Copenhagen Centre (TCC) promotes voluntary partnerships between business, government and civil society in order to provide opportunities for the less privileged to be self-supporting, active and productive citizens. TCC aims to become a ‘European house for CSR’, providing forums to facilitate the continuing debate.
· European Academy of Business in Society. In July 2002, leading European business schools and more than 60 major multinational companies teamed up to launch a large research and teaching project on the business case of CSR
· Small and medium sized enterprises (SMEs) and CSR. CSR is not just business of TNCs. According to a recent survey[76], 50% of Europe’s SMEs are already involved in CSR ranging from 32% in France to 83% in Finland, and according to another survey[77] 41% have an environmental policy, 28% make charitable donations, 15% consider ethical issues when outsourcing and 13% have a diversity policy.
· National Grid Transco UK leads the group’s community investment and coordinates the Transco Affordable Warmth Programme (to relieve fuel poverty for homes outside the gas supply areas), the National Grid (practical tree and wood-related projects) and Creative Education for teenagers failing in conventional schools.
NINETH. CODES OF CONDUCT: SELF- REGULATION
I. Introduction
Many companies have altered their policies to establish codes of conduct and policies integrating CSR principles into their business practices and to allow independent monitoring of their practices. These codes reflect the growing pressure being placed on companies by NGOs, shareholders, and socially responsible investments funds. According to the OECD, in 2000 there were 296 codes of conduct[78]. The proliferation of such codes has made some to speak of a “code mania”.
Codes of conduct represent a formalised and uniform way of dealing with a range of complex issues that is both their strengths and weaknesses. At their best, codes offer an opportunity to companies to think differently and to act in new ways. They make companies to give attention to new questions and to raise issues that have hitherto been the concern of others[79].
II. Types of code
There are five types of codes: company codes (like Shell, Phillips, Levi Strauss, etc); trade association codes (like ICC, British Toy and Hobby Association, Bangladesh Garments Headquarters and Expatiates Association, Kenya Flower Council Code, etc.); multi- stakeholder codes (like Accountability 1000, good corporation.com Project Sigma UK, Ethical Trading initiatives UK, Apparel Industry Partnership USA, Social Accountability 8000); intergovernmental codes (like the ILO Convention, OECD Guidelines on TNCs. EU CODE of conduct, etc) and world codes (ICFTU Code of Conduct Covering Labour Bodies, Principles in Global Corporate Responsibility)[80].
III. Advantages
Some companies may have viewed the adoption of higher standards as necessary but an expense without any rewards. However, companies that have adopted codes of conduct have reaped several benefits, such as compliance with local and international law, promotion of rule of law, protection of brand image, avoidance of trade sanctions, management of suppliers, increased worker productivity, alleviate shareholder and consumer concerns, maintain community goodwill[81].
IV. Contents
In general, codes of conduct should[82]:
· Be applied at every level of the organisation and production line;
· Be based on the 1998 ILO Declaration on Fundamental Principles and Rights at Work and the OECD guidelines for TNC;
· Be included in training for local management, workers and communities on implementation;
· Emphasis on a “development approach” – one which stresses continuing gradual improvements to standards, and to the code itself;
· There is a need for ongoing verification, which should be developed and performed following carefully defined standards and rules.
Although the number of companies that have invested time and effort into creating policies is still small, this number does represent some of the world’s largest corporations and there are more companies, which are currently introducing such policies. Many encouraging examples have emerged:
· A number of footwear and apparel companies drawing up codes of conduct and monitoring mechanisms
· Several leading auto and oil companies acknowledging the real impact of global climate change and pledging to reduce emissions;
· The largest diamond company in the world altering its global buying and marketing practices because of the conflict of the diamonds issue;
· The welcome extended by a number of major oil and mining companies to a new set of voluntary principles on security and HR;
· The announcements in recent months by major pharmaceutical companies that they are cutting prices on HIV/AIDS medicines in the developing world[83].
V. Codes of conduct and labour rights
Codes of conduct have privatised the implementation of national labour legislation and international labour standards. Their proliferation is a reflection of the failure of the governments to implement effective labour legislation and of the ILO to enforce internationally agreed basic minimum labour standards.
Despite pressure from unions and NGOs that codes of conduct contain, at the minimum, the core ILO standards, most codes are often less than what is demanded by national law and international labour standards but typically will include references to the non-use of forced labour and child labour and the implementation of reasonable health and safety standards. Some include a reference to the payment of minimum wage levels, but to date, very few have included a commitment to recognizing the right of workers to organize and to bargain collectively. Until recently, no company code had made commitments to the payment of a living wage[84].
VI. Voluntary or binding
Most of the instruments and methods (codes of conduct, GC, etc.) are voluntary and not legally binding. The corporations may or may not subscribe into them. And if they do, they do it for moral reasons, ethical pressure, or for public relation objectives, but they are not binding.
While voluntary codes of conduct can contribute to the promotion of CSR, their effectiveness depends on proper implementation and verification. Binding rules ensure that a minimum standard is applicable to all, while codes of conduct and other voluntary initiatives can only complement these and promote higher standards for those who subscribe to them.
Ethical codes are weak because industries produce them themselves, they are often cost-driven, and companies rarely pursue ethical standards when their competitors are ignoring them. That is why the passage from ethical codes to legal rules is a necessary step in an era of globalisation.
There is a risk that codes facilitate the translation of CSR into “business as usual”, that they will simply be absorbed within the business processes in ways which do not bring about significant changes in behaviour and priorities. It is common to hear that companies “must be seen to care about social issues”[85].
Voices have been raised that these obligations should be made an erga omnes legally binding duty for TNCs as much as for states[86].
ELEVENTH. SOCIALLY RESPONSIBLE INVESTING
Many companies are facing increasing pressure from activists who are using shareholders resolutions and proxy solicitation to influence company policy on social and environmental issues.
The development and growth of socially responsible investing (SRI) has gone through 3 stages. At first the major concern of investors was to exclude companies in certain fields such as arms, tobacco, pornography or gambling. Later environmental factors were added “green investing”. The emphasis moved from negative to positive, from exclusions to inclusions. More recently the wider concept of responsibility in investing has developed. Sustainability is one such element- are the companies engaging in activities that will lead to sustainable activities, such as switching from fossil fuels to renewable fuels[87].
Other organisations (Fairtrade, Co-op Bank’s Ethical Purchasing Index, Ethical Training Initiative, etc.) promote products produced fairly (the “ethical product”).
Morey, for instance, has developed a five-level matrix which takes account of industry sector sustainability but also of management “vision and strategy”. The matrix distinguishes between those which are “fundamentally in conflict with sustainable development (f.e. tobacco) and these which could address problems through strategic shifts (f.e. energy)[88].
TWELFTH. CORPORATE SOCIAL LEADERSHIP
“Leadership is about communicating a vision and making it happen.
Our commitment to sustainable development is today being integrated
into the way Shell makes decisions.
For example, I do not approve new investments unless they address the key sustainable development aspects of the project”[89].
Currently, some maintain that today’s businessmen need to go further than CSR. They say that CSR is essentially a risk reduction strategy, designed to avoid the more glaring gaffes that could to litigation or damaged reputation. In business, however, something will always go wrong. Hence the need for a new way for companies to prepare for the worst while showing the world the best aspects of business. It’s called “corporate social leadership” (CSL) and it involves companies using their cultural power, grass root presence and unique capabilities to go out of their way help to solve social problems.
To do it not through philanthropy, corporate giving, employee volunteering or community involvement, but through finding a dual purpose, social as well as commercial, for every component of the corporate anatomy.
Examples of CSL are Coca-Cola and its new role in Africa, helping public health authorities to deal with the AIDS crisis; British Sky TV using the youth appeal of its brand to inspire teenagers about their future careers; Daimler Chrysler and Richmont using sport to tackle social problems around the world.
At the same time, the supporters of CSL point out that it is time for the capitalists and anti-capitalists to make a common cause; it is time that campaigners for social justice and environmental protection saw business as their ally, not their enemy[90].
THIRTEENTH. CSR AND GOVERNMENT RESPONSIBILITY
A different kind of pressure on companies is for them to become actively involved in social fields like education or urban renewal, which are basically the responsibility of local and national government. This though presents companies with a dilemma: Should the company play a bigger role in society by providing infrastructure and social services where government does not deliver? Or should it concentrate on what it does best: serving its customers and getting the best return for shareholders?[91].
The key point is that companies need to be clear about the terms on which they are becoming involved. Firstly, the goals should be decided politically through the government and not be left to businesses to decide. Secondly, businesses should not take on responsibilities for which governments should be solely responsible for, nor which they do not have matching authority. Lastly, governments should not try to offload their responsibilities to companies.
FOURTEENTH. CRITICISMS DIRECTED AT THE CSR MOVEMENT
“CSR is a large glasshouse
in which everyone should be careful of throwing stones” [92]
“We have to be seen to be doing it”[93]
As the notion of CSR has come to mature to take relevance in the market place, various critiques have come out against it.
It is increasingly common to hear that companies should be run in the interests of wider society, not just shareholders. However, still some like to resurrect the old Freedman’s theory that the only responsibility of business is to make profit. They insist that when a company is successful, and posts large profits, the society at large, does benefit. Employees benefit directly through direct shareholdings in the company or through an increase in salary. Profits are also recycled through the tax that companies pay on their profits, taxes which contribute to the funding of public services, social welfare. Finally, society benefits through profits by the investment into new products and new technologies.
Another criticism is that some business leaders are even becoming concerned that governments are trying to offload responsibility for tackling social problems on their shoulders[94].
Finally, it is said that CSR is still in an immature stage. The vocabulary versus regulation debate (whether CSR should be imposed on business) makes no sense from the South’s point of view. CSR may favour larger producers and manufacturers because these companies have the resources to satisfy elevated labour and environmental standards. Smaller companies, that form the vast majority of business in the developing world, in his danger of being overlooked by the Northern buyers under pressure from head office and host country consumers to ensure imported products are traceable and ethicaly sound[95].
FIFTEENTH. CONCLUSION
“CSR may have entered our national vocabulary
but it has not taken root in our conciousness”[96]
CSR has increased in recent years as a result of the recognition of the essential contribution of business to social, environmental and HR progress and the pressure from consumers, investors, employers, governments, NGOs and public opinion.
A growing number of businesses have already CSR as a priority in their agendas. Businessmen are every time more convinced that adopting ethical standard is in the company’s best interests and that they gain competitive advantage from raising their ethical standards both internally and externally.
However, there is still small adherence of companies to the CSR doctrine. The Institute of Public Research of the UK revealed that only 4 out of 10 company boards discuss social and environmental issues routinely or occasionally; only a third of organisations have a board member with an environmental remit; only a fifth have one with an interest in social issues[97]. There is a piecemeal application of CSR and there is no systematic or sincere change in big business[98].
A few months ago a teacher, an advisor, a consultant and a management educator published a book on CSR[99]. They end the book with the following words that I would like to make mine:
“Unless engagement with these initiatives is underpinned by truth, righteousness, peace, love and non-violence, they will result only in processes that undermine their intentions. If there are those who believe that we can reach the Millennium targets without reference to these five fundamental human values, then we may fail. You have to love children to not want them to be exploited, you have to believe in peace and non-violence to engage in the lengthy process of stakeholder consultation, and you have to believe that the truth is sacred to expose you decision making to scrutiny”.
[1] Ramon Mullerat O.B.E. is a lawyer in Barcelona and Madrid, Spain; Avocat à la Cour de Paris, France; Honorary Member of the Bar of England and Wales; Honorary Member of the Law Society of England and Wales; Professor at the Faculty of Law of the Barcelona University; Adjunct Professor of the John Marshall Law School, Chicago; Former President of the Council of the Bars and Law Societies of the European Union (CCBE); Member of the American Law Institute (ALI); Member of the American Bar Foundation (ABF); Chairman of Commission 2020 of the International Bar Association (IBA); Co-Chairman of the Human Rights Institute (HRI) of the IBA; Member of the Board of the London Court of International Arbitration (LCIA); Chairman of the Editorial Board of the European Lawyer.
[2] The opinions in this paper are the personal opinions of the author and not necessarily of the organizations he represents.
[3] The author would like to thank Katja Danzeisen and James Atton for their assistance in the preparation of this paper.
[4] Kofi Annan, UN Secretary-General.
[5] Tony Blair, UK Prime Minister.
[6] Milton Friedman, “The Social Responsibility of Business is to Increase Its Profits,” New York Times Magazine, 13 September 1970.
[7] Geoffrey Owen, “Time to promote trust, inside the company and out”, Financial Times, 30 August 2002: “One of the responsibilities of managers is to defend the role of profit as the best available measure of the contribution which business makes to society”.
[8] Ella Joseph, centre-left think thank IPPR, The Observer, 2 February 2003.
[9] Doug Miller, CEO of Environment International, “CSR is here to stay”, CSR Magazine, October 2002.
[10] Institute of Directors, Standards for the Board, 1999.
[11] Kofi Annan, at Johannesburg’s Summit, 2002.
[12] Peter F. Drucker, Managing the next society, 2002, p. 287, who adds “Each of the three models of corporation developped in the past half-century stressed one of these dimensions and ............ the other two. The German world of the “social market economy put the emphasis on the social dimension, the Japanese one on the human dimension, and the American one (“shareholder sovereignity”) on the economic dimension.
[13] Adrian Cadbury, Corporate Governance and Chairmanship, Oxford, 2002, p.161.
[14] Malcom McIntosh and al, op.cit, p.16, argues that corporate citizenship is a form of CSR and a fuller understanding of the role of business in society. Some research organisations have adopted this name: Deakin Univeristy’s Corporate Citizenship Research Unit in Australia, Catholic Univeristy of Eichstate’s Centre for Corporate Citizenship Research in Germany, etc.
[15] ICC, A business vision for the 21st century, 11 January 2002.
[16] World business Council for Sustainable Development, 2002.
[17] Nick Mathiason, “Company ethics? They are not business,“ The Observer, 17 November 2002.
[18] Steve Hilton and Giles Gibbons, Good Business, p. 55.
[19] Steve Hilton and Giles Gibbons, Good Business, pp. 53 and 54
[20] John Hancock, Ethical Money, 2002, p. 3.
[21] Viewpoint: beyond compliances. Social accountability can protect businesses and profits, 13 April 2001, cited by Joseph Weiss, Business Ethics, 2002, p. 157.
[22] Business Ethics, a media company, ranks corporations in terms of citizenship. Variables in the ranking include how companies treat stakeholders: customers, employees, stock owners, the community environment, ........ and non-US shareholder. High ranking ethical companies included .......... and Gamble, Hewlett-Packard, Fannie Mae, Motorola, IBM, etc. Cited by Joseph Weiss, op. cit, p. 157.
[23] M. Moorly Start, 2000, “Putting principles into practice”, in M McIntosh Visions on Ethical Business
[24] Modern company law for a competitive economy: the strategic framework, February 1999, p.37 cited by Daniel Summerfield in, “Corporate governance: the stakeholder debate“ in Chris Moon and Clive Boney, Business ethics. Facing up to the issues, 2001, p.96.
[25] Ray Shaw, “Shareholders value or shareholders value? That is the question?, in Leo Schuster, Shareholders value management in Banks, 2000, p.37.
[26] The Economist, 19 June 1993
[27] Malcom McIntosh and al, Living the corporate citizenship, 2003, p.15
[28] Bennett Freeman, “Corporate Responsibility and Human Rights”, Global Dimensions Seminar, New York, 1 June 2002: Anthony G. McGrew, “Human Rights in a global age: coming to terms with globalisation” in Tony Evans, Human Rights fifty years on, 1999, p. 188.
[29] Andrew Wilson, op. cit.
[30] David Held, A McGrew, D. Goldblatt and J. Perraton, Global Transformations, 1999, p. 282.
[31] UN Conference on Trade and Development (UNCATAD), Financial Times, 13 August 2002.
[32] David P. Forsythe, Human rights in international relations, 2000, p.191.
[33] Adrain Cadbury, Corporate Governance and Chairmanship, pp. 160-161.
[34] B.R. Barber, “Civil society and strong democracy”, in Anthony Fidders, The global third world debate, 2001.
[35] Leo Schuster, stakeholders value management in banks, 2000
[36] Richard Whitley, Divergent capitalisms: the social structuring and change of business systems, 199, cited by Malcom McIntosh, op-cit., p.17
[37] Georges Soros, On globalisation, 2000, p. 5.
[38] Keith Davis and R. Blomstrong, Business and its environment, 1966.
[39] Joseph Weiss, op. cit, p. 91.
[40] Stephen Timms, CSR Minister, The Observer, 2 February 2003.
[41] George Mambiot, The Observer, 2 February 2003.
[42] George Mambiot, The Observer, 2 February 2003.
[43] Kelly Dent, programme director of labour rights NGO Transnational Information Exchange in Sri Lanka, The Observer, 2 February 2003.
[44] President Thabo Mbeki of South Africa, The New York Times, 26 August 2002.
[45] Barry James, “Johannesburg Summit: a triumph or a disaster”, International Herald Tribune, 6 Sept. 2002.
[46] BP’s declaration.
[47] Amnesty International, Human Rights Principles for Companies, January 1998.
[48] Melinda Ching, Amnesty International oral statement on the working methods and activities of transnational corporations, 1 August 2002.
[49] Bennett Freeman, op.cit
[50] Pierre Sane, op. cit.
[51] Forcese, “Putting Conscience into Commerce”, op-cit., p. 12. For example, Reebok’s “Human Rights Production Standards” say: “Reebok’s experience is that the incorporation of internationally recognized HR standards into its business practice improves worker moral and results in a higher quality working environment and higher quality products”.
[52] J. Nelson, “Business as Partners in Development: Creating wealth for countries, companies and communities”, The Prince of Wales Business Leaders Forum, London, 1996, pp. 47, 52.
[53] David Vidal, the link between financial performance and corporate citizenship, 1999
[54] Dibby Jones, director general of CBI, The Observer, 2 February 2003: “CSR is good for business; the 21st country employee and consumer wants to relate to a company that believes in “putting something back“.
[55] Michael Porter, the Times, 17 May 2001
[56] Pierre Sane, “Why human rights should matter to the business world”, Earth Times News, 8 January 2001.
[57] J. Ayala II, “Philanthropy makes business sense”, Business Day, Bangkok, 25 Sep. 1995, Ayala Foundation Inc., Vol. 4, No. 2, July-Sep., Oct-Nov, 1995, p. 3.
[58] For example, Nike and Reebok in Asia, which subcontracted out the production of athletic shoes and soccer balls to firms that operated sweatshops and employed child labour. Another example was Enron, who made the largest single foreign investment in India. Innocent people were beaten up, sometimes outside the very gates of Enron’s power plant, because they were demonstrating against what they believed were the plant’s adverse effects on the local environment. The police committing these abuses were under the command of local headquarters, but the company paid their salaries. Arvind Ganesan, “Business and Human Rights. The Bottom Line”, Corporation and Human Rights (Human Rights Watch), 1999.
[59] Alyson Warhurst & Bahar Ali Kazami, “Social performance management & corporate social responsibility”, Warwick business school corporate citizenship master class, 8 July 2002.
[60] Geoffrey Robertson, Crimes against humanity, 2nd edition, 2002, p 521.
[61] Reebok from South Africa in 1986 or Levi Strauss, Macy’s, Liz Clairborne, Eddi Bauer, Heinecken from Burma due to its highly repressive military government.
[62] Philip Swanson, “CSR and the oil sector”, speech in “Energy, new era, new governance”, London, 18 March 2002.
[63] Margaret Jungk, Practical Guide to Addressing Human Rights Concerns for Companies Operating Abroad, p. 171.
[64] Geoffrey Chandler “Business complicity and human rights abuses”, Global Dimension Conference, New York, 21-22, March 2001. An example for indirect complicity was the HR abuse of several international oil companies that undertook a joint venture with the Burmese government and the state oil company Myanma Oil and Gas Enterprise in the early 1990s.
[65] Geoffrey Chandler, “Exploitation is our responsibility,” Sunday Business, 16 Aug. 1998; and “Oil Companies and Human Rights”, Oxford Energy Forum, Nov. 1997, p. 3.
[66] Kofi Annan, UN Secretary-General, on the role of corporations in environment.
[67] Tom Gottschalk, Executive Vice-President, Law &Public Policy and General Counsel, General Motors.
[68] Kofi Annan, UN Secretary-General.
[69] Robin Cook, UK Foreign Secretary.
[70] Vincent Etienne Davignon, European Presidency Conference on CSR, November 2001.
[71] Brussels COM (2001) 416 Final. Commission of the European Community.
[72] European Commission: Corporate Social Responsibility: new Commission strategy to promote business contribution to sustainable development, IP/02/985, 2 July 2002.
[73]European Parliament: European criteria for companies operating in developing countries LDCs: towards a European code of conduct, INI/1998/2075.
[74] From 2003, French corporations will have to demonstrate their commitment to CSR by giving detailed accounts of their social and environmental reporting. The Guardian, 26 September 2002.
[75] OJ. 2003/C 39/2.
[76] Observatory of the European SMEs, “European SMEs and Social enviromental responsibiltiy”.
[77] Grant Thronton, “European Business Survey 2002”.
[78] OECD Codes of Conduct. An expanded review of thier contents, working party of the committee 2000.
[79] Maclom McIntosh, op.cit, p. 92.
[80] Ralhp Jenkins, Corporate Codes of Conduct: Self regulation in a global economy, business and society programme, 2001 UN Research Institute in Social Development.
[81] Ambassador Ahmad Kamal, Human Rights and Corporate Responsibility, De Paul University, 1 June 2001.
[82] Green Paper - Promotion a European framework for CSR, COM (2001) 366, July 2001.
[83] Bennett Freeman, op. cit.
[84] S. Picciotto and R. Mayne, Regulatory International Business: Beyond Liberalization, 2000, p. 208.
[85] Maclocm McIntosh, op cit, p.92
[86] Edwards Alden, “Fight in US for factory workers abroad”, Financial Times, 24 September 2002. US HR and trade groups have launched a campaign aimed at restricting US imports of goods made under sweat-shop conditions and at putting in place new laws that punish companies that fail to uphold their own declared standards.
[87] Garry Topp, Financial Times, 28 February 2001
[88] Roger Cowe, “Sustainable responsible... but not puritanical”, The Observer, 2 February 2003.
[89] Philip Watts, Chairman of the Committee of Managing Directors, Shell.
[90] Steve Hilton, ¨The corporate manifests”, Financial Times, 20-21 April 2002.
[91] Shell International (1998), Profits and principles- does there have to be a choice? , p. 2 cited by Adrian Cadbury, Corporate Governance and Chairmanship, Oxford, p.165
[92] Sarah Hoggs Chairman of ·i Group PLC, Cadbury Corporate Governance and Chairmanship. A personal view, 2002, p. XIII
[93] Head of public affairs of a large supermarket chain, The Observer
[94] IOD conference in London on CSR, The Guardian, 26 September 2002. Andrew Wilson, Director of Ashride Management College, “They (corporate leaders) are now keen to know from government exactly what the limits are for CSR compared to its own responsibility”.
[95] Tom Fox, senior research associate at Jurisdictional Institution for Environment and Development, The Observer, 2 February 2003.
[96] Ella Joseph, centre-left think-tank IPPR, The Observer, 2 February 2003.
[97] Nick Mathiason, “Company ethics? They are not business“, The Observer, 17 November 2002
[98] Naomi Klein, No logo, 2000, cited by Steve Hilton and Giles Gibbons, op-cit. p. 66: “there is absolutely no evidence that any of this reform activity is coalescing into a universal standard of ethical corporate behaviour... instead what we have with the proliferation of voluntary ethical codes of conduct and ethical business activities is a haphazard and piecemeal mass of crisis management”.
[99] Malcolm McIntosh, Ruth Thomas, Deborah Leipzigen, Gill Coleman, Living Corporate Citizenship. Slaptic rules to socially responsible business, 2003.
