Corporate Social Responsibility the current debate

Introduction: What is Corporate Social Responsibility?

It is a long-neglected challenge in today’s world of economic globalisation and liberalisation to regulate the freeing-up of markets and the increasing dominance of transnational corporations (TNCs) in global trade, investment and supply chains. Specifically, it must be ensured that this neoliberal agenda does not undermine socially ethical and inclusive patterns of development and ecologically sustainable working practises. Whilst in the past many policy makers, social and environmental activists and academics looked to the state to protect against the detrimental effects of markets and the concentration of capital, with the rise of neoliberal orthodoxy in the 1970s the inherent contradictions and failures in the neoliberal system were not only downplayed by those in positions of power, but also associated more with “state failure” than a failure on the part of the private business sector (Internet 1), despite the increasing role of the private sector in regulating market and corporations. It was largely assumed that the market and its physical representations, the TNCs, could be kept in check by minimalist state intervention and corporate self-regulation. However, twenty years of ‘actually existing neoliberalism’ (Brenner and Theodore, 2002) have proven that the market alone cannot satisfactorily regulate capital flow and the consequences of capitalism across the board – a further governing body must be brought in. Thus a quandary was thrown up by adherence to the market-led approach – who should regulate the TNCs? In response to this, a discourse and a set of policies, practices and global institutions concerned with corporate social responsibility (CSR) arose and gained ground from the 1980s onward. Despite evidence that this was not the best course of action, CSR discourse centred heavily on the promotion of purely voluntary initiatives to minimise malpractice or improve the social, environmental and human rights sectors of business performance, as well as on the regulatory role of non-state actors in standard-setting and implementation.

This report will examine several strands of the debate surrounding CSR: section 1 examines the soft voluntary initiatives that characterise corporate regulation, and talk of a gradual hardening of regulatory responses, paving the way for ‘co-regulation’ and stakeholder-led initiatives and, more recently, leanings towards legalistic approaches within the emerging corporate accountability agenda. This section will also briefly examine the importance of the ‘ethical’ stance of corporations to the new ethically responsible consumer. The latest Christian Aid report on CSR notes that: “Within a decade a whole new corporate language, championed by [TNCs] has evolved around the notion of more ethical business practice.” (Internet 2). TNCs today are savvy to the CSR debate: how are they tailoring their activities and advertising to capture the imaginations of the new ‘ethical’ consumer? In this vein, will corporations ever take the notion of CSR seriously as long as there is profit to be had in irresponsibility?

The remainder of the report will ground the debate surrounding CSR within the activities of one corporation – Royal Dutch Shell – in an attempt to illustrate the appalling and irresponsible regulatory approaches adopted by many of the largest TNCs, and consequently, why voluntary corporate regulation is unacceptable and the reluctance of governments (sub-national, national and supra-national) to intervene should be of grave concern.

The international regulation of transnational corporations – a brief history.

The international regulation of transnational corporations has been the subject of an increasingly heated debate since the late 1960s. In the early 1960s, the United Nations called for comprehensive international regulatory regimes as part of what Judith Richter summarises as “a broader push towards a socially-just New International Economic Order” (Richter, 2002: 4). At the UNCTAD conference in Santiago in 1972, the increasing waywardness of TNCs led to calls for international codes of conduct. These calls led to the UN Economic and Social Council (ECOSOC) setting up the UN Commission on Transnational Corporations as a research and administrative body. However, ECOSOC’s action was unfortunately too slow to prevent the assassination in 1972 of Chile's President Salvador Allende, who alerted the UN to plans by the International Telegraph and Telephone Company (ITT) and the Kenneth Copper Corporation to overthrow his socialist government. Allende's death in a CIA-backed military coup in 1973 contributed to UN codes coming on to the international policy agenda, becoming a ‘top priority’ three years after the coup.

In the 1980s the West was in the grip of Reagan and Thatcher’s laissez-faire economic restructuring, under which the restriction of capital and the regulation of TNCs was regarded as pure anathema. The neoliberal orthodoxy of liberalisation, privatisation and de-regulation (or ‘the Washington Consensus’ in development circles) gradually percolated to all areas of the world. By 1985 (incidentally, one year after Union Carbide’s Bhopal disaster) plans for a UN code of conduct for TNCs had all but been abandoned.

In March 1991 during George Bush Sr.’s term as President, the Administration requested that all its embassies around the world lobby against any further entertaining of the notion of a UN Code of Conduct for TNCs. This lobbying was so successful that further attempts to set in stone codes of conduct on other activities were effectively halted. The Code's official demise came in 1992, when the president of the UN General Assembly reported that "delegations felt that the changed international environment and the importance attached to encouraging foreign investment required a fresh approach" (quoted in Richter, 2002: 4). Consequently, very few of the international codes and guidelines envisioned during the heady days of the 1970s were adopted.

Those that were realised include the 1981 International Code of Marketing of Breast-milk Substitutes; the 1985 UN Guidelines for Consumer Protection; the 1985 FAO International Code of Conduct on the Distribution and Use of Pesticides; and the 1988 WHO Ethical Criteria for Medicinal Drug Promotion (Richter, 2002). One of the last attempts to introduce international corporate regulation through the UN was at the 1992 UN Confererence on Environment and Development (UNCED) in Rio.

The UN Centre on Transnational Corporations drafted recommendations to be included in Agenda 21 - UNCED's global plan of action - for the regulation of TNCs in the environmental context. However, an influential coalition of Western industrial states and an industry lobby managed to ensure that the recommendations were removed. Instead, the conference's Secretary-General, Canadian businessman Maurice Strong, invited the recently-formed World Business Council for Sustainable Development to set the recommendations on industry and sustainable development.

The WBCSD is a worldwide business lobby group, and its being charged with such responsibility by the UN has been interpreted by some as clear evidence of the UN's capture by corporate interests. Thus the ‘92 Earth Summit ostensibly marked the beginning of a ‘regulatory vacuum’ at the supranational level. Since then, industry institutions have repeatedly opposed external international regulation and increasingly, advocated industry self-regulation on the grounds that it is as effective as external regulation, although more cost effective. Another alternative is to garner certification from private bodies regarding the environmental soundness of the corporation’s operations.

As mentioned previously, there has in latter years been talk of a gradual hardening of regulatory approaches, towards a multi-layered regulatory approach. Peter Utting describes this as: “articulated regulation” (Utting, 2005: 5), a term used to refer to the “coming-together of different regulatory approaches in ways that are complementary and synergistic, or less contradictory” (Utting, 2005: 5). Although the UN policy-speak is off-putting, what Utting is suggesting is actually exactly what industry needs if it is to be sustainable. Four forms of articulated regulation are identified: ‘complementarity’ between different NGOs and their regulatory systems, the interface between “confrontational and collaborationist” (Utting, 2005: 5) forms of civil society activism, linkages between voluntary and legalistic approaches, and greater policy coherence at both the micro level of the firm and the macro level of government and international policy. What Utting fails to mention, however, is that these new strategies remain almost exclusively promotional and not legalistic.

The UNRISD suggests the following initiatives as evidence of the hardening of regulatory responses:

• certification schemes, for example, the International Organisation for Standardisation (ISO) 14001 (environmental management standards), the Fair Labour Association (FLA) and Social Accountability International (SAI) SA8000 (labour standards).

• global framework agreements, where international trade unions negotiate terms with corporations, agreeing the application of certain standards throughout their global manufacturing and supply-chain structure (for example, agreements between the International Union of Food and Allied Workers and Chiquita and Danone).

• standard-setting and monitoring schemes associated with anti-sweatshop initiatives such as the Clean Clothes Campaign, the Global Alliance for Workers and Communities and the Worker Rights Consortium.

• initiatives that emphasise stakeholder dialogues and learning about good practice, such as the United Nations Global Compact (promoting 10 principles derived from international labour, environmental, human rights and anti-corruption law), the Global Reporting Initiative (promoting sustainability or triple bottom-line reporting), the Ethical Trading Initiative (ETI; promoting social standards throughout supply chains), and AccountAbility’s AA1000 (promoting social and ethical accountability) (Utting, 2005: 11).

Whilst these initiatives are addressing some of the limitations that characterise soft company self-regulation, even the UNRISD admit that multi-stakeholder initiatives yield very mixed results (Utting, 2005: 12). Firstly, these intiatives involve only a tiny fraction of the world’s TNCs (some 61,000, plus nearly 1m affiliates and several million suppliers). By late 2004, only 37 corporations were part of the ETI, whilst only 15 were actively participating in the FLA. The world’s largest CSR-related certification scheme, that which certifies the application of ISO 14001 standards related to environmental management systems (particularly pertinent to our case study of Royal Dutch/ Shell), involved approximately 90,000 facilities (not all companies or supply-chain affiliates) by December 2004. This represents a tiny proportion of TNC affiliates and suppliers worldwide. Interestingly, whilst those seeking ISO 14001 certification are increasing year-upon-year at a decent rate, it is notable that the rate of expansion is markedly less than that achieved for quality management certification under the ISO 9000 series.