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 [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’ ^[2] 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.” [3] 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 – (please see: 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.

Why do we need Corporate Social Responsibility and Accountability?

There are many reasons to regulate the activities of TNCs. Outlined below are some basic arguments for why TNCs should be forced to adhere to international law.

Human rights need protection

Under current international law, it is primarily the responsibility of states to uphold human rights. But TNCs can abuse human rights and harm the environment, and many states often fail to uphold the basic human rights of their citizens for fear of economic loss (see Shell's activities in Nigeria) or repercussion.

There is no international law for TNCs and voluntary initiatives are not acceptable

In general, international companies do not fall under the remit of international law. Since TNCs as a rule operate in more than one country, this virtual absence of legal accountability at international level is an odd phemonenon. It is cause for concern given the power multinationals wield in the context of many of the countries in which they operate. TNCs that operate in developing countries often fail to live up to their own standards because where national regulation is weak, they may be able to engage in unacceptable (though lucrative) conduct with impunity. The case of Shell in Nigeria shows how a TNC, in spite of extremely high self-imposed standards of social responsibility, has manifestly failed to change the way it operates beyond mere PR-speak. Thankfully, some in the field are increasingly beginning to recognise the inadequacy of voluntary initiatives, and that they should be replaced with legally binding norms. For example, as the International Council on Human Rights Policy’s (ICHRP) Beyond Voluntarism concludes: ‘The relevance of international law and enforcement is beginning to be treated seriously. Indeed, there is a growing sense that voluntary codes alone are ineffective and that their proliferation is leading to contradictory or incoherent efforts.’ {REFERENCE HERE].

Why should irresponsibility offer some companies an advantage?

Whsy should irresponsibility in working practise offer some TNCs a marked advantage in the field of business? Law-abiding companies, that have a genuine commitment to socially responsible practises should be rewarded, not allowed to flounder in a market filled with unscrupulous businesses that put profit before responsibility.

Developing countries should learn from our mistakes

The irresponsibility shown by 500 years of growth in what is now the Developed World cannot be played out again in the Developing World. It is, in some ways, a case of double standards, but the natural resources available should not be plundered again

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” ^[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" ^[5] 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 ^[6]. 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” ^[7], a term used to refer to the “coming-together of different regulatory approaches in ways that are complementary and synergistic, or less contradictory” ^[8]. 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” ^[9] 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) ^[10].

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 ^[11]. 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 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.

CSR and the ‘measure of fit’ – will companies ever take CSR seriously as long as there is profit to be had in irresponsibility?

Despite the fact that many corporations believe that eventually, CSR practises will pay off, the failure of economists and marketeers to find a link between CSR and financial performance creates further doubts on the part of many corporations, furthering their reluctance for the institutions to impose regulation upon them. There is a need to answer the question - under what condition does a company satisfy its strategic business interests and the stakeholders' societal ones? The economics discourse regarding CSR gives the most telling insight into what it will take for corporations to adopt responsible business practises. The suggestions that immersion in the discourse throws up are hardly surprising. Burke and Logsdon (1996) suggest that this can be done “by reorienting CSR towards a more strategic perspective” ^[12], or tailoring CSR to fit with the principles of a corporation, rather than the other way around. It was formerly assumed that CSR entailed a zero-sum trade-off with corporate economic interests, but corporations such as Interface (the world’s largest carpet manufacturer, now working under sustainable business principles) has proved that this is not necessarily the case [13] and rather, the inclusion of ethical dimensions to a firm’s working practise can induce further customer loyalty, as well as earning ‘brownie points’ with the environmental lobbyists and a PR boost for the company (see: CSR as PR spin and marketing tool – capturing the imagination of the new ethical consumer?). But is ‘strategic’ CSR really the answer? Burke and Logsdon’s terminology regarding strategic CSR is especially telling: “[strategic CSR] yields substantial business-related benefits to the company by supporting core business activities and so contributing to the firm's effectiveness in accomplishing its mission” ^[14]. Plans to bring the TNCs in line, clearly, have a long way to go. As one retail-sector source told Christian Aid before the publication of Behind the Mask, ‘There are some companies who will only take social responsibility on board if they have to. You’ve got to use regulation to make them.’ [15].

CSR as PR spin and marketing tool – capturing the imagination of the new ‘ethical consumer’?

CSR sounds like a good thing, yet the very notion is now a growing industry, seen as a vital tool in improving the public image of some of the world’s largest corporations. In simple terms, companies must be seen as committed to ethical behaviour and the undertaking of ‘good works’ in the communities in which they operate. As Christian Aid summarises: “It sounds and looks like a modern version of selfless philanthropy and no doubt in many individual cases is motivated by a genuine wish to help and has led to some benefits. The problem is that companies frequently use such initiatives to defend operations or ways of working which come in for public criticism” [16]. CSR, in other words, can become merely another branch of PR. Averting a public relations disaster often appears as the only possible reason for pursuing avenues of development activity. Shell was, in 1995, the face of the CSR debate in Britain in the aftermath of the joint PR disasters of the Nigerian government’s execution of Ken Saro-Wiwa and eight other protestors and the row over the company’s plan to abandon the Brent Spar North Sea oil platform. As will be examined in the second part of this report, Shell’s CSR programme has brought little benefit other than to reassure those in the developed world who are not willing to look further into the debate. It certainly has not delivered any benefits to those in the front-line of their extraction activities. The case studies in this report seek to reinforce that in many cases, the rhetoric and the reality of CSR are simply contradictory.

Resistance to the Corporate-ruled Globe

Since the landmark WTO protests in Seattle, the anti-corporatism agenda has been advanced, and afforded more publicity than even its most staunch supporters could have imagined. The corporation may be trying to render national governments impotent on the global stage, but a rising tide of grassroots opposition has constituted a worthy opponent on more than one occasion. Movements to challenge the foundations of the corporation are gaining ground slowly. In America, the corporate charter revocation movement tried to bring down oil giant Unocal; in Bolivia, the population fought and won a battle against a huge transnational corporation brought in by their government to privatise the water system; in India nearly 99% of the basmati patent of RiceTek was overturned; W. R. Grace and the U.S. government's patent on Neem was revoked [17].

References

Christian Aid Behind the Mask: The real face of corporate social responsibility [18]

Interface Carpets Sustainability report [19]

The Corporation Website for The Corporation (2004, film) [20]

^ Brenner, N and Theodore, N. (2002) "Cities and the geographies of 'actually existing neoliberalism'," Antipode 34 (3): 356-386.

^ Richter, J. (2002) Codes in Context TNC Regulation in an Era of Dialogues and Partnerships Corner House Briefing No.26.

^ Utting, P. (2005) Rethinking Business Regulation: from self-regulation to social control. UNRISD Publications: Technology, business and society briefing 15

^ Burke L.; Logsdon JM (1996) Long Range Planning. Vol. 29 (4), pp. 495-502