Corporate Responsibility

Networks and projects that should increase the corporate responsibility - examples:

World Business Council for Sustainable Development (WBCSD) – a coalition of 180 international corporations from 30 countries and 20 sectors; its mission is to light the way to the world of business on its way toward sustainable life, eco-effectiveness, and corporate responsibility. The work includes efforts to collaborate on the formation of the political framework.

CERES – Ecologists and Investors for Sustainable Prosperity  – a US national network of investment funds, environmental organisations, and other welfare groups striving for improved environmental wardenship of businesses.

Business Action for Sustainable Development (BASD) – a joint project of WBCSD and the International Chamber of Commerce (http://www.iccwbo.org/) before the World Summit on Sustainable Development in Johannesburg in 2002. The main objective was to co-ordinate the business position and propose concrete projects within a global public private partnership (see below).

The Basic Concept
The dynamic development of this discipline is also manifested by the quantity of concepts and terms used, which often complement one another. Let us quote the most basic ones:

Triple Bottom Line (TBL – People, Planet, Profits)
The concept represents the response of the business community to the sustainable development concept. It strives for a balance between economic interests and contribution to social development and environment protection.

Public Private Partnerships (PPP)
Public Private Partnerships (PPP), also called progressive alliances, are a form of multi-stakeholder co-operation among the government, businesses, and non-governmental non-profit organisations. They are one of the responses to the question of how to get resources (money, ideas) where the problems occur. It is based on the assumption that forces have to be joined seriously and collective action intensified in order to resolve complex global problems. Without the synergy, co-ordination and collaboration, even growing numbers of individual acts will only have limited impacts. Each sector has its strengths and weaknesses, which are often not only complementary but also inevitable.

Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR) is probably the most widespread and most general term for any and all efforts to reflect the impacts of corporate conduct (externalities) on the surrounding society, including ‘inputs’ such as employees and suppliers. Unlike the TBL, more emphasis is on the social aspects. As outlined above, a crucial debate is held in the Anglo-Saxon world over the character of the response and a distinction is made between responsibility (voluntary and non-binding corporate activity) and accountability (the surrounding society sets clear legal standards and enforcement tools).

Socially Responsible Investment (SRI)
Socially responsible investment (SRI) falls in the category of pro-market approaches. The most general definition of SRI is of an effort to harmonise private values and social considerations with investment practice while respecting both the investor’s financial needs and the impact of the investment on the society. Investors include both individuals and institutions: from investment and pension funds to insurance companies and corporations, to state expenditures, universities and municipal hospitals, to NGOs, churches and societies.

This form is most widespread in the USA. Co-op America is one of the pioneers. Forum for Social Investment, a US NGO, itself one of Co-op America’s projects, distinguishes among three main socially responsible investment strategies:

a) Social screening

 * assessment of institutional investors according to which companies they invest in. The set of criteria includes the sector (weapons, alcohol, tobacco, gambling), product, service, environmental impact of the investment, observance of human rights, conduct toward employees and unions, gender equality, and investment in the local community;
 * tables are then offered to both small and institutional investors listing investment opportunities sorted according to their level of social responsibility.

b) Shareholder activism

 * using the economic power of an investor (minority) shareholder, or (co)owner to change the corporate practice toward more socially responsible conduct by means of dialogue with the corporate management, shareholder resolutions, actions during annual meetings, or protest sales of shares (divestment).

c) Community investment

 * connecting the investment with aid to local communities with difficult access to capital, credits, or training. Providing capital to low-income individuals, small-scale entrepreneurs, or vital community services such as childcare, senior care, or homeless care.
 * specific community banks, credit unions, credit co-operatives, or risk social capital funds provide a range of services, take on various forms, organisational structures, and business strategies.

For business representatives, the practical dissension between regulation versus optionality and market instruments is not so tense. Most stakeholding businesspeople accept the need for governmental regulation, and speak rather of the need for a balance – a hybrid solution. The dispute seems tense to the critics among the civil society. A detailed analysis of the relation between the civil society and globalisation is the subject of another lecture in this curse, therefore only a brief description will be made of the main critical arguments in the debate over corporate responsibility.

VII. The NGO Response
In spite of evident changes in the conduct of many corporations, and despite the hundreds of millions of dollars spent in their budgets on development, social services, and the environment both at the local and the global levels, a great portion of the global civil society is sceptical to corporate responsibility.

Why is it so difficult to believe the corporations’ good intentions outside the sphere of their business? Because for most of them, it is no voluntary endeavour to improve, but a response to outer pressure, an attempt to redress damages done, or a pragmatic way of increasing profits (or reducing losses).

Methods of Application of Corporate Responsibility Instruments
The approach of corporations to the above instruments is very often selective and formal. An international survey by KPMG, a global accounting and auditing corporation, assessing corporate responsibility reports, revealed a number of interesting phenomena. Since 1993, the number of companies reporting on their CR has been growing (an entire 64% of the G250, the 250 biggest global firms, in 2002). Their coverage has also grown from the environment to the broader concept of sustainability (68% of the G250).

The primary motives of the CR include ethical (53%) and economic (74%) reasons. Opportunities for innovation and learning, employee motivation, and risk reduction and management are the first among the economic reasons. Most of the sections on corporate management, however, lack specific information on the CR structure and implementation mechanisms within the company. Only a fifth of the companies actually consult the contents of the reports with their primary readers (stakeholders), and only a third ask for feedback.

According to KPMG, the coverage of the social issues is far more superficial than the reporting on the corporations’ environmental policies (85% of all the reports mention the hot topic of global climate change). The reports elaborate on corporate determination, but tangible indicators and examples of responsible conduct are missing. Only a quarter of those corporations that report on their CR provide information on the wider economic impacts and sustainability of their actions. Contrariwise, under pressure to transfer responsibility downward in corporate chains, over 80% of the CR corporations describe their conduct toward their suppliers.

Nonetheless, the numbers of CR reports with external authentication (statement of an independent auditor) are growing. However, as laconically noted by the KPMG report itself, “the CR authentication market is dominated, with over 60% share, by large accounting and auditing corporations.”

There is little wonder then that corporations are accused of non-transparency and manipulation. The facts quoted on websites or in corporate responsibility reports are difficult to authenticate and compare. That is why the terms ‘greenwash’ and ‘bluewash’ have appeared in the critic’s vocabulary.

Greenwash
includes corporate practices under which the corporation disseminates false information in order to reinforce its public reputation as (originally environmentally) responsible. Examples include companies that spend more money on advertising/PR than on their environmental programmes that are the subject of the advertisement; or ones that use their environmental programmes to appeal to those whom they harm; or ones that issue their own environmental certification.

Bluewash
is a more recent term coined in connection with the Global Compact and public private partnerships under the auspices of the UN. It refers to similar practice (humanitarian and development projects) in an attempt to increase one’s legitimacy by attachment to the UN. The reason may be that a number of the companies that are now members to the Global Compact have in the past committed serious violations of human rights and misdemeanours toward local communities or the environment (Rio Tinto, Nestlé).

Although a corporation may be reminded of its published promises, their performance depends largely on the arbitrary will of the corporation. Media pressures tend to be strong, but are quick to wane. Longer-lasting pressures by consumer boycotts or NGO campaigns can only be effective if targeted at a single case, and only at the cost of great efforts and co-ordination among great many people and groups.

First and foremost, however, what remains unchanged is the nature of the economic system in which corporations operate. Systemic reforms to internalise externalities, offered for instance by the environmental tax reform, are not in sight.