Corporate Social Responsibility – Quo Vadis?

Where are we coming from and where are we going?

Prof. Dr. Frank Emmert, LL.M.John S. Grimes Professor of Law

Director, Center for International and Comparative LawProject Director Egypt

Robert H. McKinney School of Law - Indianapolis

Overview

What is CSR and What Does it Do?Definitions of CSRIncentives for Corporations to Adhere to CSRIssues Addressed by CSRExamples of Important International CSR InitiativesProblems with CSRWhat the Future of CSR Could and Should Bring

What is CSR and What Does it Do?

The Palm Oil Story: Greenpeace and others uncover illegal destruction of

protected forests in Indonesia and Malaysia by palm oil producers

Cargill, the world’s largest trader of agricultural commodities, as well as Nestlé and Unilever, cancel or suspend contracts worth tens of millions of US$ with the Indonesian and Malaysian producers

See Financial Times, 25 March 2010, page 1

Definitions of CSRNo universally accepted definitionCommon elements of different definitions:

Voluntary adherence by corporations (self-regulation)To standards that go above and beyond legal and/or

contractual obligations to include respect for ethical and cultural norms and the avoidance of negative impact on human rights, the environment, consumer, employees, communities, and other stakeholders (Google: “Do No Harm”)

And possibly further, to the active promotion of public interest (sustainable growth, development, etc.) and support for the economic policy choices of the host country/community

Incentives for CorporationsPublic Relations

Avoid bad publicityGet good publicity (brand differentiation)

Risk Management via pro-active corporate cultureAvoid legal trouble (corruption, human rights violations re

workers and communities, environmental issues like Palm Oil…)Pre-empting of mandatory/legislative measures with stricter

and enforceable standardsHuman Resource BenefitsContractual BenefitsAccess to Public Tenders=> CSR can make good business sense

So, again, WHY should a corporation, large or small, adhere to CSR, defined as- going above and beyond the law- with the effect of reducing shareholder profits? (at least short term)

Issues Addressed by CSR1) Labor RelationsClear and fair terms of employmentNo forced employment or employment of childrenClean, healthy and safe working environmentFair remuneration levels and policies at all locationsPolicies and mechanisms preventing any forms of discrimination

or harassment at all levels of staffHuman resource development with skills and other training

opportunitiesFreedom of association and right to collective bargainingCooperation with trade unions and other labor representationsMechanisms to address grievances and labor disputes

Issues contd….

2) Human Rights beyond labor relationsPolicies and mechanisms to promote human rights in all

countries and communities where commercial activities are taking place

Active investment in countries with good HR records, divestment from worst offending countries

HR policies for selection of contractors and suppliersPolicies and mechanisms to address and prevent HR

violations by contractors and suppliers, such as forced and child labor, human trafficking, etc

Issues contd….

3) Environmental ProtectionEnvironmental impact awarenessPolicies and mechanisms to ensure compliance with

environmental regulations and industry best-practice standards

Active promotion of environmentally responsible conduct by all staff, contractors, suppliers, and customers

Systematic efforts to reduce negative environmental impacts

Issues contd….

4) Community Relations beyond environmental protectionRespect for cultural, social and economic needs Active contributions to community developmentPolicies and mechanisms against unethical lobbyingPolicies and mechanisms against bribery of local bodies

and officialsPolicies and mechanisms for communication with local

communities, including mechanisms with clear time lines for dealing with complaints

Issues contd….

5) Contractual Relations with Customers and SuppliersFair and honest dealings with contractual partnersAdherence to agreed upon contractual terms, in

particular payment termsPolicies and mechanisms preventing bribery and

corruptionPolicies and mechanisms to ensure ethical behavior by

suppliers and contractors

Issues contd….

6) Shareholder RelationsClearly communicated and appropriate standards and

policies of corporate governanceAdherence to locally required and internationally

recognized standards of financial accountingAppropriate risk assessment policiesPolicies and mechanisms preventing insider trading and

other misuse of informationPolicies and mechanisms for dealing with inquiries,

complaints and disputes

Examples of Important International CSR InitiativesOECD Guidelines for Multinational Enterprises (1976, as last

amended in 2000)The first major international initiative of its kindApplicable across industries and sectorsRecommendations by the OECD governments to MNEsAt first rather vague, later amendments brought

increasing levels of specificity, for example about briberyHowever, no assessment or review procedures, let alone

effective mechanisms to ensure compliance and address complaints

International Labor Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (1977, as amended in 2000)One of the first initiatives of its kindApplicable across industries to all MNEsNon-binding (“should”)Relatively vague language (MNEs “should take fully into

account established general policy objectives of the countries in which they operate.”)

Contains dispute settlement procedure, but only for the interpretation of the Declaration itself and only providing standing to governments, employers associations, and trade unions but not to individuals and/or companies

Examples of Industry Specific Codes and StandardsFair Labor Association (FLA) Workplace Code of Conduct for

the apparel and footwear factoriesRainforest Alliance Certification for businesses involved in

agriculture, forestry or tourism with impact on land-use and biodiversity

The Extractive Industries Transparency Initiative and the International Council on Mining & Metals (ICMM) have standards for oil, gas, and mining industries

The Equator Principles offer guidance for the financial industry on social and environmental issues in project financing

Examples of For-profit Companies and/or NGOs Offering/Conducting AssessmentsGood Corporation (UK), together with the Institute of

Business Ethics, has developed a standard and offers assessment against this standard or against a corporations own CSR standards for fee paying clients

Social Accountability International (SAI) developed SA8000, a global standard for human rights at work, and has accredited over 2,000 companies and factories around the world, employing over 1 mio workers

Problems with CSR Today1) Proliferation of Codes (already several hundreds!)

2) Industry Specific Codes can be tailored to show only the good things and steer clear of any bad things

3) Lack of Accountability and Effective Complaints- and Review Mechanisms

Example: Enron published an Annual Report on CSR and was considered a model by the CSR movement

Þwe have finally accomplished the alchemist’s dream,

Our PR departments are using CSR language to turn dirt into gold

What the Future of CSR Could or Should Be – Some Discussion Points

The most (?) interesting initiatives:UN Global Compact and John Ruggie’s Framework for

Business and Human Rights: Protect, Respect and Remedy

ISO Guidance Standard 26000 on Social ResponsibilityWill they address and fix the concerns?

Where Do We Go From Here?

ACTION PLANBook Project Corporate Social Responsibility in

Comparative Perspective QData gathering (more studies like Prof.

Mattar’s research on CSR in Lebanon…)Development of a MENA Code on CSR – Why?Including a system for certification like ISO

Thank you!

Comments or questions? -> femmert@iupui.eduWebsites:-> http://mckinneylaw.iu.edu/faculty- staff/profile.cfm?Id=166-> http://www.epsilen.com/femmert-> http://www.cilpnet.org-> http://ssrn.com/author=622007-> http://www.TheIMAC.co