PUBLIC SECTOR ROLES

IN STRENGTHENING

CORPORATE SOCIAL

RESPONSIBILITY:

A BASELINE STUDY

The World Bank • Corporate Social Responsibility PracticeThe CSR Practice advises developing country governments on public policy roles andinstruments they can most usefully deploy to encourage corporate social responsibility.

Tom Fox, Halina Ward, Bruce HowardCorporate Responsibility for Environment and Development ProgrammeInternational Institute for Environment and Development (IIED)

October 2002

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PUBLIC SECTOR ROLES IN

STRENGTHENING CORPORATE

SOCIAL RESPONSIBILITY:

A BASELINE STUDY

Prepared for the Corporate Social Responsibility PracticePrivate Sector Advisory Services Department, The World Bank

Tom Fox, Halina Ward, and Bruce HowardCorporate Responsibility for Environment and Development ProgrammeInternational Institute for Environment and Development (IIED)

October 2002

List of tables and boxes iExecutive Summary iii

1 Introduction 12 A Classification of Public Sector Engagement in CSR 32.1 Introduction 32.2 Four Public Sector Roles 32.2.1 Mandating 32.2.2 Facilitating 32.2.3 Partnering 52.2.4 Endorsing 62.3 Ten CSR Themes 72.4 Beyond the National Level 163 Understanding Public Sector Engagement in CSR 193.1 Introduction 193.2 Drivers and Constraints 193.2.1 Intergovernmental Processes 203.2.2 Trade and Investment Promotion 203.2.3 Maintaining Minimum Standards 213.2.4 Partnership and Civil Society Demands 223.2.5 Consumer Demand for “pro-CSR” goods and services 234 Strengthening Public Sector Action on CSR in Developing Countries 254.1 Building Awareness of the CSR Agenda and its Implications 254.2 Building Capacity to Shape the CSR Agenda 254.3 Building a Stable and Transparent Environment for pro-CSR Investment 254.4 Engaging the Private Sector in Public Policy Processes 264.5 Frameworks for Assessing Priorities and Developing Strategies 26

Annex 1. Public Sector Roles Identified in the Literature 27Annex 2. The Range of Public Sector Activities 29Annex 3. Alternative ways of classifying public sector activities 31

References 33

CONTENTS

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Table 1 Classification of Public Sector ActivitiesTable 2 Public Sector RolesTable 3 Drivers of and Constraints to Public Sector Engagement

Box 1 Proudly South AfricanBox 2 Business Partners for Development Box 3 Dialogue Through Partnerships: Human RightsBox 4 Green Business Award, TaiwanBox 5 Presidential Speech and Annual CSR Week, the PhilippinesBox 6 U.S.-U.K. Voluntary Principles on Security and Human RightsBox 7 Office on Labor Standards Development, ThailandBox 8 Cooperative Policy InstrumentsBox 9 Reforming Political Financing, ThailandBox 10 National Economic Development and Labor Council, South AfricaBox 11 Publish What You PayBox 12 King Report, South AfricaBox 13 Sao Paolo’s Novo MercadoBox 14 Social Responsibility Agreements, GhanaBox 15 Niger Delta Development CommissionBox 16 Tax incentives for Corporate Donations: Law of Donations, ChileBox 17 Environmental Labels and Market Access, ColombiaBox 18 Green Markets Program, ColombiaBox 19 Public Procurement, TaiwanBox 20 Ecomark, IndiaBox 21 Certification in Sustainable Tourism Program, Costa RicaBox 22 National Responsible Tourism Guidelines, South AfricaBox 23 The Egyptian Environmental Policy ProgramBox 24 Environment-Friendly Company Certification, KoreaBox 25 Capacity Building on CSR Standards, IndiaBox 26 Mandatory Sustainability Reporting, FranceBox 27 OECD Guidelines in Dutch Official Support ProgramsBox 28 The Kimberley ProcessBox 29 Global Code of Ethics for TourismBox 30 New Partnership for African DevelopmentBox 31 Promoting Provincial Government Action on CSR: British Columbia, CanadaBox 32 The Clean Development Mechanism in the Uganda Investment AuthorityBox 33 Egyptian Environmental Policy: A Response to Market Access ConsiderationsBox 34 Kaleen Label, IndiaBox 35 Private Sector Engagement in Policy DevelopmentBox 36 Workers as Drivers of Public Sector Engagement in CSRBox 37 Role of African Civil Society in CSR

LIST OF TABLE AND BOXES

iii

This report categorizes and discusses the range ofroles that public sector agencies have played inproviding an “enabling environment” for corpo-rate social responsibility (CSR). The startingpoint is a broad definition of CSR that goes wellbeyond a more limited understanding of CSR asbeing about business activities that go “beyondcompliance”. A broader definition that considersthe overall potential commitment of business tosustainable development is better suited tounderstanding public sector roles in CSR.

This report classifies public sector engagementalong two axes. First are four key public sectorroles:

• Mandating • Facilitating• Partnering • Endorsing

The second axis reflects public sector activitiesunder 10 key themes of the CSR agenda:

• Setting and ensuring compliance with mini-mum standards

• Public policy role of business• Corporate governance• Responsible investment• Philanthropy and community development• Stakeholder engagement and representation• Pro-CSR production and consumption• Pro-CSR certification, “beyond compliance”

standards, and management systems• Pro-CSR reporting and transparency• Multilateral processes, guidelines, and con-

ventions

There are examples of developing country publicsector initiatives in almost all of the categories inthis overall classification. Though the focus is oninitiatives that have taken place at the national

EXECUTIVE SUMMARY

level, the role of local and regional agenciesshould not be underestimated. Undoubtedly arich body of experience—so far unexplored—exists at the subnational levels in many develop-ing countries.

The contemporary CSR agenda is relativelyimmature, and the term “CSR” has not yet takenhold within many public sector agencies, in bothindustrial and developing countries. Many of theinitiatives highlighted in the report have not beenundertaken explicitly as “pro-CSR initiatives”but nonetheless have the potential to promotecorporate social responsibility. For example, theprimary aim of public sector activities that pro-mote exports of sustainably produced goods andservices might well be to earn foreign exchangeor to reduce the national economic impact of themarket access restrictions that can result fromCSR requirements incorporated in contracts forthe provision of goods and services. Public sectoragencies that do not use the expression “corpo-rate social responsibility” are not necessarilydoing any less than those that do.

The challenge is for public sector bodies toidentify priorities and incentives that are mean-ingful in the local and national context and tobuild on existing initiatives and capacities. Thereis a significant opportunity for public sector bod-ies in developing countries to harness currententhusiasm for “CSR” to delivery against publicpolicy goals and priorities.

The report assesses some important overalldrivers for public sector engagement in pro-CSRactivities in developing countries, as well as con-straints to engagement.

Intergovernmental processes have begun todrive some promising initiatives, although muchremains to be done for intergovernmental initia-tives to realize their full potential as drivers of

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pro-CSR public sector activities in developingcountries.

Trade and investment promotion is a keydriver of pro-CSR initiatives by public sectoragencies in developing countries. Examples arenow beginning to emerge of public sector activi-ties in developing countries to build capacity oflocal producers to meet requirements of volun-tary CSR standards such as SA8000. But thereare also increasing suggestions that tools of CSRsuch as labeling or certification schemes may beviewed as non-tariff barriers to trade or anunwelcome imposition of “foreign” concernswhen applied to developing country producers.For the time being at least it is striking that thereis little evidence of developing country govern-ment engagement in processes to develop inter-nationally applied voluntary CSR standards.

The CSR agenda brings a new focus to theneed to maintain a level playing field of mini-mum environmental and social standards so thatthe marketplace is able to reward higher stan-dards and innovation. Anecdotal evidence sug-gests that the CSR agenda on child labor inindustrial countries has given renewed impetusto public sector labor inspectorates in somedeveloping countries to step up their complianceactivities. But lack of capacity to enforce mini-mum standards remains a significant problem inmany countries.

Consumer demand is a significant driver ofCSR practices by companies in high incomecountries. Yet stories of public sector successesin stimulating consumer demand for “pro-CSR”goods and services are hard to come by in thosemiddle-income countries with potential to devel-op substantial domestic “green” or “ethical”consumer markets.

Five key themes emerge for future work tostrengthen the CSR-related roles of public sectoragencies in developing countries.

• Work to build awareness of the contemporaryCSR agenda within developing country agen-cies, including building understanding on theoverall drivers, key players, and effectivepressure points, as well as country-specificimpact assessments of the CSR agenda fortrade and investment promotion. Any workin this area will need to be sensitive to theparticular importance of support for small,medium, and micro enterprises in manydeveloping countries.

• Initiatives that enable public sector bodies indeveloping countries to become effectiveplayers in setting the terms of the CSR debateand its associated standards. The CSR agendato date has been largely shaped by multina-tional corporations, consumers, investors,and governments based in developed coun-tries.

• Work to build a stable and transparent envi-ronment for pro-CSR investment, includingefforts to strengthen basic norms of social,environmental, and economic governanceand their enforcement.

• Initiatives to engage the private sector moredirectly in public policy processes associatedwith delivery of public goods (for example,national sustainable development or povertyreduction strategies).

• Support for public sector bodies to developframeworks within which to assess local ornational priorities in relation to CSR.

The current capacity constraints for public sec-tor agencies in developing countries to engage inthe CSR agenda should not be underestimated.But the opportunities are significant, and, as thisreport shows, there is a wealth of experience todraw on.

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This report categorizes and discusses the rangeof roles that governments have played in provid-ing an “enabling environment” for corporatesocial responsibility (CSR). By “enabling envi-ronment” we mean a policy environment thatencourages (or mandates) business activity thatminimizes environmental and/or social costs andimpacts while at the same time maintaining ormaximizing economic gains.

The World Business Council for SustainableDevelopment (WBCSD) has defined corporatesocial responsibility as “[t]he commitment ofbusiness to contribute to sustainable economicdevelopment, working with employees, theirfamilies, the local community and society atlarge to improve their quality of life.”1

Corporate social responsibility is at heart aprocess of managing the costs and benefits ofbusiness activity to both internal (for example,workers, shareholders, investors) and external(institutions of public governance, communitymembers, civil society groups, other enterprises)stakeholders. Setting the boundaries for howthose costs and benefits are managed is partly aquestion of business policy and strategy andpartly a question of public governance.

Our starting point for this study is broadlycompatible with the WBCSD’s definition. But itis quite distinct from an alternative commonlymaintained starting point that views CSR asessentially about going “beyond compliance.”Assessing the role of the public sector by consid-ering only those initiatives that provide incen-tives for business to go “beyond compliance”would fail to take account of the dynamic link-ages between voluntary approaches and regula-tion and the potential for voluntary initiatives ofvarious kinds to crystallize, over time, intomandatory minimum standards.2 Neither doesthe rigid “voluntary versus regulatory” divide

that is promoted by a narrow starting point ofCSR as “beyond compliance” does not makesense in the context of developing countryeconomies where tools to encourage compliancewith minimum legislation can be understood as a significant element of the CSR agenda.3

A broader definition of CSR is also better suitedto understanding the significance of the econom-ic globalization agenda as a driver of the con-temporary CSR agenda. In many developingcountries, discussion on CSR is inescapably tiedto perceptions on the risks and opportunities ofeconomic globalization. CSR definitions thatfocus on business activities and responsibilities“beyond compliance” tend to ignore this broad-er context.

We have not sought in this paper to make rec-ommendations on how, at the country level,choices should be made on the appropriate bal-ance between different policy instruments. Pub-lic policy choices about to what extent and howindividual business decisionmaking should beframed by public policy intervention necessarilydiffer from country to country and are depend-ent on particular socioeconomic circumstances.Just as the drivers for corporate social responsi-bility differ from country to country, so too doappropriate and effective roles for the public sec-tor.

In this report, we highlight:

• Areas where the contemporary corporatesocial responsibility agenda has itself givenrise to new kinds of policy instrument, or newroles for government

INTRODUCTION1.

1. See, for example, WBSD (2002).2. See, for example, Gordon (1999).3. See, for example, Annan (1999).

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• Initiatives that are not necessarily explicitlyassociated with the corporate social responsi-bility agenda, but that nonetheless have thepotential in bringing useful insights to under-stand the role of the public sector in the con-text of CSR.

The report is based on:

• A short review of the existing literature onthe role of government in providing anenabling environment for corporate socialresponsibility

• Internet-based research to identify concreteexamples of initiatives, supplemented byemail, telephone and face-to-face discussionswith a variety of public sector officials, entre-preneurs, nongovernmental organizations(NGOs), and consultants in industrial anddeveloping countries alike.

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2.1 Introduction

There is a variety of lenses through which toview and categorize public sector engagement inthe CSR agenda, depending on the purpose ofanalysis and the answer to the question, “Why isit important to consider the role of the publicsector?” Annex 1 provides an overview of thekey roles identified in existing literature on therole of the public sector in the CSR agenda.Annex 2 provides an overall listing of public sec-tor activities given our broad starting point forunderstanding the CSR agenda.

For the purposes of the present report, wehave developed an overall classification thatdraws on two axes. The first describes the pub-lic sector role, and the second considers keythemes of the contemporary CSR agenda. Table1 summarizes the approach.

Public sector bodies may choose to addressdifferent CSR themes through actions reflectinga variety of roles. For example, it is quite feasi-ble for a government to seek to increase andimprove the level of corporate sustainabilityreporting by using any one or a combination ofvarious mandatory (legislative), facilitating(guidelines on content), partnering (engagementwith multi-stakeholder processes), and endors-ing (publicity) tools. It is also apparent thatsome public sector activities, such as procure-ment, have multiple linkages with the contem-porary CSR agenda.

Our classification has the merits of being rel-atively simple; that is, holistic in its ability tocover the complete CSR agenda and neutral inthat it does not reflect inherent biases towardany particular set of public sector actions. But itis by no means the only way to categorize pub-lic sector initiatives. We have not devoted sepa-rate headings to distinctive themes such as “busi-

ness and conflict,” “business and humanrights,” “business and environment,” or “busi-ness and labor.” Rather, our classification ofCSR themes reflects a high level of generality,which has the additional advantage of under-scoring the need for integration across themes.Annex 3 sets out some alternative dividing linesfor frameworks to build understanding on pub-lic sector roles.

2.2 Four Public Sector Roles

Four principal public sector roles reflect theoverall range of initiatives that we have identi-fied: mandating, facilitating, partnering, andendorsing (table 2).

2.2.1 Mandating

In their “mandating” role, governments at dif-ferent levels define minimum standards for busi-ness performance embedded within the legalframework. Examples include establishment ofemission limit values for particular categories ofindustrial installations, or requirements for com-pany directors to take particular factors intoaccount in their decisionmaking. Even “mandat-ing activity can drive industrial innovation andbest practice. For example, the familiar notionsthat enterprises should apply the best availabletechniques, best available technology, or the bestpracticable environmental option to manageindustrial emissions allow for the fact that whatis “best” will change over time with technologi-cal innovation and technology transfer.

2.2.2 Facilitating

In their “facilitating” role, public sector agenciesenable or incentivize companies to engage with

A CLASSIFICATION OF PUBLIC SECTOR ENGAGEMENT IN CSR2.

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Table 1. Classification of Public Sector Activities

Public sector roleCSR theme Mandating Facilitating Partnering Endorsing

Setting and ensuring Defining minimum standards Tax incentives and penalties; ensuring access Working with multilateral compliance with and establishing targets; to information; facilitating understanding on agencies and civil societyminimum standards establishment of enforcers minimum good practice abroad; naming and to build capacity

and inspectorates; supporting shaming poor performers; frameworks for citizen legal action voluntary agreements; supporting civil society

Public policy role of Reforming political financing; Engaging business in public policy processes; Forums for debating public Including business business legislation as policy setting clearly defining societal priorities; including policy proposals representatives in policy

for voluntary action; CSR elements in other policy areas arenasmandatory disclosure of payments to public bodies

Corporate governance Stock exchange regulations Implementing international principles Multi-stakeholder code and codes; company law development

Responsible investment Guidelines for FDI; Facilitating legislation for SRI; guidelines for Public-private partnerships Endorsing metrics andrequirements for government public investments; linking investment indicators; supporting loan guarantees opportunities to SD policy civil society initiatives

Philanthropy and Mandating corporate Tax incentives; “timebank” schemes; league Public-private partnerships Publicizing leadingcommunity development contributions tables to promote peer pressure corporate givers

Stakeholder engagement Licensing requirements for Supporting civil society engagement; defending Facilitating dialogue and Association with particularand representation stakeholder consultation key stakeholder interests in key forums multi-stakeholder processes multi-stakeholder

processes

Pro-CSR production Pollution taxes; command and Pro-CSR export initiatives; capacity building; Joint government-industry Public procurement; and consumption control legislation driving business advisory services; enterprise investment in capacity; pro-CSR management

pro-CSR innovation development; public procurement; voluntary developing sectoral in public sector bodies; CSR labels; education and awareness raising; guidelines labeling schemes support for civil society action; tax incentives

Pro-CSR certification, Mandatory environmental Information and capacity building; supporting Engaging in standards- Endorsing specific “beyond compliance” management systems business-to-business partnering / mentoring; setting processes standards systems andstandards and public procurement; tax and regulatory approaches; public management systems incentives; supporting supply chain initiatives procurement and public

and voluntary certification sector practices

Pro-CSR reporting and Mandatory reporting Guidelines for voluntary reporting; informal Engaging in multi- Supporting instruments transparency incentives stakeholder dialogue on for peer pressure;

guidelines commending reporters

Multilateral processes, Implementing guidelines Capacity building and technical support Negotiating agreements; Endorsing guidelinesguidelines and through legislation shared monitoringconventions

Table 2. Public Sector Roles

Mandating “Command and control” Regulators and Legal and fiscal legislation inspectorates penalties and rewards

Facilitating “Enabling” legislation Creating incentives Capacity building

Funding support Raising awareness Stimulating markets

Partnering Combining resources Stakeholder engagement Dialogue

Endorsing Political support Publicity and praise

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the CSR agenda or to drive social and environ-mental improvements. In many of the approach-es reflected under this heading, the public sectorplays a catalytic, secondary, or supporting role.For example, in Britain an amendment to the1995 Pensions Act4 requires pension funds todisclose whether they take social, environmen-tal, and ethical issues into account, but stopsshort of requiring fund managers to adopt anyparticular policy.5

In their role as facilitators, public sector bod-ies can stimulate the engagement of key actors inthe CSR agenda– (for example, by providingfunding for research or by leading campaigns,information collation and dissemination, train-ing, or awareness raising). Public sector bodiescan also develop or support appropriate CSRmanagement tools and mechanisms, includingvoluntary product labeling schemes, bench-

marks, and guidelines for company managementsystems or reporting. And they can stimulatepro-CSR markets by creating fiscal incentivesand by applying its public procurement andinvestment leverage. One example is highlightedin box 1.

2.2.3 Partnering

The notion of “partnership” is central to theCSR agenda. Strategic partnerships can bring thecomplementary skills and inputs of the publicsector, the private sector, and civil society intackling complex social and environmentalproblems (box 2). In their partnership role, pub-lic sector bodies may act as participants, con-venors, or facilitators (box 3).

BOX 1.

Proudly South African

Proudly South African is a non-profit companyset up by the government-led NEDLAC (seebox 10). It involves a campaign to promoteSouth African companies, products, and servic-es in order to support job creation and eco-nomic growth, but crucially also requires com-panies to demonstrate their commitment tosocial responsibility. A logo signifies to con-sumers that the company satisfies criteria onlocal content, quality, commitment to fair laborstandards, and sound environmental practices.Two hundred members had been granted mem-bership by June 2002, and the campaignexpects to have around 400 members by theend of 2002.

Negotiations are under way to recognizemembership status as a factor in governmentprocurement decisions, with the Departmentfor Education so far having committed itself togiving preference to members in awarding ten-ders. Future plans for the campaign also includeinternational promotions and publicity, andexport advice.

Source: www.proudlysa.co.za.

4. Although this legislation did not require funds to undertake any particu-lar policy, most companies preferred to give a positive signal. The Acthas been instrumental in encouraging the growth of Socially Responsi-ble Investment, which in turn encourages industry to be more proactiveon CSR (O. Lankester, personal communication). France and Germanyhave now introduced similar legislation (Adams 2002).

5. DTI (2002).

BOX 2.

Business Partners for Development

The Business Partners for Development (BPD) program was estab-lished to study, support, and promote strategic examples of partner-ships involving business, civil society, and government workingtogether for the development of communities around the world. Thir-ty focus projects were carried out in 20 countries, with the aim ofdemonstrating that tri-sector partnerships benefit the long-term inter-ests of the business sector while meeting the social objectives of civilsociety and the state by helping to create stable social and financialenvironments. The findings of the program suggest that such partner-ships, between local or central government, companies, and civil soci-ety organizations, can provide business benefits, enhanced communi-ty developmental impact, and positive outcomes for public sectorgovernance. Public sector officials often played crucial roles, includ-ing drafting contract provisions and concession design, endorsement,dispute resolution, awareness raising, and ensuring the long-term sustainability of investments and infrastructure resulting from thepartnerships. However, BPD also stressed that there are often publicsector capacity issues to be overcome to enable such engagement.

Source: www.bpdweb.org.

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2.2.4 Endorsing

Political support and public sector endorsementof the concept of CSR and in particular, CSR-related initiatives reflect a fourth public sectorrole in our typology. Endorsement can take vari-ous forms, including through policy documents,the “demonstration” effect of public procure-ment or public sector management practices,6 ordirect recognition of the efforts of individualenterprises through award schemes (box 4) or“honorable mentions” in Ministerial speeches(box 5).

There are often no bright lines between thesefour roles. For example, there may be caseswhere government acts as partner, but the incen-tive for partnership derives from the possibility(explicit or implied) that legislation may followif a partnership is unsuccessful.7 Equally, thelines between “facilitating,” “partnering,” and“endorsing” are not always clear. For example,the U.S.-U.K. Voluntary Principles on Securityand Human Rights initiative has combined apartnership process of stakeholder engagementwith a facilitating role and implicit governmentendorsement of the outcomes (box 6).

BOX 3.

Dialogue Through Partnerships: Human Rights

In 1998 the Norwegian government established the Con-sultative Body for Human Rights and Norwegian Eco-nomic Involvement Abroad (KOMpakt) to promoteincreased dialogue, information sharing, and mutualunderstanding between the human rights community, theprivate sector, and the Norwegian authorities. The mem-bers primarily represent five groups that contribute to thisdialogue: business associations (including representativesof individual enterprises), unions, human rights organiza-tions, research institutes, and the government. The Min-istry of Foreign Affairs acts as convenor and secretariatfor the initiative. The Norwegian Agency for Develop-ment Cooperation and Ministry of Trade and Industryand Ministry of Petroleum and Energy also engage asstakeholders in the three working groups, which discussnormative, private sector, and political aspects of CSR,respectively.

Source: Ministry of Foreign Affairs odin.dep.no/ud/.

6. For example, the U.K. government indicates its support for positivehuman resources policies through targets for employee diversity andaccreditation to the Investors in People award among governmentdepartments (DTI 2002).

7. Examples include German “self-obligations,” producer responsibilityinitiatives in the U.K. and at EU level, and the European Commission’sround tables on CSR.

BOX 4.

Green Business Award, Taiwan

The Taiwan Environmental Protection Admin-istration (EPA) has run an annual Green Busi-ness Award since 1992, to “commend industri-al organizations that have made a contributionto environmental protection in Taiwan.” TheEPA exhibits practices from award-winningcompanies to create a demonstration effect forother companies. In the nine years since theaward was founded, 90 companies have beenshowcased. The EPA holds a high profile awardceremony, and arranges for winning companiesto meet with the president and “receive his per-sonal words of praise.” The EPA believes thatTaiwan’s high ranking in ISO14000 certifica-tion (fifth in the world with over 560 organiza-tions certified) can be linked to the promotioneffect of the Green Business Award.

Source: www.epa.gov.tw.

President Gloria Macapagal-Arroyo gave aspeech at the 2002 conference of the AsianForum on CSR, stressing the importance ofcollaboration between government, the privatesector, and civil society in the Philippinespoverty reduction strategy. By presidentialdecree, the first week of July is designated CSRweek in the country.

Source: Asian Forum Today , July 3 2002.

BOX 5.

Presidential Speech and Annual CSR Week, the Philippines

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2.3 Ten CSR Themes

The second axis for our classification considersthe core themes of the CSR agenda. Taking ourbroad definition of CSR as a starting point, wehave identified 10 key CSR themes that are rele-vant to identification of public sector roles (seetable 1). Additional key themes might be devel-oped as the CSR agenda matures, and this clas-sification does not attempt to predict these.

Setting and ensuring compliance with minimum standardsThere is little need here to illustrate the conven-tional mandating role of the public sector settingand ensuring compliance with minimum stan-dards in mandating role. But minimum stan-dards can also be addressed by the public sectorin other ways, underscoring the dynamic rela-tionship between minimum legislative standardsand the burgeoning body of corporate codes ofconduct and standards on CSR-related issues.Box 7 provides one example of public sectorfacilitating action that makes linkages with suchCSR tools as a way of tackling poor compliancewith minimum standards.

Partnership also has a role in setting standardsthat are regarded as reflecting minimum goodpractice or performance requirements. Coopera-tive environmental policy instruments such asenvironmental covenants (box 8) offer one exam-ple. The U.S.-U.K. Voluntary Principles on Secu-rity and Human Rights (box 6 ) is another.

Finally, an emerging area for public sectoractivity on minimum standards lies with supportfor citizen actions against “worst practice” com-panies. The public sector role of defining mini-mum legal requirements on environmental orsocial issues accompanied by access to justice foraffected individuals lies within the traditionalmandating role of government. New endorsingroles are now emerging. As transnational litiga-tion against parent companies of multinationalcorporations over environmental or socialimpacts increases, particularly when it would bedifficult or impossible for affected individuals tosecure access to justice in their own countries,there are examples of host country governmentssupporting citizens’ actions in home countrycourts, and effectively endorsing such action.8

BOX 6.

U.S.-U.K. Voluntary Principles on Security and Human Rights

The U.S. and U.K. governments, companies inthe extractive and energy sectors, and NGOsengaged in a dialogue on security and humanrights that resulted in the publication inDecember 2000 of a set of voluntary principlesto guide companies in maintaining the safetyand security of their operations within anoperating framework that ensures respect forhuman rights and fundamental freedoms. Theprocess continued in 2001, working on trans-lating the principles into action, particularly inNigeria. The Dutch government joined theprocess in November 2001.

Source: http://hrpd.fco.gov.uk/reports.asp.

BOX 7.

Office on Labor Standards Development, Thailand

The Department of Labor Protection and Social Welfare, a division ofthe Ministry of Labor and Social Welfare, has recently set up an Officeon Labor Standards Development. It aims to address the lack ofenforcement on labor issues and to promote compliance to voluntarylabor standards. A support program entitled “The Power of LaborStandards” has been launched, which will provide presentations andfree training programs to industry, subsidized consulting for factories,and a self-monitoring process. A budget of “approximately $5 millionhas been allocated to the training and development of Ministry staff and Thai industry in order to foster voluntary compliance withvoluntary labor standards and corporate codes of conduct.”. In collaboration with Thai NGO the Kenan Institute Asia, the ministry organized a conference in March 2001 on voluntary laborcodes.

Sources: Parissara Liewkeat, ILO, personal communication; www.kiasia.org; Kaufman. et al. (2002).

8. For example, the South African government in English litigation againstthe English and Welsh multinational Cape plc. See also Ward (2002).

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Public policy role of businessPublic sector activities that set a clear and trans-parent framework for private sector engagementin public policy can make an important contri-bution to alignment of business practices withsustainable development goals. For example, inmany countries corporate donations and lobby-ing are prominent features of the political land-scape, sometimes to the extent that the voices ofother interest groups may be drowned out.9

Political financing rules can help to set publicpolicy boundaries for business engagement indemocratic processes (box 9).

On occasion, legislation that may not appearto be part of the CSR agenda in one context sets

the public policy context for business-led“beyond compliance” activities in another,reflecting the range of regionally specific defini-tions of CSR. For example, the South Africangovernment has introduced a raft of legislationto promote black economic empowerment as ameans of tackling the legacy of apartheid. Busi-ness initiatives around race issues in this specificnational context are understood as an integralpart of the CSR agenda. As well as defining cer-tain procedures that companies must follow, thegovernment also gives a strong lead to the busi-ness community by defining national socio-eco-nomic priorities to which companies can con-tribute.

Affirmative action policies include those relat-ed to employment practices, private, and publicsector procurement and company ownership, allof which give preferential treatment to historical-ly disadvantaged South Africans. For example, inJuly 2002 the government put forward a charterto provide a framework for progressing theempowerment of historically disadvantagedSouth Africans in the mining and minerals indus-try. This includes a proposal for an undertakingby government and industry to negotiate the

BOX 8.

Cooperative Policy Instruments

1. Environmental Covenants, the Netherlands The environmental covenant is a policy instrument intended to givenew impetus to established relationships between the public and pri-vate sectors in tackling environmental issues. It involves at least twoparties, of which one is a government agency and the other a repre-sentative of a sector of industry, that agree on the realizations of envi-ronmental targets. Following consultations, the participants agree inwriting the roles that they will play in order to tackle the issue in mutu-al dependence.

Source: Glasbergen (1998).

2. Environmental Management Cooperation Agreements, South AfricaA key outcome of post-1994 environmental policy debates in SouthAfrica has been a statutory recognition of voluntary agreements or“Environmental Management Co-operation Agreements” (EMCAs) insection 35 of the National Environmental Management Act (NEMA).Influenced by the Dutch experience with environmental covenants,EMCAs are conceived of as a type of administrative agreementbetween public authorities and “any other person—or community”for the purpose of compliance with NEMA.

Work within the Department of Environmental Affairs andTourism to implement EMCAs has met with resistance from someSouth African NGOs that argue that the minimum conditions for thesekinds of tools to be effective instruments for environmental protectionare not present in South Africa.

Sources: Acutt, (2002), .Albertyn and Watkins (2002).

BOX 9.

Reforming Political Financing, Thailand

The 1997 Thai constitution introduced newparty, political finance, and election laws,under the Organic Law on Political Parties andthe Organic Law on Elections, and empoweredan independent Election Commission (ECT) ofThailand with oversight authority. These lawsstrictly regulate party operations and account-ing practices to enhance transparency andaccountability within the party system. A keyobjective of the new legislation is also tostrengthen parties as ideological bodies andbroaden their membership bases, with the aimof reducing the prevalence of patronage andvote buying.

Source: National Democratic Institute/CALD (2002).

9. UNDP (2002).

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transfer of ownership of at least 51 percent ofmining industry assets to historically disadvan-taged South Africans within the next 10 years.10

Governments can also seek to engage businessin public forums for debating policy proposals(box 10), and by involving industry representa-tives in international policy arenas, for example,many governments, industrial and developing,included business people in their delegations tothe 2002 World Summit on Sustainable Devel-opment.

Challenges remain in defining the properboundaries of business involvement in publicgovernance. The dilemmas are acutely expressedin demands for developed country businessesoperating in conflict zones or countries associat-ed with egregious human rights violations orcorruption to press governments to fairly dis-tribute the financial benefits of their investment.The “publish what you pay” campaign (see box11) offers one way forward by promotingmandatory reporting of information that canthen be used by non-business actors to hold gov-ernments accountable.

Taking a different starting point in the “busi-ness and conflict agenda,” partnership-basedpromotion of enterprise development and busi-ness activity in conflict zones can also play animportant role in building and sustaining peace.For example, governments at both national andregional levels have recognized the contributionof enterprise development and business promo-tion—particularly among Muslim businesses—to delivery of lasting peace and security in theisland of Mindanao in the Philippines. 11

Corporate governanceCorporate governance guidelines and codes ofbest practice offer one way to respond to poorcorporate performance and a perceived lack ofeffective board oversight. Some governancecodes are linked to listing or legally mandateddisclosure requirements. Business-driven codes,such as those contained in the 1994 King Reportin South Africa (box 12) can be important driv-

BOX 10.

National Economic Development and Labor Council, South Africa

National Economic Development and Labor Council (NEDLAC) is astatutory body launched in 1995 as a forum for multilateral decision-making and consensus-building related to social and economic policyformulation for the South African government. It is led and funded bythe public sector and also involves business, labor and civil societyorganizations. The main government department involved is theDepartment of Labor, out of which it is funded, but the Departmentof Trade and Industry and the Department of Finance and PublicWorks are also centrally involved in NEDLAC. Other departmentsattend when there is an issue that relates to their portfolio. Organizedbusiness is represented by Business South Africa, which is an umbrel-la body of 19 different employer organizations. Organized labor isrepresented by the three main labor federations in South Africa. Orga-nized community is represented by the South African Youth Council,National Women’s Coalition, South African National Civics Organi-zation, Disabled People of South Africa, and the National Co-Opera-tives Association of South Africa.

Source: http://www.nedlac.org.za.

BOX 11.

Publish What You Pay

A coalition of NGOs and civil society organi-zations is calling on governments to take lead-ership in promoting transparency overresource revenues worldwide. A recent moveby the U.K. government calls for voluntarydisclosure of revenues paid to developingcountry governments by extractive industries.The aim is to encourage the transparency andaccountability of the national authoritiesreceiving these payments. However, the coali-tion argues that regulation linking disclosureto stock exchange listing requirements isrequired to prevent companies flouting a vol-untary agreement.

Source: www.publishwhatyoupay.org.

10. Source: www.ocnus.net.

11. See generally www.mindanao.org.

10

ers for changes in companies legislation. Others,though purely voluntary in nature, may bedesigned to help forestall further government orlisting body requirements.

Beyond government legislation establishingbasic requirements for business organization andcorporate accountability through principles ofcompany law, public sector roles have alsoincluded negotiation and implementation ofinternational principles, partnership-based codedevelopment and engagement in capacity build-ing, and pensions legislation linked to good cor-porate governance practices (box 13).

Responsible investmentThe notion of “socially responsible investment”within the CSR agenda is most commonly usedto refer to the Socially Responsible Investmentmovement within the financial services sector.Governments in some developed countries havetaken steps to promote socially responsibleinvestment, for example by enacting enablinglegislation such as the British Pensions Act(described above), by endorsing particular sys-tems of indicators and metrics, or by engaging incivil society-led initiatives to promote sociallyresponsible investment.12

Beyond the financial services sector, a broaderview of responsible investment encompasses pub-lic sector inward investment policies linked toCSR-friendly practices. These may include re-quirements on technology transfer, local econom-ic linkages, or local community consultation (box14); guidelines for public sector loan guaranteesand public investments; and public-private part-nerships that seek to align corporate investmentwith public sector investments (for example, ininfrastructure, education, and health provision).

Philanthropy and Community DevelopmentPhilanthropy and investment in communitydevelopment initiatives are common CSR strate-gies for businesses. Governments can harness thecommunity development potential of corporatephilanthropy and social investment through dia-logue to optimize their alignment with publicsector goals. In certain cases, they can mandatecorporate contributions in return for a license tooperate (box 15).

BOX 12.

King Report, South Africa

In 1994 South Africa”s King Committee oncorporate governance, initiated by the Instituteof Directors, issued an influential report oncorporate governance. Chapter 20 of thereport contained a Code of Corporate Prac-tices and Conduct. The South African Compa-nies Act was subsequently amended to reflectcertain code recommendations. The report’ssuccessor, the so-called “King II Report” waspublished in 2002. It identifies social responsi-bility as one of seven characteristics of goodcorporate governance and makes extensiverecommendations for amendments to existinglegislation.

Sources: www.iodsa.co.za/corpgov; www.ecgi.org/codes/com-parative_summaries.

BOX 13.

Sao Paolo’s Novo Mercado

The Novo Mercado is a listing segment of theSao Paolo stock exchange designed for thetrading of shares issued by companies that vol-untarily undertake to abide by key corporategovernance practices and disclosure require-ments beyond those already required by Brazil-ian legislation. The national government issupporting the new exchange with a directivethat allows pension funds to invest a higherpercentage of assets in domestic equities, aslong as they are listed on the Novo Mercado.

Source: www.bovespa.com.br.

12. For example, the U.K. Department for International Development sits onthe advisory group of the “Just Pensions” project, which encouragespension trustees to use their influence to persuade fund managers toinvest in socially responsible enterprises (www.justpensions.org).

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Another relatively common public sectorintervention is to create incentives for voluntarycorporate donations and social investments.This may be through tax incentives (box 16) orthrough broader reputational mechanisms ofpublic recognition for leading corporate givers.

Stakeholder engagement and representationThe public sector has a key role to play in facil-itating meaningful stakeholder dialogue with thebusiness community (for example, by buildingthe capacity of civil society actors or by directlyfacilitating dialogue and multi-stakeholderprocesses). In some cases governments requirecompanies to enter into stakeholder engagementthrough mandatory legislation (as with theGhanaian social responsibility agreementsdescribed in box 14).

Governments have also represented the inter-ests of particular stakeholder groups, for exampleto make the case within the World Trade Organi-zation (WTO) that CSR initiatives developed bythird parties are discriminatory (box 17).

Pro-CSR production and consumptionPublic sector agencies promote pro-CSR produc-tion practices through business, technical andadvisory services,13 and research. Government-led export promotion of “green” goods andservices can build international market accessopportunities for sustainably produced goodsand services (box 18).

BOX 14.

Social Responsibility Agreements, Ghana

One outcome of the overhaul of forest policy in Ghanain the 1990s was a new regulation stipulating thatcompanies tendering for timber cutting permits wouldbe assessed in terms of their respect for the social andenvironmental values of local residents. Under the newlaw, which came into operation in 1998, logging com-panies are required to secure a “Social ResponsibilityAgreement” with the customary owners of the land.This agreement follows a standard pattern, to includea code of conduct for a company’s operations—guid-ing environmental, employment, and cultural prac-tices—and a statement of social obligations, which is apledge of specific contributions to local development.

Each agreement must be fully negotiated with thelocal community. There is a strict procedure for devel-oping an agreement with local representatives and thedistrict forest office before submission to a centralevaluation committee. While these agreements are stillin their infancy, the policy itself already provides use-ful lessons for other countries where high-value timberis logged in community areas and in how to imple-ment a fairly simple, cost-effective, accountable systemto support sustainable and socially responsible logging.

Source: Mayers and Vermeulen (2002).

BOX 15.

Niger Delta Development Commission

Oil and gas companies operating in the NigerDelta are required by law to contribute threepercent of their annual revenue to the NigerDelta Development Commission, which is alsofunded by federal government and state gov-ernments from the region. The Commissionchannels these funds into infrastructure, envi-ronmental, and social development projects inthe Delta.

Source: www.nddconline.org.

BOX 16.

Tax Incentives for Corporate Donations: Lawof Donations, Chile

The Chilean government offers a variety of taxcredits to corporations for charitable dona-tions. Most are oriented to support education-al activities, such as schools, universities, andvocational institutions. Donations may attracttax deductions or be deducted as an expense,thus reducing tax liability.

Source: CONAMA.

13. For example, the German agency GTZ provides technical assistance forprivate companies” long-term activities in developing countries throughpublic-private partnerships (GTZ 2002).

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Legislation that supports pro-CSR industrialinvestment within businesses—for example, pol-lution charges associated with implementationof the “polluter pays principle”—can also con-tribute to “pro-CSR” production processes. Forexample, a 1999 World Bank study of top pol-luters in China found that a Chinese pollutionlevy, although low, had significantly improvedinvestments in abatement.14

On the consumption side, support for envi-ronmental and social labeling schemes designedto stimulate consumer demand for environmen-tally or socially preferable goods and services canbe found in developing as well as industrial coun-tries. This area of activity is considered later.

Governments may also choose to includeCSR-related requirements in public procurementpractices; that is, linking their actions as con-sumers to promotion of pro-CSR production.Two U.K. government departments, the Depart-ment for International Development and the

Foreign and Commonwealth Office, haveswitched to Fairtrade products in their staffrestaurants.15 The Environmental ProtectionAdministration of Taiwan has linked public procurement to promotion of its Green Mark(box 19).

Pro-CSR certification, “beyond compliance”standards, and management systems Many of the examples associated with the over-all theme of “pro-CSR production and con-sumption” reflect the role of certification,“beyond compliance” standards, and environ-mental or social management systems in theCSR agenda. Some labeling and certificationschemes, like the product-based Indian EcomarkScheme (box 20), have been initiated by publicsector bodies. Others are awarded at company

BOX 17.

Environmental Labels and Market Access,Colombia

In 1998 the Colombian government maderepresentations to the WTO Committee onTrade and Environment and the Committeeon Technical Barriers to Trade, setting out itsconcerns regarding private European eco-labeling schemes for cut flowers and theirpotential negative implications for Colom-bian exporters’ access to European markets.Colombia put forward the case that privatelabeling schemes should be subject to theCode of Good Practice for the Preparation,Adoption, and Application of Standards ofthe Agreement on Technical Barriers toTrade, thereby ensuring that they do not con-stitute an unnecessary barrier to internation-al trade. The Colombian government hassupported a national industry program thatencourages the adoption of environmentalmanagement systems.

Source: Government of Colombia (1998).

BOX 18.

Green Markets Program, Colombia

The Ministry of the Environment created the Green Markets Programto develop instruments and mechanisms that induce the production of “green” goods and services that may be competitive in both nation-al and international markets. The program will be supported by a voluntary National Ecolabeling Program. The Green Markets Programis in charge of coordinating various related government initiatives,including:

• Organic Agricultural Program (Ministry of Agriculture and RuralDevelopment): promoting the production and consumption oforganic food in Colombia.

• Clean Development Mechanism (Ministry of the Environment): pro-moting and approving projects oriented to the reduction of Green-house Gases.

• Industrial Eco-Products and Environmental Services Initiative (Min-istry of the Environment): promoting the production of environmen-tal friendly goods and services.

• Bio-Commerce Initiative (developed by the Alexander Von Hum-boldt Institute): promotes projects and companies that are aware ofthe ecosystems surrounding them and use them in a sustainable way.

Source: web.minambiente.gov.co/mercadosverdes/.

14. Hua and Ming (1999).

15. See www.fairtrade.org.uk.

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level. These include Belgium’s Social Label,16

South Africa’s Proudly South African scheme(box 21), and Costa Rica’s Certification in Sus-tainable Tourism Program (box 22). Public sec-tor bodies have created guidelines designed tofeed into development of private sector codes ofconduct or standards (box 22).

Public sector agencies have also engaged in arange of activities to encourage take-up of estab-lished environmental management system stan-dards (box 23), as well as developing locallyappropriate management approaches (box 24).

Other interventions by public sector agenciesin developing countries have included capacitybuilding activities designed to help domestic pro-

ducers to meet CSR standards. The Thai Officeon Labor Standards Development described inbox 7 is one example. Box 25 outlines a broad-ly complementary initiative in India.

Pro-CSR reporting and transparencyDiscussion on the importance of promoting pub-lic access to information on environmental andsocial issues is a familiar part of the sustainable

BOX 19.

Public Procurement, Taiwan

The Taiwan Environmental Protection Admin-istration (EPA) has run an eco-labeling scheme(Green Mark) since 1992. In 1998 a Govern-ment Procurement Act was introduced thatincluded a clause to promote the scheme. Thisstipulates that products bearing the GreenMark or with comparable characteristicsshould be given priority in government pro-curement bids and benefit from a price advan-tage of 10 percent. The EPA and the PublicConstruction Commission have since drawn upRegulations for the Priority Procurement ofEco-Products by Government Organizations.The EPA provides training and guides in greenprocurement for government procurementstaff. By November 2000, the Green Mark pro-gram had drawn up 67 product criteria andawarded the logo to 906 products manufac-tured by 225 companies, with a combinedproduct value equivalent to the annualturnover of the Taiwanese clothing industry.

Source: www.epa.gov.tw.

BOX 20.

Ecomark, India

This voluntary product labeling scheme was initiated by the IndianParliament in 1991. The Ministry of Environment and Forests, theCentral Pollution Control Board, and the Bureau of Indian Stan-dards are all involved in its administration. Assessment of consumerproducts in 16 categories ranging from foodstuffs to fire extinguish-ers is designed to take into account full life cycle of product (materi-als, production, and disposal). So far, however, it seems that fewbusinesses have participated in the scheme, few labeled products areavailable, and that “ordinary consumers are hardly aware of theEcomark or the concept itself.” Suggested reasons for this are thewider regulatory requirements for registering new products, thenature of the labeling criteria, and the lack of consumer education.

Sources: Making India Green (2001); envfor.nic.in/cpcb/ecomark; www.epa.gov/opptintr/epp/ pubs/envlab/india.

BOX 21.

Certification in Sustainable Tourism Program, Costa Rica

This program, developed by the Costa Rican Tourism Institute, is sub-sidized by the Costa Rican government as part of its national strategyto promote sustainable tourism. It comprises mainly performance-based standards for environment, internal company management sys-tems, local community relations, and customer relations and is appli-cable to all accommodation establishments. It is administered by a vol-untary committee, which includes representatives from a wide rangeof stakeholder groups including government, NGOs, industry, andacademia. To encourage wide participation, registration and the firstevaluation are free, and certified hotels receive a Certification in Sus-tainable Tourism plaque showing the level they have achieved on a oneto five scale. The scheme is often held up as one of the best models oftourism certification. In June 2001 six other Central America coun-tries agreed to promote a regional scheme based on it.

Source: www.turismo-sostenible.co.cr.

16. This label is awarded by the Ministry of Economic Affairs, on the adviceof an independent, multi-stakeholder body, to companies and enterpris-es that ensure that their goods are produced in a socially responsiblemanner. The principle and the criteria for allocating the label are basedentirely on the five core labor standards of the ILO. Source: www.ilo.org.

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BOX 22.

National Responsible Tourism Guidelines,South Africa

A 1996 White Paper sets the policy frameworkfor tourism development and includes specificreference to the concept of “responsibletourism”. “Responsible tourism is not a luxu-ry for South Africa. It is an absolute necessityif South Africa is to emerge as a successfulinternational competitor.” In 2001 the Depart-ment of Environmental Affairs and Tourism(DEAT) drafted a set of responsible tourismguidelines, in consultation with a wide rangeof stakeholders. These provide “a frameworkwithin which responsible tourism is defined inSouth Africa and within which benchmarkstandards can be set for accommodation,transport, cultural and natural heritage andfor operators and marketing associations.”Marketing and trade associations, or geo-graphically defined groups, are expected to usethe guidelines as the basis to develop codes ofconduct and best practice. Individual enter-prises are then expected to develop their ownresponsible tourism policies based on theguidelines, identify appropriate standards andtargets, and report on progress.

Source: www.environment.gov.za.

BOX 23.

The Egyptian Environmental Policy Program

The Egyptian Environmental Policy Program (EEPP) is a four-year(1999–2003) sector policy reform program, funded by the U.S. Agencyfor International Development (USAID), to support policy, institution-al, and regulatory reforms to address Egypt’s most pressing environ-mental policy problems. The program is currently supporting imple-mentation of an Integrated Environmental Management System for theTenth of Ramadan Industrial City. To support implementation of thisinitiative, the Egyptian Environmental Affairs Agency has designed andinitiated a program of activities consisting of an ISO 14001 awarenesscampaign, an environmental policy workshop, preparatory gap analy-sis, and implementation workshops.

In a distinct initiative—the Red Sea Sustainable Tourism Initiative’sEnvironmental Management Systems Program—EEPP has worked to“promote the adoption of best environmental practices in existinghotels and resorts along the Red Sea coast. Its primary focus is to intro-duce and demonstrate improvements in operational efficiency andenvironmental performance. This is achieved through a multi-discipli-nary approach that combines awareness and training programs, on-siteproperty environmental assessments, and the establishment of operat-ing [environmental management systems], with funding provided forselected demonstration projects.”

EEPP is carried out with the collaboration of the Ministry of Petro-leum (Organization for Energy Planning) and the Ministry of Tourism(Tourism Development Authority).

Sources: Eye on Environment, Newsletter of the Egyptian Environmental Policy Program, Septem-ber 2001, Issue 1; EEPP leaflet: “ISO 14001 Preparatory Program.”

BOX 24.

Environment-Friendly Company Certification, Korea

The Korean government designates businesses that practice prevention-oriented environmentalmanagement as “environment-friendly.” These businesses handle pollutants in a responsible man-ner and make tangible contributions to environmental improvement. The system was adopted inApril 1995 with a view to engaging businesses in sustainable management and development efforts.A total of 126 companies had been named environment friendly by the end of December 2001.

These companies are linked through a nationwide Environment Network established in May2001 to build a system that facilitates exchange of environmental information between companies,provides technical assistance and consultation services to small and medium-sized enterprises, anddevelops effective environmental improvement tools. As of December 2001, 342 “superb” envi-ronmental improvement cases are on the web for public access.

Source: Ministry of Environment, Korea (2002).

15

development agenda. Company reporting onnonfinancial policies and impact has become atool within the CSR agenda. Social and environ-mental reporting by companies, or so-called“triple bottom line” reporting on environmen-tal, social, and economic impact has attractedgovernment attention in many high-incomecountries,17 although it is difficult to find exam-ples of developing country public sector actionin this area. Public sector initiatives related toreporting include requirements for mandatorydisclosure against social or environmental indi-cators (see box 26) or development of guidelinesfor voluntary reporting. At the level of interna-tional cooperation, some industrial country gov-ernments—though so far no developing countrygovernments—have engaged in the GlobalReporting Initiative.18 As new themes evolvewithin the CSR agenda, the potential value ofcompany disclosure as a means of driving betterpublic governance is also receiving increasingattention, as reflected in the “publish what youpay” campaign outlined in box 11.

Multilateral processes, guidelines, and conventionsThe contemporary CSR agenda is associatedwith a number of multilateral processes andguidelines. The UN Global Compact, launchedby Kofi Annan in 1999, has received endorse-ment from government officials in both devel-oped and developing countries. The globallyapplicable Organization for Economic Coopera-tion and Development (OECD) Guidelines forMultinational Enterprises, concluded in 2000,have resulted in the establishment of NationalContact Points to oversee implementation of theguidelines.19

Intergovernmental processes have alsoemerged to tackle sector-specific issues—forexample, through the innovative KimberleyProcess on so-called “conflict diamonds” (box28)—and to create sectoral frameworks forimplementation (box 29).

BOX 25.

Capacity Building on CSR Standards, India

The Indian Textiles Committee, part of theMinistry of Textiles, has taken up a nationalcampaign to sensitize the textile and clothingindustry, particularly in the “decentralized SMEsector,” to the emerging challenges resultingfrom the forthcoming liberalization of the Indi-an textile and clothing industry. The Committeeis working with the Ministry of Commerce,state governments, and local industry and tradeassociations on the campaign. Approximately7,500 company representatives will have takenpart in 25 workshops. The aim is to disseminateinformation on various standards and compli-ance mechanisms including ISO 9000 QMS,ISO 14000 EMS, and Social Accountability (SA8000) standards, offering technical assistanceto encourage implementation.

Source: http://textilescommittee.nic.in/ncompain.htm.

BOX 26.

Mandatory Sustainability Reporting, France

In 2001 the French Parliament passed a lawrequiring mandatory disclosure of social andenvironmental issues in companies’ annualreports and accounts. It requires all Frenchcorporations listed on the “premier marché”(those with the largest market capitalizations)to report against a template of social and envi-ronmental indicators, including those relatedto human resources, community issues andengagement, labor standards and key health,and safety and environment issues.

Source: www.occes.asso.fr/fr/comm/nre.html.

17. A summary of some government initiatives on corporate sustainabilityreporting is available in the report of a UNEP/GRI Roundtable held in2001 at www.uneptie.org/outreach/reporting/.

18. The Global Reporting Initiative has recently provided input to theNetherlands government on how they could seek to use the GRI in theirrelationships with developing country governments (Mark Brownlie,personal communication).

19. The text is available via http://www.oecd.org/pdf/M000015000/ M00015419.pdf . There are National Contact Points in the 30 OECD mem-ber states, as well as in Argentina, Brazil, Chile, Estonia, Lithuania, andSlovenia.

16

BOX 27.

OECD Guidelines in Dutch Official SupportPrograms

The Dutch Ministry of Foreign Affairs andMinistry of Economic Affairs have chosen toincorporate the OECD Guidelines into officialsupport programs for export, overseas invest-ment promotion, and international coopera-tion. As of January 2002, companies seekingsuch support are required to declare in writingthat they are familiar with the guidelines andthat—within the limits of their ability—theywill attempt to apply the guidelines to theirown actions. However, the government willnot monitor compliance with this “declarationof intent,” and sanctions are not foreseen.

Source: Ybema (2001).; Anema (2002).

BOX 28.

The Kimberley Process

The high profile issue of “conflict diamonds” (those mined areas ofcivil conflict in Africa) has led to recognition of a need for large min-ing companies to ensure that their products can be clearly identified onthe global market. The Kimberly Process has been working to estab-lish minimum international standards for national certificationschemes relating to trade in rough diamonds. The process has involvedmore than 30 governments, the European community, the diamondindustry, and civil society. Through participation in the KimberleyProcess, the governments of various diamond-producing countries inAfrica have helped to support the legal trade in diamonds, as well ascreate the potential for reduction in the illicit trade. The South Africangovernment has acted as chair of the process. The governments ofSouth Africa, Namibia, Angola, and Botswana have hosted meetingsfor the development of the certification scheme.

Source: www.kimberleyprocess.com.

BOX 29

Global Code of Ethics for Tourism

This code was approved in 1999 by the World Tourism Organization (an intergovernmental body withbusiness affiliate members) following two years of wide consultation with the industry. The code includesnine articles outlining the “rules of the game” for destinations, governments, tour operators, developers,travel agents, workers, and travelers. The tenth article provides an enforcement mechanism based on con-ciliation through the creation of a World Committee on Tourism Ethics, made up of representatives ofeach region of the world and representatives of each group of stakeholders in the tourism sector, gov-ernments, the private sector, labor, and NGOs.

Source: www.world-tourism.org.

2.4 Beyond the National Level

This review of initiatives has focused particular-ly on engagement in “pro-CSR” activities bynational level public sector bodies. But it wouldbe wrong to assume that public sector engage-ment is limited to this level. Many CSR-relatedinitiatives are based on collaboration betweennational governments (box 30) at a regionallevel or on activities undertaken at provincial orstate level (box 31).

The local level should not be ignored either.Agenda 21, the policy blueprint for actiontoward sustainable development adopted at theUN Conference on Environment and Develop-ment in Rio de Janeiro in 1992, stresses the roleof local authorities. So-called “Local Agenda21” initiatives have provided opportunities forprivate sector engagement in processes to definelocally relevant policy frameworks for sustain-able development, with incidental benefits inpromoting responsible business practices.20

20. See ICLEI (2002). .

17

BOX 30.

New Partnership for African Development

New Partnership for African Development(NEPAD) was announced by the representa-tives of 15 African countries in October 2001as an integrated program for the socioeconom-ic development of Africa. A background paperfor the Africa Economic Summit held in Dur-ban in 2002 summarizing the links betweenCSR and NEPAD states “good corporate citi-zenship will be absolutely central to the successof [NEPAD] and its goals of encouraging eco-nomic growth and reducing poverty. Africangovernments must play the key leadership rolein setting the appropriate framework,” inorder that the private sector itself can con-tribute to these goals.

Source: World Economic Forum (2002); see also www.nepad.org.

BOX 31.

Promoting Provincial Government Action onCSR: British Columbia, Canada

The regional government of British Columbiaset up the Green Economy Secretariat withdedicated resources to promote sustainabilityacross and outside government. This was abol-ished under a new administration as of June2001. However, while it existed it implement-ed projects relating to eco-labeling, socialauditing standards, indicators, and support for“green” venture projects and environmentaltechnologies. It also introduced legislation topermit social and environmental minorityshareholder resolutions, and carried out a sur-vey to gather the views of the private sector onthe roles that government could play to sup-port CSR programs.

Source: Coro Strandberg, personal communication

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3.1 Introduction

The baseline assessment of public sector activi-ties in this report is far from providing a globaldatabase of “public sector enabling examples”or allowing any robust comparative assessmentof which countries have done “more” than oth-ers. There are three key reasons for this.

First, our research has revealed many initia-tives that have not expressly been promoted orrecognized as part of the “enabling frameworkfor CSR” but that nonetheless fall within thescope of our study. For example, the primaryaim of public sector activities that promoteexports of sustainably produced goods and serv-ices may be to earn foreign exchange. Certainlysome governments have taken up and helped toshape the terms of the CSR agenda. But govern-ments or agencies that do not use the expression“corporate social responsibility” are not neces-sarily doing any less than those that do. Under-standing on basic terms within the CSR agendais far from consistent, reflecting the relativeimmaturity of the contemporary agenda.

Second, established environmental manage-ment tools such as life cycle assessment, cleanerproduction, eco-efficiency, and environmentalmanagement systems are evolving rapidly. But inindustrial and developing countries alike, advo-cates of CSR sometimes lack understanding ofthese established approaches. Full integration ofthe social, economic, and environmental issueswithin the overall CSR agenda is some wayaway.

Third, building understanding on why somepublic sector agencies have done “more” thanothers to build an “enabling environment forCSR” begs questions about the effectiveness ofparticular approaches in meeting “CSR-enabling” goals. Many of the initiatives that wehave highlighted are relatively recent. To ourknowledge few have been the subject of formalevaluations, so it is impossible to point to bestpractice examples. Inadequate funding, malad-ministration, or insufficient consumer demandcan and do frustrate promising initiatives. Cau-tion should equally be taken in drawing conclu-sions as to the transferability of any particularinitiative to different socio-economic contexts.

3.2 Drivers and Constraints

Building understanding on why some public sec-tor bodies choose to engage in promoting an“enabling environment” calls for an assessmentof the positive drivers of engagement, and theconstraints to broader or deeper engagement.One of the limitations of this short global reviewof public sector initiatives is that it has notallowed us to develop a comprehensive list ofdrivers that takes account of the national orlocal “CSR context” for individual initiatives.However, some clear overall indications of keypotential drivers of and constraints to public sec-tor engagement are presented in table 3 anddescribed in more detail below.

UNDERSTANDING PUBLIC SECTORENGAGEMENT IN CSR3.

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3.2.1 Intergovernmental Processes

International policy processes, such as the Kim-berley Process on conflict diamonds (box 28),have the potential to drive public sector engage-ment that creates an enabling environment forCSR. Intergovernmental cooperation at theregional level can also drive public sector under-standing on the implications of the CSR agendaby bringing together different governments insettings where one or more of the participantshave already engaged in the agenda.21 The CleanDevelopment Mechanism of the Kyoto Protocolto the Framework Convention on ClimateChange also has the potential to drive public sec-tor engagement in promotion of “pro-CSR”business (box 32).

Elsewhere, intergovernmental policy processeshave not yet realized their potential to drive pub-lic sector engagement. For example, it appearsthat there has so far been little or no developingcountry public sector engagement in complaintsto national contact points under the OECDGuidelines on Multinational Enterprises.22

3.2.2 Trade and Investment Promotion

Public sector bodies are recognizing the potentialfor the CSR agenda to open new market accessopportunities for exports of sustainably pro-duced goods and services and to tackle potentialexclusion from existing markets as CSR condi-tions are introduced (box 33).

Public sector responses include capacitybuilding for domestic producers to enable themto meet CSR standards (see box 7), and engage-ment in CSR standard-setting initiatives toensure they do not create unfair market accessbarriers. There is increasing anecdotal evidencethat the tools of CSR may come to be viewed asnon-tariff barriers to trade23 or an unwelcomeimposition of “foreign” concerns (box 34).However, we have found little evidence of devel-

Table 3. Drivers of and Constraints to Public Sector Engagement

Driver Key constraints

International policy processes• Intergovernmental frameworks • Lack of public sector capacity to engage in negotiation and implementation• Regional intergovernmental cooperation • Lack of take-up of CSR issues in regional processes• Application of multilaterally agreed guidelines (for example, OECD • Lack of engagement with processes and guidelines (for example, OECD Guidelines

Guideliness) National Contact Points)

Trade and Investment promotion• New pro-CSR export market opportunities • Lack of awareness of “green” or “ethical” market opportunities in export markets• CSR-related requirements being introduced in existing export markets • Lack of capacity to equip domestic industry to meet CSR-related export requirements• The need to attract and retain domestic and foreign direct investment • Lack of capacity to engage in key standards-setting processes

• Lack of understanding on the link between public sector interventions on CSR and economic competitiveness

Maintaining minimum standards• Demand from business and civil society for a level playing field of social and • Lack of capacity to maintain and enforce minimum standards

environmental standards that allows the market to reward leaders • Perception that corporate social responsibility is about voluntary business • Weak enforcement through traditional activities action, not public sector action

• Weaknesses in the institutions of civil society that are necessary for cooperative management approaches to be effective

Partnership and civil society demands• Demonstrations of the potential value of partnerships and private sector • Lack of financial or human resources to participate in partnerships

engagement to address complex social and environmental issues • Weak institutions of civil society (for example, trade associations, NGOs, trade • Domestic civil society pressure to improve environmental and/or social unions, community based organizations

standards (for example, from workforce) • Weak organized labor

Consumer demand for sustainable goods and services • Lack of domestic consumer demand

21. AG/RES. 1786 (XXXI-O/01), 5 June 2001 on Promotion of Corporate SocialResponsibility in the Hemisphere.

22. Source: John Evans, TUAC, personal communication.

23. See box 17 on Colombia’s submission to the WTO Committee on Tradeand Environment over the impact of German cut flower labelingschemes on Colombian producers.

21

oping country government engagement inprocesses to develop internationally applied vol-untary CSR standards outside the mainstreamstandards-setting bodies such as InternationalOrganization for Standardization (ISO). Issuesof developing country capacity to engage instandards setting activities such as those of ISOand its member standards bodies are beingaddressed through a number of initiatives.24

In contrast to the relatively well-defined sta-tus of trade promotion as a driver of CSR activ-ities, there is only anecdotal evidence to confirma direct link between pro-CSR public sector poli-cies and wider economic competitiveness, partic-ularly in attracting foreign direct investment.

3.2.3 Maintaining Minimum Standards

The CSR agenda is giving rise to new demandson the public sector to maintain a “level playingfield” of minimum environmental and socialstandards alongside legal frameworks to protectcommercial transactions and free and fair com-petition. Without a credible risk of penalties forfailure to comply—whether through civil society

24. For example, UNIDO’s service module for quality and productivity, whichworks to strengthen the capacity of existing standardization bodies indeveloping countries, many of them within the public sector. Seehttp://www.unido.org/doc/501746.html.

25. Hilowitz (1997). It is unclear how successful the Kaleen label has been,both in terms of market penetration and elimination of child labor.

BOX 32.

The Clean Development Mechanism in the Uganda Investment Authority

The government-established Uganda Investment Authority promotes investmentin Uganda. The Uganda Investment Authority has always insisted on Environ-ment Impact Assessments for all projects before implementation. However, in arecent initiative, the Uganda Investment Authority has begun to promote proj-ects under the Clean Development Mechanism. It is a requirement (under theKyoto Protocol to the Framework Convention on Climate Change) that cleandevelopment mechanism projects should meet sustainable development criteriaset by national authorities. In Uganda’s case, this requirement is met when proj-ect proposals fit with the national Poverty Eradication Action Plan. Priority sec-tors for Clean Development Mechanism projects are energy, agriculture, forestry,waste management, and cleaner production in manufacturing and transport.Concept papers have been prepared in these areas for promotion to private sec-tor investors who can then benefit from the Carbon Fund. Projects already ben-efiting from the fund are in the energy, forestry, and agriculture sectors.

Source: Dr. Maggie Kigozi, Executive Director, Uganda Investment Authority, mkigozi@ugandainvest.com.

BOX 33.

Egyptian Environmental Policy: A Response to Market Access Considerations

“Improving environmental standardsshould be considered as an integralmeans of maintaining our access toforeign markets in those sectors wherewe have a comparative advantage,and increasing our ability to competein new ones. It is in this context thatthe Egyptian Environmental AffairsAgency through the USAID-supportedEgyptian Environmental Policy Pro-gram has initiated the ISO 14001Preparatory Program.”

Source: Egyptian Environmental Policy Programleaflet, “ISO 14001 Preparatory Program.”

BOX 34.

Kaleen Label, India

The Rugmark program was initiated by civil societygroups in response to European consumer awarenessof child labor in the South Asian carpet industry. Inresponse to pressure from some carpet exporters,who perceived Rugmark as overly stringent and“unnecessary foreign intervention in Indian commer-cial affairs”,25 the Indian government introduced itsown carpet labeling initiative, Kaleen label. This isbased on an industry-wide, self-regulated code ofconduct administered by the quasi-governmentalCarpets Export Promotion Council and a nationalmonitoring committee chaired by a government rep-resentative.

Source: www.india-carpets.com.

22

pressure or compliance actions by public agen-cies—minimum mandatory standards cannotcreate the level playing field that allows the mar-ketplace to reward higher standards and innova-tion. The introduction of voluntary labor codesof conduct may have given new impetus to pub-lic sector inspectorates in some cases.26 Lack ofcapacity to enforce minimum standards throughtraditional “command and control” methodsmay also lead public sector bodies to experimentwith cooperative management approaches toattaining environmental goals, and in turn gen-erating criticism from civil society (see box 8).

3.2.4 Partnership and Civil Society Demands

Some of the potential drivers of public sectorengagement in CSR in developing countriesappear to have been unexploited to date. Forexample, public sector experience of involvingprivate sector actors in the development ofnational strategies for sustainable developmentor for poverty reduction is relatively limited out-side developed countries (box 35). Businessengagement in national policy processes can alsofoster alignment between CSR strategies at thebusiness unit level and pursuit of overall publicpolicy goals.

“Partnership” initiatives spearheaded by pub-lic sector bodies—whether national governmentsor local administration—are often resourceintensive. Many of the non-OECD initiativeshighlighted in our overall review of public sectorinitiatives are associated with donor interven-tions.27 A further constraint lies with the fact thatpartnership calls for significant input from keysections of society such as NGOs, trade unions,or community based organizations alongsidepublic sector input. Indeed, civil society or work-force pressure is often a key driver for govern-ment action (box 36).

However, in many middle- and low-incomecountries, civil society voices are weak (box 37),and significant barriers to organization of work-ers remain around the world.28 Support forcapacity building within civil society, alongsidesupport for fundamental labor rights such asfreedom of association29 can therefore be a cru-cial public sector facilitating role.

BOX 35.

Private Sector Engagement in Policy Development

Fair and workable development strategies demand input from governments, development agencies, civilsociety, the research community, and business. Yet, until now the voice of the latter has been almostentirely absent. Donors and NGOs increasingly admit the need for a forceful private-sector view. Dis-cussions on investment-friendly policies in general, and taxation reform, infrastructure funding, andskills-building in particular, are far more likely to produce tenable, efficient and relevant outcomes ifbusiness is at the table.

Source: Deutsche Bank et al. (2002).

Recognizing the Value of Private Sector Engagement in Implementation of National Policy To enhance participation of NGOs in the implementation of Agenda 21, the Government in collabo-ration with all stakeholders need to set aside a certain portion of the fiscal budget to support andstrengthen NGOs and the private sector for the implementation of activities that fall within the Nation-al Action Plan and other national policies.

Source: Government of Lesotho (2002).

26. Fiona Gooch, personal communication; Clare Lissaman, personal com-munication.

27. This might also be a reflection of the added visibility of donor-funded ini-tiatives in desk-based research.

28. See ICFTU (2002).

29. For a comment on the value of public sector support for capacity-build-ing within civil society in the context of CSR see Borregaard (2002).

23

3.2.5 Consumer Demand for “pro-CSR” goods and services

Public sector intervention to stimulate consumerdemand for sustainably or ethically producedgoods and services or to facilitate pro-CSR con-sumer differentiation, for example, throughproduct labeling schemes, relies on the purchas-ing choices of a significant minority of informedand concerned consumers. Government-ledschemes to promote such decisionmaking arenumerous in high-income economies, but lesscommon in developing countries. Even in mid-dle-income countries with the potential to devel-op substantial “green” or “ethical” consumermarkets domestically, experience to date is limit-ed and public sector success stories are hard tocome by.30

BOX 36.

Workers as Drivers of Public Sector Engagement in CSR

The National Tripartite Agreement on Benzene concluded in 1995, between Brazilian trade unions; thepetrochemical, iron, and steel industry; and the national government, provides a model of employer-union cooperation for sustainable development. Signed by industrial associations, Brazilian trade unioncenters, the government and Fundacentro, after a vigorous campaign led by the Unified Workers Con-federation, it targets benzene as a hazard, and makes it mandatory for companies and subcontractors tocarry, store, use, or handle it and its derivatives in a prescribed manner, register its use with the ministry,and ensure a “Program of Prevention” in every workplace. Standards and procedures define objectives,applications, and responsibilities for each workplace party, and a technical standard for safe exposuredetermined by workers, employers, and government. Strict procedures are defined for evaluation, withworkers involved in monitoring. Workers in each plant participate in a Representative Group of Work-ers, educated and responsible for monitoring and enforcing the designated Program for Prevention ofOccupational Exposure to Benzene. They also have equal representation on a “Permanent NationalCommission for Benzene” that oversees developments, monitors compliance, promotes studies, supple-ments laws and regulations, and issues Certificates for the Controlled Use of Benzene to companies. Peri-odic seminars on benzene organized under the Accord provide for joint evaluation.

Source: ICFTU, TUAC, GUF (2002).

BOX 37.

Role of African Civil Society in CSR

“Only South Africa is familiar with the con-cept of Corporate Social Responsibility, in therest of SADC Member States this is a new con-cept. CSR is mostly driven by NGOs even inSouth Africa, government comes in at a laterstage.”

Source: Themba Mhlongo, Chief Director, SADC Secretariat, per-sonal communication

30. See box 21 on the Indian Ecomark scheme.

25

These drivers and constraints outlined aboveindicate some core themes for work to strength-en developing country public sector roles inCSR.

4.1 Building Awareness of the CSR Agenda and its Implications

If developing country agencies are to effectivelycapture the potential sustainable developmentand poverty reduction benefits of the CSR agen-da, access to tailored information on the overalldrivers of the agenda, key players, and effectivepressure points is invaluable. For example, gov-ernments are beginning to consider the relevanceof specific voluntary approaches (such asSA8000) to national economic development pri-orities. However, effective policy decisions canonly be made if public sector bodies have accessto information on the effectiveness of voluntaryschemes in enhancing business performance andmarket access.

Supporting initiatives could include country-specific impact assessments of CSR-relatedrequirements imposed through contracts forsupply of goods and services, and work tostrengthen the integration of CSR-related themesin enterprise development and export and invest-ment promotion. Work to build awareness of theCSR agenda should be sensitive to the particularsocial and economic importance of small, medi-um, and micro enterprises (SMMEs) in manydeveloping countries, their vulnerability in theface of some CSR requirements, and the policypriority for a number of developing country gov-ernments of supporting SMME development.

4.2 Building Capacity to Shape the CSR Agenda

Developing country governments are often notrepresented in the development of CSR-relevantpolicies and standards formulated or promotedby inter-governmental bodies such as the Euro-pean Union or organizations such as ISO. TheCSR agenda to date has been largely shaped by multinational corporations, consumers,investors, and governments based in industrialcountries. Stakeholders in developing countrieshave often been objects of CSR initiatives ratherthan active participants shaping the basic termsof the debate. This is particularly reflected inlimited developing country public sector engage-ment in CSR-related standards-setting activities,which generates the potential for trade-relatedtensions and accusations of “privatized neo-colonialism.”

New initiatives are needed to enable publicsector bodies in developing countries to becomeeffective players in setting the terms of the CSRdebate and its associated standards. This appliesas much to international initiatives such as theUN Global Compact as to private standards-set-ting processes.

4.3 Building a Stable and Transparent Environment for pro-CSR Investment

Specific initiatives to enhance pro-CSR invest-ment need to be accompanied by action to buildthe basic governance characteristics of attractiveinvestment locations, including freedom fromcorruption, effective administration of tax sys-tems, regulatory certainty, and an effective judi-

STRENGTHENING PUBLIC SECTOR ACTION ON CSR IN DEVELOPING COUNTRIES4.

26

cial system. Counterparts to these basic charac-teristics that reflect core concerns of the CSRagenda include provision for rights of publicparticipation and access to information andeffective access to justice.

Over-regulation or regulatory uncertainty candeter pro-CSR investment and enterprise devel-opment. But an ability for best practice compa-nies to distinguish themselves in the marketplaceis in part contingent on a consistently appliedand enforced set of minimum environmental andsocial standards. Interventions that help tostrengthen basic norms of environmental andsocial governance and their enforcement, includ-ing through respect for human rights, can becomfortably understood as “CSR-enabling” ini-tiatives. Work in this area should take account ofthe potential to capitalize on locally relevantincentives for compliance, including peer groupor civil society pressure at the national or locallevel.

Support for pro-CSR public sector activitieswould also benefit from greater empirical under-standing on the links between implementationand enforcement of the bottom line of corporatebehavior and the existing CSR activities ofinvestor companies.

4.4 Engaging the Private Sector in Public Policy Processes

If public sector bodies in developing countries areto harness the CSR agenda to national, regional,or local policy goals, then greater efforts will beneeded to overcome the current lack of privatesector engagement in key policy processes. Thisincludes overall strategic frameworks such asnational sustainable development strategies andpoverty reduction strategies, but also extends to

other areas where achievement of national publicpolicy goals could be strengthened through pri-vate sector engagement, such as education. Rele-vant resources might include regional or sector-specific toolkits on private sector engagement inpublic policy processes; establishment of forumsto bring together public spending agencies withcompanies considering and undertaking commu-nity development activities; and efforts to buildframeworks for understanding the respectivestrengths and core competences of public sectorand private sector funding, spending, and capac-ity development activities.

Public sector bodies need also to be aware ofthe potential for promoting CSR that is support-ive of national policy priorities. For example,there may be opportunities to integrate businesslinkages programs into national poverty eradica-tion strategies. Businesses could benefit fromadvice on how their country- or site-specificactivities could be aligned with national devel-opment strategies. The development of publicsector advisory services in these areas mayrequire external support.

4.5 Frameworks for Assessing Priorities andDeveloping Strategies

Finally, support could be given for public sectorbodies to develop frameworks within which toassess local or national priorities in relation toCSR. These could map existing drivers and con-straints in the local context in order to defineappropriate modes of intervention within anoverall strategy. Capacity constraints should notbe underestimated, particularly given theresource implications of many of the exampleshighlighted in this report. Support should there-fore be given to development of locally appro-priate modes of intervention rather than simplyapplying models from elsewhere.

27

Document Governments Theme/focus considered of document Public sector roles identified

SustainAbility Emerging market Business case Setting targets and enforceable minimum standardset al. (2002) economies for sustainable Facilitating stakeholder partnerships and voluntary initiatives

development Promoting internalization of costsParticipating in codes of conduct (local and international)

Bell (2002) Members of the G8 Role of governments Setting of vision and goals for the role of business in societyin promoting Leading by example, especially public procurementcorporate Creating framework conditions (for the market)sustainability Fiscal policy (especially taxation)

Promoting innovationZadek (2001) None in particular A new “Third Promoting concept of corporate citizenship

Generation” CSR Developing markets that encourage corporate citizenshipa

framework Ensuring that business is accountable to civil societyNegotiating and enforcing global principles and goals

OECD (2001) OECD members Development of Legal and regulatory incentivesvoluntary business Tax incentives for NGO sectorinitiatives Issuing codes, publicizing initiatives that promote responsible practice

Contributions to compliance expertiseBPD (2002) Developing countries Benefits of tri-sector Ensure innovative and adaptable core standards

partnerships to Guidelines for reportinggovernments Stimulate dialogue on roles and responsibilities of actors

Build internal capacity to participate in partnershipsEnsure transparency and accountability of business

Committee of UK Public policy to Economic instruments and incentives Inquiry (1999) reinforce best Brokering voluntary agreements and codes

business CSR practice Leading by exampleb

Promoting good practice: education, advocacyEncouraging partnerships: in supply chains and between stakeholders

Leighton et al. California How can public Increase quantity and quality of company information(2002) policy support CSR: Convenor bringing together stakeholders

lessons for California Technical assistance to companies and citizen groupsLeverage as investor and purchaser

PIU (2000) UK Enabling environment Promoting best practice in business(chapter 9) for voluntary action Reducing unintended impacts of voluntary action re. trade

Protecting consumer choiceEncouraging business reportingIncentives for participation in voluntary initiatives

Aaronson and Five EU Public influence on CSR: Developing markets that encourage corporate citizenshipa

Reeves (2002) governments lessons for US Giving CSR a higher profile and coordinating across departmentsPromoting partnerships for setting standardsPromoting international standards as basis for business reporting

CBSR (2001) Canada, UK, Denmark, How can public policy Creating government departments and committees to discuss CSRthe Netherlands support CSR: lessons Promoting international guidelines for business

for Canada Initiating and supporting websites, networks, and multi-stakeholder partnerships to maximize positive impact of business

Nelson (2002) None in particular Creating enabling Develop a coordinated CSR policy, provide leadership, support researchenvironment for CSR: Identify minimum standards, establish regulationroles for government, Cooperate with other governmentscompanies, NGOs Support voluntary initiatives and partnerships

Apply fiscal policiesEncourage disclosureUse public funds to lever private resourcesInclude CSR in procurement and export credit guarantees

a. Including product labeling, public procurement and contracting, fiscal policy (including pension fund rules).b. Through procurement, environmental management, reporting, employment practices.

PUBLIC SECTOR ROLES IDENTIFIED INTHE LITERATURE

ANNEX 1

29

• Setting minimum standards for business

• Encouraging and ensuring compliance

• Setting frameworks for business participation in public policy

• Supporting citizen action against poor performers

• Creating fiscal incentives for pro-CSR activities

• Engaging in intergovernmental and international initiatives, conventions, and guidelines

• Setting policy goals and overall strategy frameworks for private sector action

• Catalyzing voluntary CSR initiatives

• Defining socioeconomic priorities from which businesses can take a lead

• Promoting “joined-up” government on CSR by coordinating across departments

• Coordinating industry and civil society actions

• Leading by example (for example, through public procurement and management systems)

• Enabling and promoting pro-CSR consumer choice

• Pro-CSR export promotion

• Developing, supporting, and implementing codes of conduct

• Stimulating pro-CSR markets (for example, through public procurement)

• Promoting the interests of particular stakeholder groups (for example, producers or employees)

• Defining the boundaries of the CSR agenda in the local/national context

• Working in partnership: intergovernmentally and/or with business and civil society

• Linking businesses’ CSR activities to public sector expenditures

• Encouraging responsible investments and loans

• Formal and informal judging of what constitutes good practice

• Collating and disseminating information on good practice, and encouraging replication

• Explaining CSR to companies and other stakeholders

• Informing the international CSR debate about the local and national CSR context

• Developing the technical knowledge base for pro-CSR business

• Capacity building to help companies meet external CSR requirements

• Supporting civil society to drive CSR

• Informing and educating businesses, consumers, employees, investors, and regulators

• Facilitating dialogue among other stakeholders

• Giving political support and official endorsement to CSR initiatives

• Highlighting individual companies” good practice

THE RANGE OF PUBLIC SECTOR ACTIVITESANNEX 2

31

Application to domestic or foreign companies and location of business activity (for example,public sector action designed to influence the domestic behavior of domestic companies, thebehavior of domestic companies operating outside national borders, or foreign companies ineither context).

Engagement with each of the key actors in the CSR agenda, and the specific roles required of the public sector in maintaining these relationships.

Distinguishing between the management challenges for business engaging in the agenda: impactin the value chain versus impact of internal business practice versus contributions to communitydevelopment.

Outward-looking (encouraging companies to inform external stakeholders, for example, reporting requirements) versus inward-looking (for example, supporting public rights of consultation).

Level of government; that is, local, national, regional, international.

Incentivizing good practice versus disincentivizing bad practice.

Consciously enabling versus incidentally enabling CSR (for example, strong enforcement of minimum standards versus green export promotion).

Target audience or actor whose behavior public sector initiatives try to change (for example, foreign companies, domestic companies, investors, consumers, public sector employees such asregulators).

Which public sector agencies or government departments are involved, and the extent of “CSR integration” across departmental functions.

ALTERNATIVE WAYS OF CLASSIFYING PUBLIC SECTOR ACTIVITIES

ANNEX 3

33

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The CSR Practice is part of the PrivateSector Advisory Services (PSAS)Department, jointly operated by theInternational Finance Corporation andthe World Bank.