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The Department of International Environment and Development Studies, Noragric, is the international gateway for the Norwegian University of Life Sciences (UMB). Eight departments, associated research institutions and the Norwegian College of Veterinary Medicine in Oslo. Established in 1986, Noragric’s contribution to international development lies in the interface between research, education (Bachelor, Master and PhD programmes) and assignments.

The Noragric Master theses are the final theses submitted by students in order to fulfill the requirements under the Noragric Master programme “International Environmental Studies”, “Development Studies” and other Master programmes.

The findings in this thesis do not necessarily reflect the views of Noragric. Extracts from this publication may only be reproduced after prior consultation with the author and on condition that the source is indicated. For rights of reproduction or translation contact Noragric.

© Melanie Brooks, May 2009 meliebks@hotmail.com Noragric Department of International Environment and Development Studies P.O. Box 5003 N-1432 Ås Norway Tel.: +47 64 96 52 00 Fax: +47 64 96 52 01 Internet: http://www.umb.no/noragric

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Declaration

I, Melanie Rose Brooks, declare that this thesis is a result of my research investigations and findings. Sources of

information other than my own have been acknowledged and a reference list has been appended. This work has not

been previously submitted to any other university for award of any type of academic degree.

Signature………………………………..

Date…………………………………………

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Abstract

This study examines the existing regulations of corporate social responsibility (CSR) of

multinational corporations (MNCs) in the non-renewable resources extractive sector (NRRES) as

well as discerning how companies who choose to engage in socially responsible behavior can

design their policies to include provisions for human rights and development. Current guidelines

for CSR are for the most part non-binding or aspirational initiatives and are therefore not

complied with by a significant number of companies in the NRRES and other sectors. MNCs

who do choose to practice CSR and extend their policies to include human rights and

development most often do so to improve their corporate image or because of pressure from

shareholders or other stakeholders. In the Katanga Province of the Democratic Republic of the

Congo (DRC), there is a large concentration of multinational mining companies with extractive

operations in the region, which is infamous for underdevelopment and inadequate human rights.

Of the multinational mining companies operating in Katanga, many of them have developed

CSR policies that include funding for local development projects. The most common types of

projects funded by companies in the study are infrastructure, healthcare, education and other

training, and employment. Unfortunately, many of these programs are wholly dependent on

corporate funding to keep them afloat and are often unsustainable beyond the period of MNC

involvement in the region.

It is clear that without binding international legislation, not all MNCs will be dedicated to

responsible business practices and even fewer will include provisions for human rights and

development in their broader CSR agendas. The current global economic crisis has had the

surprising effect of mainstreaming CSR concerns as citizens and organizations around the world

call for increased transparency and accountability from banks, corporations and other

institutions, which may be the catalyst needed to make CSR mandatory rather than optional.

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Acknowledgements I would like to take this opportunity to thank the many people in my life whose support and encouragement have been indispensable during the process of researching and writing this thesis. Without them, this would have been a much more difficult task. To my family in the US and in Norway, thank you so much for believing in me and never doubting that I would achieve everything I hoped for. Even though we are often far apart, your interest in my education and my thesis has helped keep me on track and never forget what I set out to do. To my supervisor, Professor Darley Jose Kjosavik, thank you for understanding how important this topic was to me and agreeing to supervise my thesis. I have so much appreciated your wisdom, insight and kindness throughout this process. To my colleagues in Paris, thank you for your interest in my thesis and for letting me rant about CSR during coffee breaks and lunches. Your ideas have offered me a new perspective on many subjects and challenged things I was sure I knew before. To Olivier, thank you for everything. You have been there to share my enthusiasm for my thesis, comfort me when I have been discouraged or overwhelmed and encourage me to keep going when I did not feel like I could continue working. Your patience as a sounding board for all my ideas has been wonderful and I cannot imagine having done this without you.

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Table of Contents

Declaration.............................................................................................................................................. ii

Abstract ................................................................................................................................................. iii

Acknowledgements ................................................................................................................................ iv

Table of Contents .................................................................................................................................... v

List of Tables and Figures .................................................................................................................... viii

List of Abbreviations .............................................................................................................................. ix

Glossary of Important Terms ................................................................................................................. 10

1. Introduction....................................................................................................................................... 13

1.1 Background ................................................................................................................................. 13

1.1.1Evolution of CSR ................................................................................................................... 14

1.2The Research Problem .................................................................................................................. 15

1.3 Objectives.................................................................................................................................... 16

1.3.1Objective 1: ........................................................................................................................... 16

1.3.2Objective 2: ........................................................................................................................... 16

1.4 Outline of the Thesis.................................................................................................................... 17

2. Applied Theory and Literature Review .............................................................................................. 18

2.1 Theoretical Basis ......................................................................................................................... 18

2.1.1 Human Rights: The Assignment Approach ............................................................................ 18

2.1.2 Moral Economy .................................................................................................................... 20

2.2 Literature Review ........................................................................................................................ 20

2.2.1. Spheres of Influence in CSR................................................................................................. 21

2.2.2. Deliveries............................................................................................................................. 21

2.2.3. Challenges and Responses.................................................................................................... 24

2.2.4. MNCs and Sustainable Development.................................................................................... 25

3. Study Area and the “Resource Curse” ................................................................................................ 26

3.1. Description of the Study Area ..................................................................................................... 26

3.2. The Resource Curse .................................................................................................................... 26

4. Methodology ..................................................................................................................................... 30

4.1. Research Approach ..................................................................................................................... 30

4.2. Qualitative Research Strategies ................................................................................................... 30

4.2.1. Positivism and Interpretivism ............................................................................................... 30

4.3. Selection of Study Area .............................................................................................................. 31

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4.4. Research Design and Methods .................................................................................................... 32

4.5. Primary Data Collection.............................................................................................................. 33

4.6. Secondary Data Collection.......................................................................................................... 33

4.7. Ethical Considerations and Limitations ....................................................................................... 34

4.8. Data Analysis ............................................................................................................................. 36

5. Mapping the Mechanisms for Regulating CSR in the NRRES ............................................................ 38

5.1The Initiatives ............................................................................................................................... 41

5.1.1. The United Nations Global Compact .................................................................................... 41

5.1.2. The OECD Guidelines for Multinational Enterprises ............................................................ 42

5.1.3. Extractive Industries Transparency Initiative ........................................................................ 43

5.1.4. The International Council on Mining and Metals .................................................................. 45

5.1.5. The Global Reporting Initiative ............................................................................................ 46

5.1.6. Social Accountability International....................................................................................... 47

5.1.7. Voluntary Principles on Security and Human Rights............................................................. 49

5.1.8. Equator Principles ................................................................................................................ 50

5.1.9. The United Nations Principles for Responsible Investment ................................................... 52

5.2. Mechanisms measuring the compliance of MNCs to CSR guidelines........................................... 52

5.3. Strengths and weaknesses of current methods of international regulation of CSR ........................ 54

5.4. The role of Socially Responsible Investment (SRI) in relation to CSR ......................................... 55

6. An analysis of CSR policies of MNCs in the NRRES in terms of human rights and development........... 57

6.1. How CSR policies are formulated with respect to human rights and development........................ 57

6.2. Why do MNCs choose to incorporate human rights and development in their CSR policies? ....... 58

6.3. Types of social programs and development projects funded by MNC’s as part of their CSR strategy.............................................................................................................................................. 60

6.3.1. Infrastructure........................................................................................................................ 62

6.3.2. Education and Training Programs......................................................................................... 62

6.3.3. Healthcare............................................................................................................................ 64

6.3.4. Employment......................................................................................................................... 64

6.4. The types of CSR policies that are most effective in promoting human rights and development ... 65

6.5. Sustainability of CSR motivated programs for human rights and development............................. 68

7. Findings and Discussion .................................................................................................................... 70

7.1. Principal Findings ....................................................................................................................... 70

7.2. Right place, Right time ............................................................................................................... 72

7.3. The Financial Crisis and CSR: a Roadblock or a Jumpstart? ........................................................ 75

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8. Summary and Final Thoughts............................................................................................................. 77

8.1. Summary .................................................................................................................................... 77

8.2. Final Thoughts............................................................................................................................ 78

8.3. Future Research .......................................................................................................................... 79

Bibliography .......................................................................................................................................... 81

Appendix............................................................................................................................................... 84

Questionnaire for Corporate Representative ................................................................................... 84

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List of Tables and Figures

Overview of CSR Initiatives and Guidelines………………………………………………………...……39

Stakeholder Interest vs. Influence Matrix…………………………………………………..……………..59

Examples of Development Project sponsored by mining sector MNCs as part of CSR…………….……61

Multiple Stakeholder Identification………..…….………………………………………………………..67

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List of Abbreviations

BLIHR – Business Leaders Initiative for Human Rights

CMI – Christian. Michelsen Institute

CSR – Corporate Social Responsibility

DRC – Democratic Republic of the Congo

EITI – Extractive Industries Transparency Initiative

ESG – Environmental, Social, Governance

EP – Equator Principles

EPFIs – Equator Principles Financial Institutions

GMI – Global Mining Initiative

GRI – Global Reporting Initiative

ICMM – International Council on Mining and Metals

IFC: International Finance Corporation

IIED – International Institute for Environment and Development

LDC – Less Developed Country

MMSD – Mining, Minerals and Sustainable Development

MNC – Multinational Corporation

NRRES – Non Renewable Resources Extractive Sector

OECD – Organization for Economic Co-operation and Development

SAI – Social Accountability International

SRI – Socially Responsible Investment

UNEP – United Nations Environment Program

UNDP – United Nations Development Program

UNEP FI – United Nations Environment Program Finance Initiative

UNGC – United Nations Global Compact

UNPRI – United Nations Principles for Responsible Investment

VPSRH – The Voluntary Principles on Security and Human Rights

WBCSD – World Business Council for Sustainable Development

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Glossary of Important Terms

Corporate Social Responsibility

While there is no universal definition for CSR, there is a broadly accepted conceptual meaning

with room for minor variations to encompass an expanded or more limited scope of attention.

According to the International Financial Corporation (IFC) which is a member of the World

Bank,

“Corporate social responsibility is the commitment of businesses to contribute to sustainable

economic development by working with employees, their families, the local community and

society at large to improve their lives in ways that are good for business and for development.”

Another more general definition of the social responsibility is:

“The principle that businesses should actively contribute to the welfare of society and not only

maximize profits” (Downes, 2006:656).

Multi-National Corporations (MNCs)

How a Corporation comes to be classified as multinational or transnational can depend on

several factors with ownership, production and management being the most important. However,

other factors such as a Corporation’s structure and business strategy also contribute to its

classification (Downes, 2006). Simply put, the most basic requirement for a company to be

deemed multinational is that it must have production facilities in at least one foreign country

outside of the country in which it is headquartered (Downes, 2006).

In today’s business world and economy, it is all too common for a corporation to be multi-

national. To relate this modern business development to the subject at hand, many if not the

majority of the owners of MNCs are from countries that are considered part of the ‘Developed

World’ while a significant part of their productive and extractive operations take place in Less

Developed Countries (LDCs), which is where CSR initiated development comes into play.

Non-Renewable Resource Extractive Sector (NRRES)

Corporations that are part of the non-renewable resource extractive sector are those involved at

any level in the exploitation of such resources. According to Neil Harris at Griffith University’s

School of Public Health in Queensland, Australia, the NRRES “encompasses the location,

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extraction and primary refinement of the planet’s non-renewable resources including fossil fuels,

metallic minerals and non-metallic minerals” (Harris, 2005).

The discussion of the NRRES can be directly tied to that of MNCs as well as the discussion of

Sustainable Development in terms of the multinational ownership and operation of many

Corporations in the NRRES as well as the obvious lack of sustainability of such exploitation.

Sustainable Development

To clarify the applicable meaning of sustainability in terms of Development I will refer to the

widely used definition offered by the World Commission on Environment and Development

(WCED).

“Sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs” (WCED, 1987:8).

Human Rights

Generally speaking, human rights are the most basic of rights that belong universally to all

humans, based on the fact that they are human, and can neither be created nor taken away.

(businessdictionary.com). In the context of development human rights can refer to access to

water, healthcare and education as well as equality, dignity and employment (un.org, ohchr.org).

Unfortunately, these most basic of rights are those most often violated and most difficult to

assure, despite global efforts to do so.

The Virginia Declaration of Rights, which was drafted in 1776 and had significant influence on

the US Declaration of Independence, addressed the meaning of human rights in its first section.

Section 1 of the Declaration reads:

“That all men are made by nature equally free and independent and have certain inherent rights,

of which, when they enter into a state of society, they cannot, by any compact, deprive or divest

their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and

possessing property, and pursuing and obtaining happiness and safety.” (billofrights.com)

Stakeholder

According to the Business Dictionary, a stakeholder is a “Person, group, or organization that has

direct or indirect stake in an organization because it can affect or be affected by the

organization's actions, objectives, and policies. Key stakeholders in a business organization

include creditors, customers, directors, employees, government (and its agencies), owners

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(shareholders), suppliers, unions, and the community from which the business draws its

resources. Although stake-holding is usually self-legitimizing (those who judge themselves to be

stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled

to different considerations” (business.dictionary.com).

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1. Introduction

1.1 Background

The primary goal of this study has been to explore the burgeoning subject of Corporate Social

Responsibility (CSR) of Multinational Corporations (MNC’s) in the Non-Renewable Resources

Extractive Sector (NRRES), with an emphasis on multinational mining companies. While the

ownership and headquarters of many MNCs in the NRRES are located in wealthy countries their

extractive operations, of minerals for example, often take place in impoverished countries

severely lacking in the areas of social and economic development and human rights. Of special

interest to me is the question of whether or not and, if so, how can such MNCs actively promote

and enhance human rights and facilitate multi-level social and economic development in the

developing countries in which their extractive operations are based. To answer this question

requires an examination of not only the corporations themselves and their individual CSR

policies and programs but also of the manner in which mining sector MNCs are regulated in

terms of their basic operations and voluntary endeavors which can each have serious

implications, both positive and negative, on development and human rights in host countries.

The study that I have conducted is based in a relatively new and rapidly growing ideology about

the responsibility of corporations in which expectations go above and beyond financial gain in

the corporate sector. This emerging ideology identifies the corporation of the twenty-first century

as a globally influential and astonishingly powerful socio-political-economic entity. In fact,

many MNC’s boast yearly economic turnovers higher than the GDPs of the countries in which

they operate (Bendell, 2000). With this power and influence comes the opportunity to create or

destroy, ameliorate or impoverish, empower or disenfranchise. The goal of increasing CSR in the

NRRES is not only to keep MNCs from negatively affecting the societies in which they operate,

but also to encourage them to actively contribute to the enhancement of the lives and livelihoods

of those who their operations affect either directly or indirectly. The domain of this ideology

transcends that of the Global Political Economy with the creation of a new Moral Economy

(Whiteford, 2005), in which business ethics are not considered simply the means to more

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profitable ends but rather ethical behavior which respects and promotes human rights and

development as an ‘end’ in itself.

1.1.1Evolution of CSR

While the practice and scope of Corporate Social Responsibility has increased considerably

under various pressures over the past several years, CSR as a concept is not a novelty. Though

the creation of the term itself has been credited to Howard Bowen who in 1953 penned “Social

Responsibilities of the Businessman”, the concept of the socially responsible business dates back

to the late 1930s (Thinking Shift, 2007). The early objectives of CSR were localized and fairly

general as companies were usually operating ‘in their own backyard’, so to speak, and the

demands and expectations of stakeholders and the community at large were relatively few

(Thinking Shift, 2007). The earliest Corporate Executive practitioners of socially responsible

activities did so by donating to charity organizations and by practicing this type of philanthropy

they were able to ‘give back’ to the community at the end of the year, which would assumedly

fund some beneficial projects or needy organizations. This also made the company appear a

generous, helpful entity in the public eye, preserving favorable public and employee opinion and,

finally, the company likely received a very attractive tax break because of their charitable giving.

Therefore, the concept of CSR stuck and continued to metamorphose to greater serve both the

Corporation and the Community, at least in theory. It seems, though, that from the get-go there

was always an ulterior motive, or motives, for CSR beyond simply the desire to do good and

behave responsibly.

It has been the increase in the expectations of stakeholders, authorities and society along with

other factors such as globalization, environmental concerns, technological advances, and

requirements about transparency in business that CSR has evolved as it has (natural-

resources.org). It was during the 1970’s and 80’s that CSR took a huge leap to encompass a

wider range of complex social, economic, and environmental issues in an increasingly global

economy and an era of heightened social awareness and public participation, demands and

pressure on companies. This is marked by the development of guidelines and ‘codes of conduct’

for MNC’s by both the Organization for Economic Co- operation and Development (OECD) and

the United Nations Centre on Transnational Corporations (UNCTC) (corporatewatch.org).

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If CSR grows in response to the demands raised by stakeholders, governments and public

pressure, it seems inevitable that Development activities would eventually enter into the realm of

CSR policies of MNCs.

There are countless motivations and explanations for the inclusion of development-facilitating

programs in CSR policies and programs and the reasoning behind this varies along a broad

spectrum of drivers. At one end of the spectrum, there is a genuine sense of ethical responsibility

to give aid where there has only been exploitation. At the other end is the Corporation’s need for

positive media coverage and the continued acquiescence of the governments and communities in

which they operate to maintain their viability. And in between the idealist’s and cynic’s views of

why an MNC would dig into its coffers to promote development outside of the wealthy country

where it is likely headquarted lies an array of arguments including environmental concerns,

improving the sustainability of a project, bowing to stakeholder demands and decreasing social

and environmental risks to the project. More difficult than identifying drivers for MNCs to invest

in development through CSR is discerning whether it is the Corporation or the host communities

that benefit most from these expenditures and also how to regulate CSR and insure that

companies are more than just paying lip service to expectations for social and environmental

responsibility.

1.2The Research Problem

In this research project, I have studied how CSR policies of MNCs in the NRRES, particularly

those in the mining sector, can be crafted to promote human rights and development in

impoverished countries host to their extractive operations. I have also explored existing

guidelines and initiatives for governing CSR and related development projects and the issue of

the apparent absence of a mandatory international code of social conduct for MNCs and the

implications of this on CSR. The type of data sought and acquired during this study has primarily

been qualitative data and in the framework of Moral Economy and the Assignment Approach to

analyze the correlation between CSR regulations, norms, CSR policies, and social and economic

development.

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1.3 Objectives

1.3.1Objective 1:

To understand how the operations and behaviors of MNCs in the NRRES are regulated at the

international level in terms of CSR.

Research Questions:

• What types of CSR guidelines are currently in place?

• What are the repercussions for MNCs who do not adhere to existing guidelines and

regulations?

• What are the strengths and weaknesses of current methods of international regulation of

CSR?

• What is the role of Socially Responsible Investment (SRI) in relation to CSR?

1.3.2Objective 2:

To understand the effects of CSR policies of MNCs in the NRRES on human rights and

development in the countries host to their extractive operations.

Research Questions:

• How are CSR policies formulated with respect to human rights and development?

• Why do MNC’s choose to incorporate human rights and development in their CSR

policies?

• What types of social programs and development projects are funded by MNC’s as part of

their CSR strategy?

• What types of CSR policies are most effective in promoting human rights and

development?

• Are CSR motivated programs for human rights and development sustainable beyond the

timeframe of a corporation’s physical presence in the area?

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1.4 Outline of the Thesis

This thesis is the result of my personal research conducted during the course of my studies on the

subject of Corporate Social Responsibility and Development. It is presented here with the goal of

conveying my motivation and interest in the subject as well as the experiences of the research

itself and the findings and conclusions I have made as a result of this study. The layout of this

work includes a background chapter made up of a literature review and an explanation of the

theoretical foundation of the study, to give an academic introduction to the subject of CSR.

Following the Background chapter is a chapter dedicated to the presentation and discussion of

the primary research objectives and research questions that have been the basis of this study and

from which the body of my research has been drawn. Subsequently, there is a brief chapter

describing the study area, multinational mining companies and the operation of MNCs in

impoverished regions as well as a discussion of the ‘resource curse’ phenomenon experienced by

many resource-rich but economically impoverished countries. While I was unable to conduct

fieldwork in the specific area where the extractive operations of the companies I have studied

take place, the presentation of the study area will be focused on the Katanga Province of the

Democratic Republic of the Congo (DRC). This was the originally intended site for data

collection and is a site of operations for each of the companies I interviewed during this study.

Following the description of the study area is a chapter to present and discuss the methodology

of the research undertaken for this study. This chapter includes a discussion of the research

approach and strategy, methods of data collection and analysis, ethical considerations and finally

the limitations of the study. The fifth and sixth chapters are dedicated to addressing the research

objectives and related questions. In these chapters, I examine the existing guidelines and

regulations for CSR in general, as well as those specific to the mining and extractive sectors, and

follow this examination with a discussion of how multinational mining companies are currently

including development activities as part of their broader CSR programs and objectives. The final

chapter of this work covers the findings and discussion of the study. This section also includes

the strengths, possibilities, challenges and weaknesses of the concept and practice of CSR, as it

exists at this point in time. My personal insights and recommendations are also presented at the

end of this chapter.

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2. Applied Theory and Literature Review

2.1 Theoretical Basis

I have chosen to analyze CSR in the NRRES through the framework of the assignment approach and the

moral economy.

2.1.1 Human Rights: The Assignment Approach

Researchers at the Christian Michelsen Institute (CMI) in Bergen, Norway, have taken what I

will refer to as an “assignment approach” in assessing the duties allotted to corporations in terms

of securing and assuring human rights. The discussion of the duties of realizing human rights is

attributed to Nobel Prize-winning economist Amartya Sen who questioned that, if universal

human rights as a concept are universally accepted, whose duty would it be to guarantee them?

(Kolstad, 2007). CMI researcher Ivar Kolstad presents the “assignment approach” in which

primary, secondary and tertiary duty-bearers are designated in a division of moral labor (Kolstad,

2007). It is a normative approach to business ethics and “focuses on the optimal division of

moral labor between agents, i.e. an efficient division of moral tasks between corporations, state

institutions and other agents.” (Kolstad, 2007:2). CMI differentiates between positive and

negative duties in terms of human rights. Positive duties are those performed to actively promote,

deliver or affirm human rights while negative duties are those that act to uphold the rights of

others by refraining from activities that would undermine or infringe upon human rights. The

category of negative duties is also referred to as unconditional duties since they are duties that

apply to all individuals, corporations and government institutions alike. (Kolstad, 2007).

The assignment approach specifically relates to positive duties, those which are not considered

unconditional, per se, but which must be upheld in order to secure universal human rights. In

short, positive duties fall first upon the primary duty-bearer, such as the national government. In

the case that the primary duty-bearer defaults on their positive duties, then those duties fall to the

secondary duty-bearer, such as the international community or civil society. Finally, if the

secondary duty-bearer is unable to perform their positive duties then those responsibilities must

be taken on by the tertiary duty-bearer, such as the national or multinational corporation with

operations in the region in question. Therefore, a corporation must be prepared to step in and

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fulfill the positive duties associated with human rights provisions in the event that primary and

secondary duty-bearers are unable to do so. Moreover, if a corporation chooses to operate in a

country where they have advance knowledge that the national government is not fulfilling their

positive duties in relation to human rights and perhaps even falling short of their negative duties

and the international community is unable assure human rights for some reason or another, then

the corporation should have no choice but to take on those duties.

Since human rights and basic social and economic development share many of the same goals, I

am also employing the assignment approach in relation to development and CSR as well. To

apply this approach to CSR in the NRRES, I will use an example of a multinational mining

company with extractive operations in the Democratic Republic of the Congo (DRC) A mining

company pursuing mineral extraction in the DRC should take the initiative to research the human

rights record and development status of the country, if not for ethical reasons then to assess the

operational risks associated with the geopolitical situation. The company would discover, if for

some reason they did not already know, that the DRC is an incredibly impoverished and war-torn

country, with a particularly poor record of human rights and lack of development, infrastructure

and services in the resource-rich Katanga province where most mines are established. Following

this assessment, and in accordance with the assignment approach, the company would see that

the primary duty-bearer, the DRC government, has not been fulfilling its positive or negative

duties in terms of human rights and development to the country’s citizens. Moreover, while it is

evident that the international community has made and is making efforts to secure human rights

and encourage development in the region, they have been largely unsuccessful (UNSC, 2002).

Therefore, those remaining positive duties that are being fulfilled by neither the government nor

the international community fall upon the corporation. According to the assignment approach, if

the mining company is not prepared to take on those duties then they should not proceed with

operations in the DRC.

Unfortunately, this is a hard pitch to sell to many MNCs since, from a business perspective,

taking this approach negatively impacts their competitiveness because even if they do not

proceed with operations in the country due to poor human rights and development, somebody

else will. This observation underlines the need for a universally binding mandate that prevents

any company from proceeding with projects in resource-rich countries such as the DRC, or

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Nigeria or Burma for that matter, if they are not prepared to assume the positive duties associated

with human rights and development there.

2.1.2 Moral Economy

The idea of a moral economy is one that identifies the interplay between ethics and economic

activity, where adherence to social norms and values is viewed as being more important than

even profit. Within a moral economy, the responsibilities of institutions and individuals are

considered along with the rights associated with different people and groups (Sayer, 2000). The

moral economy is unique because it gives corporations responsibilities grounded in human moral

philosophy rather than sets them free from such obligations as some other economic theories do.

The contemporary scenario where the main function of the corporation is to make a profit, at any

cost, cannot exist in a moral economy.

2.2 Literature Review

Most of the existing studies on the topic of CSR used to promote human rights and development

deal with three primary concerns (Bendell, 2000; Buhmann, 2007; Carroll, 1991; Jenkins, 2004;

Kolstad, 2006 and 2007; Pahle, 2007; BLIHR, 2003 and 2004). The first concern is whether or

not promotion of human rights and development are the domain of business of corporations at

all. One point of view is that while it is the responsibility of a corporation to adhere to legislation

governing their operational activities it is up to the governments and civil societies of

impoverished countries to facilitate development and human rights, and that the corporation

should not involve itself in this arena. On the other side of the debate is the argument that since

corporations often have economic and political resources exceeding those of governments in host

countries of their extractive operations (Bendell, 2000) then it is their moral responsibility to

help the needy citizens of those states via the active promotion and enhancement of human rights

and the facilitation of multi-level social and economic development. This second perspective is

reflective of the assignment approach which has been presented by researchers from the CMI,

and discussed in the preceding section of this paper, who attest the need for a moral division of

labor whereby if “public institutions and others fail to protect rights, these positive duties fall on

corporations” (Kolstad, 2007: 4).

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The second primary focus in this field is the different levels at which a corporation can practice

CSR, and what happens when there is ethical or responsible behavior enacted at one level but not

at another (BLIHR, 2003, 2004; Carroll, 1991; Pahle, 2007).

2.2.1. Spheres of Influence in CSR

The way in which an MNC practices CSR can occur at several different levels. In his report

Business Matters, Simon Pahle asserts that there are three spheres of influence in which CSR can

be practiced. The first is the Micro Sphere, which deals with the rights and treatment of workers

employed directly by the company. The second is the Meso Sphere, which affects those who are

not employed by the company but who are affected by the activities of the company nonetheless.

This sphere includes the people that live in the area in which a company operates who can often

be negatively influenced by the company’s presence directly, such as the case with resettlement

due to corporate activity, or indirectly in the scenario that a company overuses or contaminates a

natural resource which the community depends upon (Pahle, 2007). The third sphere of influence

is the Macro Sphere, which encompasses the consequences that the actions of a company can

have on a society as a whole.

It is in the second sphere of influence, the Meso Sphere, where most development programs exist

as part of CSR policies. This is because the geographic locations of the operations of many

MNC’s fall within the boundaries of LDCs, and the communities that are most directly affected

by the company’s activities are often very poor. They are also often lacking in infrastructure and

highly dependent upon their access to the resources which can be impacted by the company’s

physical presence and operations (Pahle, 2007). The MNC is then under various pressures to

practice CSR and related development activities in this sphere by investing in basic infrastructure

such as roads, water and power facilities and compensating people for their loss of land and/or

access to natural resources.

2.2.2. Deliveries

In addition to there being multiple spheres of influence of an MNC there are also different

categories of assessment when measuring how ‘responsible’ a company is. According to a series

of reports facilitated by the Business Leaders Initiative for Human Rights (BLIHR) in 2003 and

2004, and discussed by Pahle in his own work, we can apply the matrix of “Essential, Expected

and Desirable Deliveries” to assess the performance and behavior of companies on an individual

22

level. It is when analyzing this framework that the basis of some of the principal arguments

against the participation of MNCs in development is brought to light.

In their Deliveries Matrix BLIHR considers essential deliveries to be “the minimum obligations

that a responsible company is expected to comply with” such as acquiescence to laws of the host

country and requirements of other governing bodies as well as market and industry regulations

(BLIHR, 2003:9). Unlike the activities covered under essential deliveries, those qualified as

expected deliveries are not mandatory. Expected deliveries include public reporting by the

company on their development of social and environmental policies and programs and the

ongoing monitoring and improvement of such programs. These types of activities are becoming

increasingly more common with heightened public expectations of MNCs along with increased

pressure to be seen as socially and environmentally responsible (BLIHR, 2003, 2004). Finally,

the activities that fall under the heading of desirable deliveries include voluntary social

contributions and investments such as the empowerment of underprivileged groups, efforts to

improve public policy and facilitating sustainable development projects that will continue to

benefit the community after the company has left the region.

Most CSR facilitated development occurs within the final category of activities discussed within

the BLIHR matrix. MNCs are by no means required to actively promote the development of

communities in which they operate but it is becoming more and more common to do so,

particularly in the case of NRRES companies whose influence in the aforementioned Meso

Sphere is especially high. However, even if a company does choose to engage in activities in the

category of desirable deliveries they may not have acted to the standards of essential and

expected behaviors. This means that companies whose actions may not have fully complied with

national laws or industrial regulations, or perhaps failed to be environmentally or socially

responsible, can still make charitable donations to benefit communities and enhance their public

reputation. The idea that damage to local communities, the economy, or the environment as a

result of irresponsible company practices can be made up for by making a post-operative

financial contribution is carelessly naïve and hypocritical. Moreover, “to hand out charitable

petty cash from coffers that are filled by unjust or exploitative practices in the company’s own

influence spheres is a perversion of CSR” (Pahle, 2007:14).

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Many critics of the role of MNCs in development activities by way of generous CSR policies are

quick to point to companies guilty of such CSR ‘perversion’ (Bryane, 2003). Corporations often

have large budgets set aside for spending on very public philanthropic programs and, often,

development-related activities. An arguably larger amount still is spent on producing reports and

impressive web pages to convince the public of the success of their philanthropic endeavors.

However, it is not the excessive spending or misspending but rather the source of the funds for

all these activities that is the most problematic. The use of tainted money to fund programs to

benefit communities that MNCs have damaged in some way in the course of making that money

is like putting a band-aid on a self-inflicted cut that has begun to fester.

In such a scenario, the companies are practicing damage control for their negative actions rather

than exclusively philanthropic activities. It is as if doing something good for a community will

cancel out the negative effect that the operations of the company had on it. While some would

say this is better than doing nothing at all, it remains a central argument for those who feel that

MNCs should not be allowed a role in Development as they use CSR and development programs

to make up for previous exploitation and to improve their public image (Bryane, 2003).

This brings us to the third major topic of discussion on the subject of CSR in promotion of

human rights and development, which is the regulation of corporate behavior (Pahle, 2007). With

proper regulation, an MNC would never be able to perform desirable deliveries of CSR without

first adhering to essential deliveries. Unfortunately, it has proven very difficult to effectively

regulate multi- and trans-national corporations whose ownership, operation, distribution and

banking take place in many different countries with drastically varying legislation. International

assemblages such as the United Nations (UN), the International Chamber of Commerce (ICC),

the Organization for Economic Cooperation and Development (OECD), and the World Business

Council for Sustainable Development (WBCSD) have all made efforts to address the problem of

regulating the behavior of MNCs by developing guidelines and initiatives for CSR (Buhmann,

2007). This topic is the pillar of the first research objective of this thesis and will be discussed in

detail in the following chapter.

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2.2.3. Challenges and Responses

Though there are certain legal requirements binding MNC’s to responsible practices, the extent

of the activities that these regulations cover is limited to the most basic such as adherence to laws

that forbid slave and child labor, paying taxes and refraining from other social abuses of power.

MNC’s will often tout their compliance with these basic moral standards as if they want to be

distinguished for following intrinsic legal and ethical guidelines. The belief that abstaining from

criminal activity constitutes CSR in the eyes of the Corporation is a huge challenge. The true

responsibility of MNCs goes far beyond acquiescing to fundamental laws governing taxes and

labor. Unfortunately, the legal requirements for the activities that go ‘above and beyond’ such

inherent obligations are overwhelmingly insufficient. The growing recognition of challenges

within CSR has spawned the creation of regulatory compacts, guidelines and initiatives meant to

direct the behavior of MNCs and ensure responsible behavior (Pahle, 2007). There exist

numerous codes and initiatives aiming to govern more extensively the activities of MNCs in

terms of their social and environmental performance, but the degree to which they are adhered to

is largely voluntary. However, since most Corporations are dependent upon retaining an ethically

responsible image in the public eye it is necessary for them to comply with certain standards of

social responsibility for their own economic viability (natural-resources.org). Still, no matter

how much good will and faith is put behind voluntary frameworks for CSR, MNCs are still free

to choose whether or not and to what level they will be socially and environmentally responsible.

The fact remains that many companies who are more hidden from the public eye because of their

geo-political orientation and other factors may have less initiative to adhere to voluntary CSR

guidelines.

While the existence of such regulatory initiatives is encouraging for anyone interested in CSR

and the role of MNCs in Development, without the legal power to enforce the guidelines the

initiatives are little more than well-meaning and expensive pieces of paper. There must be

concrete consequences for participating companies and countries that fail to meet the standards

set or else there is no real driver to comply to the ‘recommendations’ other than media coverage

and perhaps a sense of ethics, neither of which has been sufficient in the past. In addition, there

should be a mandatory set of guidelines that all countries and companies must follow rather than

an assortment of voluntary initiatives that they may or may not choose to comply with.

25

However, these things do not happen overnight and it must be acknowledged that the creation of

these guidelines and initiatives in recent years is definitely a step in the right direction.

2.2.4. MNCs and Sustainable Development

Sustainability theory has been popularized in recent years and the word ‘sustainability’ itself has

become a sort of buzzword not only in the field of Development Studies but also in business and

economics. We often hear references to sustainable economic growth, sustainable business

practices, sustainable management of resources and sustainable social or community

development among countless other examples. In fact, the concept of sustainability is used so

often and in so many situations that it is easy to forget what sustainability really entails. It can

seem somewhat contradictory then that many MNCs, particularly in the mining and other

extractive sectors, often refer to sustainability and sustainable development in particular

(Jenkins, 2004). Companies whose extremely profitable operations are based in unsustainable

extractive practices will simultaneously facilitate and fund sustainable development programs

that are discussed in their public reports concerning the environmental and social impacts of their

activities. It is not uncommon for companies to take up the notion of sustainable development

and proceed to use it as a framework to support their CSR programs and related activities, even

when their own business practices are inherently unsustainable (Jenkins, 2004).

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3. Study Area and the “Resource Curse”

3.1. Description of the Study Area

Due to the international nature of my research project, the study area cannot be limited to a

single village, region, organization or corporation. Therefore, my research activities took place in

multiple locations in order to achieve firsthand knowledge of the various structures and

perspectives that have important implications for the stated objectives of the research project.

In order to avoid too broad or overly general accounts of CSR and development projects funded

by companies in the mining industry, my focus has been directed at the infamously resource-rich

Katanga Province in the Democratic Republic of the Congo. Katanga province is located in the

geographic area of what is known as the “copper belt” found along the border shared by DRC

and Zambia. Not only is Katanga resource-rich, but it is also in dire need of development and

human rights reform. This makes it a prime location for studying the interaction of extractive

sector MNCs with local communities and how these companies practice CSR at the local level.

Also, since there is a high concentration of companies with mining operations in the region, I

have been able to compare the CSR policies and programs of companies all operating within a

similar geo-political environment.

3.2. The Resource Curse

Many resource rich countries suffer from corruption, low public health and human rights

standards, poor access to education and healthcare, not to mention very few environmental

regulations or bodies ensuring transparency in government spending of taxes and royalties paid

by foreign extractive sector companies.

Contemporary discussions about the DR Congo identify a connection between the country’s

abundant extractible natural resource base and the simultaneous lack of economic development,

or even active underdevelopment, and assiduous violent and nonviolent conflict. As a result of its

classification as a mineral rich country which has seen more than its fair share of conflict and

much less economic growth and development than one would expect from a country so abundant

in extractible, internationally in-demand natural resources, DR Congo has become a prominent

example of a country afflicted with the ‘resource curse’. This is not to say that resource

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abundance automatically dooms a state to economic stagnancy and interminable conflict, nor is it

the only deciding factor in a country’s development. However, there is significant literature

directly or indirectly linking natural resource endowment to an increase in the probability of

conflict and economic decline, especially in states where poverty is already prevalent.

Economic analyses have shown that poverty actually increases rather than decreases in countries

with a high dependency on natural resource commodities as a percentage of its overall exports

while resource dependency has similarly been shown to correspond with lowered economic

growth (Ross, 2003). As previously mentioned natural resource-abundance alone is insufficient

to explain conflict though it has been found to increase the probability of conflict, especially

when accompanied by another factors known to exacerbate conflict, such as increased poverty

and negative economic growth (Ross, 2003).

It is natural to question how a country so rich in natural resources could perform so poorly

economically. One well-known and widely accepted explanation for this phenomenon is ‘Dutch

Disease’. This term refers to the effect of a state’s considerable increase in revenue from trading

one commodity on the competitiveness of its other tradable goods and its overall economic

growth. In the example of the Netherlands in the 1960’s, from which the term ‘Dutch Disease’ is

derived, the discovery of natural gas created a booming trade in that particular sector but led to a

de-emphasis of other sectors thus decreasing their competitiveness in global markets, resulting in

a paradox of negative economic growth despite the country’s natural resource endowment

(World Bank Institute, 2006).

Resource-based wealth also has a tendency to negatively affect government by making it weaker

and more corrupt and lessening accountability (Ross, 2003). This is an incredibly relevant

discussion in an era in which governance and, more importantly, good governance have become

very common, even trendy, go-to words in the fields of international and development studies.

Without entering into a critique on the excessive use of these terms that has perhaps obscured

their real meaning and implications for the developed as well as the developing world, it is

important to address the decidedly negative way in which natural resource wealth has been found

to effect governance at many crucial levels. For one, dependence on this type of revenue as a

means of state funding as opposed to financing government through public taxation has been

shown to decrease levels of accountability in bureaucratic sectors and increase the probability of

28

the misallocation of state funds as well as undermine democracy (Ross, 2003 and Cramer, 2006).

Due to the lowered accountability of the government to properly allocate its natural resource

generated wealth it is less likely to spend adequate funds on infrastructure, public health and

education.

The lack of culpability in the spending of state funds is not exclusively because of the absence of

a tax system that would encourage the public to hold members of the bureaucratic community

more accountable for their actions. The fact that natural resource revenue, per se, is not easy to

track and is therefore easily diverted due to lack of government capacity to manage such wealth

makes corruption and embezzlement much more likely (Ross, 2003). It is not difficult to discern

a cycle emerging from these observations where government accountability and transparency are

negatively affected by natural resource abundance and are inversely related to corruption, lack of

attention to public welfare or investment in infrastructure, increased military expenditures and

the greater likelihood of conflict, all of which are mutually reinforcing.

It is important that through acknowledging this connection we find a way to break the ‘resource

curse’ on developing countries such as DR Congo. In order to do this we must address the root

issues underlying this affliction which include weak state infrastructure, over-dependency of the

economy on natural resource exports , the lack of economic diversification and corrupt dealings

between multinational corporations involved in the extraction and exploitation of natural

resources and host governments in resource rich countries. Giving aid and humanitarian support

to DR Congo may offer a temporary or partial reprieve but it does not offer a real solution to the

structural problems at the heart of the country’s predicament. One way to address the negative

impact of natural resource commodity dependence in the economies of developing countries

would be to diversify exports and therefore prevent the onset of ‘Dutch Disease’, as well as by

placing restrictions on the international trade of primary goods from conflict-prone countries

(Ross, 2003).

Advocacy for ethical corporate practices and transparency in corporate-state dealings as an

answer to natural resource fueled corruption and related under-investment in social and

economic development has increased considerable in recent years. For instance, the United

Nations Security Panel produced a study on the link between the exploitation of mineral wealth

and corruption, underdevelopment and conflict in the DRC (UNSC, 2002). Other analysts of the

29

‘resource curse’ call for transparency not only in the payments from extractive sector

corporations to host governments, but also in how resource rich states allocate funds (Ross,

2003). The influence of this type of ideology has proved to be pervasive and has resulted in a

considerable increase in pressure on multinational corporations with extractive operations in

developing countries. The formulation of complex corporate social responsibility policies and

regulations of such have become commonplace as the scope of corporate influence is beginning

to be understood fully. Voluntary initiatives such as EITI and the UN Global Compact have been

created to encourage levels of corporate responsibility that go beyond basic accordance with

laws and adopt business practices with the environment, sustainability and social development in

mind. Unfortunately, since compliance with these guidelines is not universal or mandatory they

cannot be considered sufficient in breaking the ‘resource curse’, though they have raised

consciousness of the predicament of impoverished, resource-rich countries such as DRC and

increased public and shareholder pressure on MNCs with extractive operations there.

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4. Methodology

4.1. Research Approach

For this study, I chose a qualitative approach, which I felt was much more fitting than a

quantitative approach because of the overwhelming emphasis on social, political and business

concepts rather than quantifiable sets of data (Bryman, 2004). A constructionist ontology would

help me understand the effects of notions of CSR, as well as related existing regulatory

framework, of extractive sector MNCs on human rights and development in the impoverished

countries in which they operate. The qualitative research approach is in line with constructionist

ontology.

4.2. Qualitative Research Strategies

As part of the overall research strategy, I decided to use interpretivism and constructionism since

I considered them the most appropriate approaches for studying social phenomena and the

interface between man-made structures, socio-behavioral expectations and ethics. These

strategies take into account the often subjective and dynamic nature of social institutions and

their meanings (Bryman, 2004) .The research design had to be flexible to accommodate the

qualitative methods of data collection that were employed.

4.2.1. Positivism and Interpretivism

Since the study is based in part on the interactions between synthetic structures and concepts

such as corporations, governments, communities, organizations and regulatory initiatives as well

as human notions of responsibility, rights and morality the epistemological position chose to

employ was that of interpretivism. An interpretivist epistemological approach is characteristic of

qualitative research in which “the stress is on the understanding of the social world through an

examination of the interpretation of that world by its participants” (Bryman, 2004: 266). I found

that statement to be especially true in the context of my research where a given person’s

perception or understanding of what constituted CSR and to what extent companies should be

held responsible was linked to their position in the company-government-community nexus.

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4.3. Selection of Study Area

My initial plan was to conduct fieldwork in the Katanga Province in the Democratic Republic of

the Congo to observe first-hand the community level development projects of several mining

companies with operations in the region. I had read on their websites and press releases about

their CSR policies and development activities in rural DRC but I wanted to see for myself and

talk to the people who were recipients of corporate aid to see how effective CSR really is in

terms of social development. I wrote to many representatives of NGOs in DRC, specifically to

Pact, an American organization funded by USAID who has a project in the DRC working with

mining companies to develop local communities. Over the course of several months in the

Spring of 2008, during the planning phase of my research project, I wrote repeatedly to PACT

representatives, project coordinators, researchers and directors at their offices in Lubumbashi,

DRC and Washington DC. Though I included a detailed explanation of my research proposal

and I conveyed my interest in their programs and desire to volunteer with them for my fieldwork,

I did not receive a single response.

Due to the security situation and dire lack of infrastructure in the Katanga province, there was no

option for me to go alone; if I were to travel there for fieldwork I would have to be with a large

organization or a company who had connections in transportation as well as security. Since I was

also interested in addressing policy and regulatory issues in CSR and development, I devised a

questionnaire for corporate representatives of mining companies to find out more about their

CSR programs and the motivations behind them, beyond what was advertised on their websites.

During this process, I encountered a very helpful and informative Director of Corporate Social

Responsibility at a small mining company developing a copper mine in DRC. This person stands

out as the most valuable source of information throughout my research. Once he had responded

to my questionnaire and answered all of my addition al questions in a series of emails and phone

calls, the offer was made that perhaps I could do a traineeship in their CSR department, at their

headquarters or in their field office in the DRC. I was thrilled and felt that this was my chance to

do genuine fieldwork for my study without risking my safety by going independently to the

DRC, an option that had already been forbidden by my family and my wonderfully caring

supervisor.

32

Unfortunately, when the price of commodities crashed in the fall of 2008, copper mining

companies such as the one I had hoped to work with found themselves in a difficult situation,

with production at many sites grinding to a halt and resulting in total layoffs of more than

300,000 people in the Katanga Province alone (mineweb.co.za). With insufficient funds to cover

existing financial obligations, it was clear that the offer to host my research was a luxury that

they could no longer guarantee. At that point, I had to accept that I would not be able to conduct

fieldwork in the villages receiving CSR development aid from multinational mining companies

operating in the DRC. However, if I get a chance in the future to do a field study in the area, that

would be a priority as a follow up to this research.

Therefore, I had to alter the research objectives somewhat to accommodate my inability to do

conduct first hand research in the host communities and the resulting increased emphasis on

policies and regulations driving CSR and development in the mining sector. However, I decided

to maintain focus on mining companies with operations in the Katanga Province of the DRC to

keep the study grounded and allow for conclusions to be drawn based on companies all operating

under similar geo-political factors.

4.4. Research Design and Methods

The type of data collected during the research was both primary and secondary. The primary data

was collected through observation, interrogation and participation in the various study areas. In

this study, I found it was necessary to rely heavily on secondary data to both support and build a

basis of understanding the primary findings. Primary data is of course more desirable than

secondary data, which has limitations such as a lack of familiarity with and control of the quality

of data obtained through secondary measures (Bryman, 2004). It was often impossible to gain

access to primary data, for reasons that will be discussed further in the challenges limitations

section of this chapter, and in these cases secondary data was substituted for the primary data

that I could not get. Some of the factors that contributed to the difficulty of acquiring primary

data were issues such as safety, access to key player in the sector, confidentiality and privacy;

politicization of primary research objectives and questions and willingness of participants,

among other factors.

33

4.5. Primary Data Collection

For primary methods of data collection, I conducted qualitative, semi-structured interviews,

unstructured interviews and a questionnaire that could be answered by respondents in the event

that they were unavailable or unwilling to participate in an interview. I also collected data

informally through participant observation during my internship in the field of Socially

Responsible Investment (SRI) at an Investment Institution in Paris, France. Semi-structured and

unstructured interviews were conducted with corporate representatives and others with specific,

applicable knowledge in the field of CSR such as consultants specializing in CSR and analysts

working in SRI. I also developed a detailed questionnaire concerning my research objectives that

I could send to respondents via email when interviews were not possible.

Qualitative interviews have been described as having several benefits as opposed to participant

observation, primarily because there are simply some social phenomena or issues that cannot be

grasped through observation by the researcher which makes asking people who do experience or

understand them the only way of obtaining knowledge about them (Bryman, 2004). I found this

to be very true and believe that I obtained a larger quantity of well-rounded data by conducting

qualitative interviews as well as utilizing the participant observation technique of data collection.

Often, what I observed as a researcher was not the same as what I was told by respondents or

from consulting secondary data sources. Therefore, the data I collected while participating in the

CSR sector as an intern and researcher is a valuable supplement to the data I collected via

qualitative interviews and questionnaires.

4.6. Secondary Data Collection

Since primary data was not always available on the regulation, motivation and practice of CSR it

was also necessary to use documents as sources of secondary data. To obtain relevant

information I conducted analyses of official documents such as policy documents, international

legislation, voluntary initiatives concerning CSR and publicly available corporate reports

concerning CSR. In the analysis of official documents from private sources such as corporations,

it is important to remember that these documents are not written objectively and are usually

linked to a certain viewpoint or agenda (Bryman, 2004).

Analysis of documents for secondary data collection was especially important in gaining

information and insight into existing guidelines and regulations for MNCs regarding CSR. In

34

doing this, I studied the publicly available information on the specific guidelines and initiatives

available on their websites and documents produced by researchers at the UN on the subject of

existing CSR guidelines and regulations. I also had to rely heavily on publications such as press

releases, case studies and other documents to assess how MNCs are addressing social and

economic development and human rights in their CSR agendas.

4.7. Ethical Considerations and Limitations

Unfortunately, there were several limitations confronted during the course of this study of the

implications and regulations of CSR for human rights and development, many of which were

foreseeable due to the relatively delicate subject matter of the research. The most importent

limiting factor was the lack of access to primary information for reasons of safety and lack of

connections within the upper echelons of corporations and international regulatory bodies. Even

at the beginning of this study, I was aware that that some of the information I wanted to attain

was going to be beyond my reach, at least in the scope of this research project, but I just hoped

for the best and have had to make do with the information available to me.

When conducting qualitative research there are many ethical issues that must be carefully

considered by the researcher (Bryman, 2004). According to Diener and Crandall (1978; Bryman,

2004), there are four main ethical issues to contemplate in social research including not

compromising the safety of participants, the necessity of informed consent of the participants,

acting with respect to the privacy of participants and abstaining from any kind of deception

during the research project. From the beginning of this study, I was aware that I needed to be

cautious in my research so as not to risk my own safety and wellbeing or that of my informants

(Bryman, 2004). One example of this is that, since the research topic remains controversial, I

assured the anonymity of the corporate representatives and other experts and analysts who

participated in qualitative interviews or responded to my CSR questionnaire.

In the case of this research, it was necessary to be very attentive to ethical considerations when

conducting interviews with representatives of different groups. While trying to obtain

information I had to be sure to inform them of exactly how the information I was seeking would

be used and abstain from overly intrusive questions and protect their anonymity when necessary

(Bryman, 2004). Since I could not promise that the information I gathered from corporate

respondents would be used to paint their companies in a positive light, I agreed to keep their

35

identities anonymous and leave out the names of specific companies when reporting my findings.

Assuring their anonymity may have had positive results by allowing respondents to speak more

openly about controversial or defensive issues. Unfortunately, as a result, I have been obligated

to refer to respondents generally and to the corporations they represent as simply “the company”,

“the corporation’, or “the MNC”.

I encountered the biggest research challenge during my correspondence and qualitative

interviews with mining company representatives. I found that there is a very fine line between

asking the necessary questions to get the desired information, and asking too much of the

informant at which time they are no longer cooperative. My instinct was to form an opinion, or

judgment, about the activities of a wealthy MNC with operations in a developing country.

However, if I did this then I was sure not to gain their trust or compliance during the interview.

At the same time, I had to be true to my objectivity as a researcher and not just tell them what I

believed that wanted to hear from me in exchange for the information I required from them. By

‘objectivity’ I do not mean value neutrality, but being open minded in the context of the subject

matter.

I experienced mixed reactions to my questions and the more probing ones inspired defensive

reactions. I suppose that in the context of this research, defensive facades are to be expected.

After all, mining companies receive much more criticism than praise for their social and

environmental impacts and performance and as a student in Development Studies, it is possible

that CSR representatives assumed that I already had a pre-conceived negative opinion about their

company. Unfortunately, this limited the amount of pertinent original information I was able to

extract from these interviews.

Another limitation was the lack of response to my inquiries from representatives of MNCs in the

mining sector. Every company I contacted for an interview or response to my questionnaire had a

very well crafted website detailing their commitment to CSR and giving examples of their social

outreach and community level development programs. Despite this, only a very small percentage

agreed to interviews with me to detail their programs and discuss their motivations and CSR

obligations and practices. On more than one occasion, I received an initial positive response to

my primary inquiry agreeing to answer my questionnaire or to set up an interview, but once I

posed my questions to the company representative or CSR specialist I received no further

36

response or acknowledgement. My theory for why is twofold; first of all, that my questions were

considered too detailed and maybe intrusive by respondents and they felt out of their professional

comfort zone by answering them on behalf of their company. Secondly, many companies may

outsource their CSR and particularly their development programs to consultancies and NGOs,

therefore corporate respondents did not have the knowledge of the policies and programs

necessary to answer my questions.

This final observation may help to explain the overall lack of interest I received from MNCs in

responding to my inquiries and providing information for my study. After all, if they were not

actively involved in CSR and relied on companies and organizations outside the company to

implement and report on CSR then they would have little more than what information was

provided on the corporate CSR website, which of course I had access to as well. If this is true

then many companies who practice CSR and contribute to development may be doing so in name

only and outsourcing all related activities and reporting, which means that CSR is not truly a part

of the “corporate culture” and only serves as clever marketing and to meet nominal obligations.

4.8. Data Analysis

The methods of data analysis I employed to analyze the qualitative data I collected through

interviews, official documents and questionnaires were data reduction and verification and the

drawing of conclusions. For data reduction I first put together all of the notes I had accumulated

as a result of the qualitative interviews I conducted as well as the written responses I received to

the questionnaire, as well as the notes I had made on information gained during my experience

working in SRI. I brought these data together with the analyses I had made while collecting data

from secondary sources, such as corporate websites and sustainability reports as well as

documents produced by CSR regulatory bodies. I proceeded by transcribing all of my notes,

analyses and questionnaire responses into a Word document on my personal computer to

organize the data and simplify the process of data analysis. Since I had two very separate, but

related, objectives it was necessary to first put all of the information I gathered into one of two

groups; one related to specific CSR practice and performance of companies studied, and a

second related to CSR regulation and legislation. Due to the scope and type of the data collected

during the research process, I did not find it suitable to use SPSS or other analytical software

(Bryman, 2004).

37

In this study, the periods of data collection and analysis were not distinctly separate and often

overlapped. Since the research did not take place in a concentrated timeframe or in a solitary

study area, I found it more convenient to analyze data as it was collected, throughout the research

process. Part of the reason for this is the bulk and complexity of qualitative data, as discussed by

Bryman and Burgess when they refer to the “problem” of qualitative data analysis, which is,

described as “voluminous, unstructured and unwieldy” (Bryman and Burgess, 1994:216). The

volume of data I collected from respondents during semi-structured and especially unstructured

interviews was immense and undeniably unwieldy. Even after just one interview, it was difficult

to know where to start with the analysis of the data I had collected. The unstructured nature of

the interviews I conducted allowed respondents significant freedom in answering and it was

difficult not to be sidetracked from my research objectives. When going over the data I had to

limit what I deemed suitable for analysis and used my research questions and objectives as a

guide to selecting the pertinent information.

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5. Mapping the Mechanisms for Regulating CSR in the NRRES

There is an ever-expanding body of voluntary initiatives and guiding principles addressing the

issues of Corporate Social and Environmental Responsibility, transparency, and sustainable

development. According to a 2004 list published by the United Nations Research Institute for

Social Development (UNRISD) there are no fewer than ninety-nine such regulatory initiatives

for corporations (Abrahams, 2004). The initiatives identified in the report are grouped by

categories including industry self-regulation, multilateral regulation, civil regulation, national

legislation and proposals. This grouping is in line with other analyses that attribute the approach

of CSR regulation to three separate practical disciplines including neoliberal self-regulation,

government regulation at both the national and international level, and finally regulation by civil

society such as non-government and non-profit organizations (Bryane, 2003).

The most influential and widely practiced of the initiatives, as identified during the scope of this

research, include the International Council on Mining and Metals (ICMM) Charters, the OECD

Guidelines for Multinational Enterprises, the UN Global Compact (UNGC), the SA8000, the

Global Reporting Initiative (GRI), the Extractive Industries Transparency Initiative (EITI), the

Voluntary Principles for Security and Human Rights (VPSHR), the Equator Principles, and the

United Nations Principles for Responsible Investment (UNPRI). In order to understand the scope

and purpose, as well as the limitations, of these initiatives it is necessary to go more in depth into

the discussion of them (see figure 1).

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Figure 1: Overview of CSR Initiatives and Guidelines

Name of Initiative Focus Basic Characteristics Comments

UN Global Compact 10 principles to guide companies in embracing and enacting human rights, labor standards, environmental responsibility, and anti-corruption within their “sphere of influence”.

Voluntary initiative with principles to govern corporate responsibilities in terms of social, environmental and governance issues. Companies required to report on their performance along the lines of the 10 principles.

One of the most comprehensive initiatives and also one of the strongest, due to mandatory reporting. Since it is voluntary, no legal enforcement of the 10 principles.

OECD Guidelines for

Multinational

Enterprises

The guidelines serve as recommendations for companies operating in or from OECD member countries and address issues such as business ethics, human rights and labor practices, financial accountability and transparency among others.

Member countries are equipped with national contact points (NCPs) to implement the guidelines within the national context. The guidelines have been updated continuously since their adoption in 1976 to include contemporary CSR concerns.

The guidelines are incredibly well crafted but difficult to enforce since they are not binding and do not require reporting from individual companies and implementation in large and unstable counties is a challenge.

Extractive Industries

Transparency Initiative

“Publish What You Pay” initiative, the EITI’s members are resource rich countries and the principles are directed at host governments as well as companies with extractive operations in the member country.

The EITI requires that payments by oil, gas and mining companies to host governments be published and publicly accessible in order to prevent corruption and bribery in the extractive sector and encourage revenue from resource extraction to be used for development and poverty reduction.

This is the only initiative focusing exclusively on the payments between extractive sector companies and host governments. The focus of the EITI is undermined by the fact that many of the world’s most resource-rich and corrupt countries (ex. DRC, Nigeria, and Liberia) are not compliant.

International Council on

Mining and Metals

Specifically directed at CSR and sustainable development in the mining industry.

The ICMM has developed an industry-specific Sustainable Development Network which includes not only the prerequisite set of principles, but also a mechanism for public reporting to show that business practices are in accordance with the 10 principles, and finally a requirement for independent verification of compliance with the principles

The ICMM is a step ahead of many of the other initiatives mentioned in this section because it has developed a system of reporting of companies’ performance in accordance with the 10 principles. Though it is technically a multistakeholder group, counting both mining companies and NGOs, the council is controlled almost exclusively by company CEOs while NGOs seem do have much less influence.

Social Accountability

International

Primarily focused on human rights for workers and communities around the world.

SAI has created an influential and far-reaching web of partnerships with NGOs, companies, trade and labor unions, social auditing groups and others to improve global working conditions and promote ethical practices by employers. SAI is most famous for the SA800, a social accountability tool and standard for ethical employment practices and upholding human rights in the workplace.

The SA 8000 is a voluntary initiative meant to be used as a standard for measuring social performance of corporations. Like the GRI, the SA 8000 requires that signatories report on their social performance and attain independent certification of their adherence to international labor and human rights standards.

Global Reporting

Initiative

Focused on sustainability reporting of MNCs around the world..

The GRI is a voluntary reporting initiative and has produced a framework and guidelines for reporting on sustainability and CSR issues. It is arguably the

In March 2009, the GRI Board released the Amsterdam Declaration on Transparency and Reporting, blaming the lack of a regulated system to insure global

40

most high profile of all the reporting initiatives and has been widely adopted as a guide to sustainability reporting. They have added 14 specialized sector supplements, one of which is focused on the mining sector with sector specific reporting guidelines.

transparency and accountability for the economic crisis and challenging the lack of binding mandates for ESG reporting. The Board urged governments make ESG reporting by companies, public bodies, investment agencies and government pension funds mandatory

Voluntary Principles for

Security and Human

Rights

The VPSHR is a partnership between governments, NGOs and companies focused on maintaining safety and security in business operations while respecting human rights, especially for companies operating in countries where there is a high level of operational risk due to the presence of conflicts and/or human rights abuses.

The VPSHR completely voluntary and are not legally binding. The Principles themselves serve as guidelines for signatory companies as to how to assess and reduce risks while augmenting their role in respecting and enforcing human rights in the countries in which they operate. Companies are should recognize the impacts of their operations on local communities and mitigate the negative impacts, including conflicts, as much as possible.

The initiative is unique in its attention to security and human rights in countries host to operations of extractive and energy sector companies, and it is therefore very important to this study. Unfortunately, the VPSHR have been slow to develop beyond the stage of raising awareness of security and human rights issues and encouraging dialogue amongst its participants. There is no formal requirement for reporting on promotion or implementation of the Principles.

UN Principles for

Responsible Investment

Committing institutional investors to considering extra-financial (i.e. environment and social) issues when advising other investors or analyzing the performance of companies.

Institutional Investors sign on to the UNPRI Principles, which are voluntary and non-binding, showing (in theory) their commitment to following, implementing and promoting the Principles. The primary focus is attention to ESG (environmental, social and governance) issues in addition to traditional financial indicators when analyzing companies performance and recommending investments to clients.

Shareholders are arguably one of the most influential stakeholder groups and their demands or expectations can force a company to behave more responsibly or risk losing its investors and therefore its capital base. The commitment to focus on extra-financial ESG issues as well brings CSR to the forefront of the appraisal of the strengths and risks of an individual company.

Equator Principles Committing financial institutions to assessing and mitigating the extra-financial social and environmental risks associated with the financing of projects with total capital costs of more than $10 million.

The 10 Principles commit member institutions to require that their borrowers obtain ESIAs and Action Plans before they can secure project funding. By adopting the EP, financial institutions also commit to ensuring that borrowers comply with industry, country and international guidelines. EP members must also complete mandatory annual public reporting on their implementation of the Principles

Though the EP is aimed at financial institutions, it has significant impact on companies borrowing capital funding for projects from member institutions. Since EP financial institutions require that borrowers conduct ESIA and Action reports, companies are under obligation to perform CSR related activities that are prescribed by other initiatives but not enforced.

Source: Own research and initiative websites

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5.1The Initiatives

5.1.1. The United Nations Global Compact

The UN Global Compact (UNGC) is a voluntary initiative that came into being in 2000 with the

objective of providing MNCs with a framework for responsible behavior. Participation in the

UNGC is voluntary and signatory companies are encouraged to act in accordance with the ten

principles set forth by the initiative and ideally with the other objectives set forth by the United

Nations including the Millennium Development Goals. The ten UNGC principles alone address

the subjects of human rights, labor standards, the environment, and anti-corruption, with an

emphasis on the role of business in respecting and facilitating the universal compliance of the

principles and standards grouped under each subject. Participants are required to provide a report

communicating their progress in dealing with the issues covered in the principles within the first

three years of joining the initiative and every two years thereafter.

The compact boasts over 3,800 participants of which 2,900 are businesses from 100 different

countries (unglobalcompact.org). At the time of this research, however, not all of the 3,800

participants of the UNGC are classified as active, communicating participants. In fact 1,064 of

the member companies listed on the UNGC website are grouped under the heading of ‘Non-

Communicating Participants’ while another 260 companies are considered ‘Inactive Participants’

(unglobalcompact.org; 01/2009). According to the official UNGC website a non-communicating

classification is given to companies who failed to meet requirements related to the mandatory

‘Communication on Progress’ report or failed to participate in dialogue with the UNGC about

specific issues within the allotted timeframe. Similarly, a company classified as an inactive

participant failed to meet certain deadlines for submission of their ‘Communication on Progress’

report.

This sort of declassification from active member status shows that there are some repercussions

for companies who fail to meet the requirements of membership in the UNGC. However,

depending on the type and severity of infraction of the signatory company this cannot possibly

be punishment enough. Even declassified members may still claim membership and take

advantage of that nominal status to project an image of responsibility on public platforms where

consumers or investors may not be discerning enough to know the difference between an active

or inactive participant classification. If companies can sign on to the compact with the

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knowledge that the benefits that membership will have in terms of their public perception are not

dependent on their active participation or adherence to the compact, then essentially any

company could in theory become a member without good will or intention to uphold the terms of

the compact. Since the Global Compact is not legally enforceable, there are no real repercussions

for companies whose behavior fails to meet the standards set for members and therefore no real

motivation to uphold the specifications and duties of membership, other than ethics of course,

since even non-complying members retain their member status. The UNGC does reportedly

announce when companies lose their status due to non-conformation with the principles but since

most consumers, media and investors are not avid readers of the UNGC website this may go

widely unnoticed.

5.1.2. The OECD Guidelines for Multinational Enterprises

One of the frontrunners in the development of guidelines for responsible corporations was the

Organization for Economic Cooperation and Development (OECD). In 1976 they adopted the

OECD Guidelines for Multinational Enterprises as a part of the OECD Declaration on

International Investment and Multinational Enterprises. They are another important, broadly

focused, set of non-binding recommendations for CSR in MNCs. In this case, signatories are not

companies but rather the individual countries in which MNCs have operations. Participating

countries include the thirty OECD member countries as well as several countries who are not

members. The premise for the Guidelines is that they are “non-binding recommendations”

(OECD, 2001: 2) for member governments to address to companies operating from or within an

adhering country. Included in the recommendations are voluntary principles and standards that

constitute a code of conduct across topics such as corporate governance, human rights, labor

standards and environment, among others (PDAC, 2007). There are National Contact Points

(NCP) in each adhering country to facilitate the implementation of the Guidelines by ensuring

ethical practices of companies conducting business in the member country (www.oecd.org).

However, since there is no legal repercussion for the MNC’s who do not comply with the

recommendations set forth in the Guidelines it may be difficult for the respective host country to

enforce them. Despite the apparent lack of authority to effectively enforce the recommendations

and voluntary principles that they promote, the OECD Guidelines for Multinational Enterprises

is one of one of the most important set of standards for CSR to date. This is due to its broad

application, high profile status and the fact that it has been in existence for more than thirty

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years, and has been continually revised to help address contemporary concerns for the ethical

operation of MNCs (OECD, 2002).

It is important to note that in the scope of this study of CSR in the mining industry the

overwhelming majority of countries host to mineral extractive operations are not members of the

OECD or signatories to the aforementioned Guidelines. The Guidelines therefore have even less

regulatory authority but can still serve as a guide for host governments in their expectations and

measurement of the responsible business behavior of MNC’s operating within their borders. In

addition, since many of the MNCs responsible for such operations hail from OECD member

states and/or national signatories to the OECD Guidelines for Multinational Enterprises, one

could say that they should be held to the same standards of operating in their own countries,

regardless of where their projects are located.

5.1.3. Extractive Industries Transparency Initiative

A very important and quickly progressing initiative relating directly to the NRRES is the

Extractive Industries Transparency Initiative (EITI). The EITI is focused on ensuring

transparency both on the part of MNCs in the NRRES as well as the government in the host

country where the natural resource extraction is taking place. The philosophy behind the EITI is

that with good governance and transparency extractive industries can “generate large revenues to

foster growth and reduce poverty” (eitransparency.org). While many of the initiatives or

guidelines mentioned in this section come across as more general in terms of CSR with plenty of

well meaning talk ‘from a distance’ and little action, the EITI seems to be more focused and

action oriented. Its aim is to implement concrete regulations about the transparency of financial

transactions between MNC’s and host countries. Though participation in the initiative is

voluntary, individual companies and countries may sign on and by doing so they agree to make

publicly available all information regarding payments and revenues facilitated by operations in

the NRRES. Therefore, it is not only necessary that companies publicly provide financial records

about taxes, signatory bonuses and licensing fees paid, but governments must also provide

complementary records and most importantly must show how the revenue was spent

(www.eitransparency.org).

The EITI may risk a perception of being overly bureaucratic with the emphasis being on proper

and transparent documentation and reporting rather than development and human rights focused

44

projects on the ground. However, the importance of transparency in the NRRES cannot be

emphasized enough. Without transparency the money being paid to host governments by MNC’s

for the natural resource wealth being extracted can easily disappear into the pockets of the

corrupt rather than going towards macro and micro level socio-economic development and

human rights in the host country (Ross, 2003). Lack of transparency teamed with corruption in

either the extractive sector company or the host government can do very little good, if not great

harm, to the poverty-stricken members of the host country. This has unfortunately been the case

all too often when a less-developed country is endowed with natural wealth, to the extent that the

predicament of such countries has been dubbed the ‘natural resource curse’ (Ross, 2003). Proper

implementation of the EITI could help to insure that the problems associated with natural

resource endowment in poor countries are less possible to arise. This is not to say that the EITI

alone can lift the ‘curse’, but holding companies as well as governments responsible for the

overwhelming amount of money generated by natural resource extraction is absolutely necessary

if corruption in the NRRES is to be eliminated. Increased transparency can also ensure that funds

generated by the extraction and sale of resources go to where they are desperately needed;

towards development and human rights in less developed countries host to natural resource

wealth.

The EITI cannot achieve the challenge of insuring transparency in the extractive sector on its

own. Convincing both extractive sector companies as well as host governments to sign up to the

initiative and comply with all the regulations of the EITI is surely not an easy task. Moreover, it

is necessary to have both companies and host governments sign up because having only

companies or only governments is missing the mark. An MNC in today’s business world and

media climate will have little to lose and much to gain by joining the EITI. Becoming an

implementing company entails a public endorsement of the initiative, a commitment to assist in

the actualization of the initiative and its principles in member countries, and finally a yearly

monetary contribution of an unspecified amount to keep the EITI managed and running smoothly

at an international level (www.eitransparency.org). The first requirement of public endorsement

is an easy task and can be managed by posting a declaration on the corporate website. The

second requirement remains vague and a company’s commitment to encouraging host countries

to follow the EITI is impossible to measure so agreeing to this is not asking much of the

company. Finally, an annual contribution to the EITI, which is essentially a membership fee,

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should not be hard to come by for most extractive sector companies whose impressive profits

allow for such minor expenditures. In return for their compliance with the EITI, a company is

rewarded with international recognition as a transparent entity, notably free of corruption and

bribery, which has done its part in assuring transparency in the extractive sector. However,

without the endorsement of the EITI by host countries it is impossible to say that payments from

signatory companies are not fuelling corrupt practices in the countries in which they operate.

While a company may be committed to transparency, sustainability and, in the best cases,

community level development, the money they are paying to a host government in taxes and

royalties may never reach the people or projects it was intended for unless the company commits

to the same principles.

5.1.4. The International Council on Mining and Metals

The International Council on Mining and Metals (ICMM) has as its members seventeen of what

are largely considered the giants of the contemporary mining industry, including several MNC’s

which have been the specific focus of this study, as well as 30 other association members

(icmm.com). Unlike the other previously mentioned organizations, guidelines, and codes of

conduct for CSR the ICMM is specifically focused on the mining industry and the unique risks,

challenges and possibilities faced by its corporate members as well as the regions and

communities host to mineral extractive operations. The ICMM has developed an industry-

specific Sustainable Development Network, which includes not only the prerequisite set of

principles, but also a mechanism for public reporting to show that business practices are in

accordance with the 10 principles, and finally a requirement for independent verification of

compliance with the principles (icmm.com). The ten principles cover issues such as ethical

business practices and corporate governance, sustainable development, respect for human rights

cultural diversity, risk management, health and safety performance, environmental performance,

biodiversity, recycling, social, economic and institutional development in host communities and

stakeholder engagement.

The CEO-led organization was formed in 2001 following the launch of the Global Mining

Initiative (GMI) in 1999 and the Mining, Minerals and Sustainable Development (MMSD)

project in cooperation with the International Institute for Environment and Development (IIED)

in 2000. These events set in motion a rising awareness of sustainable development and CSR in

46

the mining industry that culminated in the ICMM and its 10 principles designed to guide

companies towards sustainable development. Governance of the ICMM is carried out by a

council made up of the CEOs of all of its member companies as well as two additional

representatives who are elected from amongst the member associations (www.icmm.com). The

list of council members reads like a play list of the largest, richest and most influential mining

companies in the world, some of whom were interviewed during the course of this research.

The ICMM looks almost ‘too good to be true’; with the principles addressing human rights and

community development, the required adherence to GRI reporting guidelines by all members, the

third party verification of company performance, the “gap analysis” which compares other

existing guidelines (such as the ones discussed in this section) and looks for gaps in standards

between different initiatives and the impressive cache of social and environmental case studies.

While it may be considered cynical to look for a catch in this idyllic organization, it is necessary

to do so. One potential catch could be the makeup of the ICMM council, whose line-up consists

almost exclusively of industry CEOs. Of the seventeen powerful multinational mining companies

who are member of the ICMM, all seventeen are council members. Of the thirty associations that

belong to the ICMM only two are given seats on the council, and those two are elected,

presumably by the CEOs who are automatic council members. Therefore, the council is

representative of 100% of CEOs but less than 7% of the member associations, whose interests

could arguably be significantly different from those of the CEOs.

5.1.5. The Global Reporting Initiative

The Global Reporting Initiative, commonly referred to as the GRI, is a well-known and widely

adopted sustainability-reporting framework and self-proclaimed global action network. The

initial idea for the GRI is credited to CERES, a non-profit group based out of Boston,

Massachusetts, who began by securing funds and staff for the then small-scale GRI project in

1997-1998 (globalreporting.com). When the United Nations Environment Program (UNEP)

partnered with the non-profit group initiative in 1991, the GRI quickly shot up from its relatively

low profile status. When it released its first draft of Sustainability Reporting Guidelines later that

year it was to a global audience and a responsive body of members who quickly started

producing sustainability reports based on GRI guidelines (globalreporting.com). Over the past 10

years the GRI has grown and evolved considerably, updating their guidelines and adding

47

fourteen specialized sector supplements, one of which is focused on Mining and Metals. In 2008

the GRI reported a total of 507 Organizational Stakeholders (OS) representing 55 different

countries (globalreporting.com).

In March 2009 the GRI Board took an unprecedented step with the release of the Amsterdam

Declaration on Transparency and Reporting, blaming the lack of a regulated system to insure

global transparency and accountability for the current (as of March 2009) economic crisis. The

GRI Board expressed belief that the crisis could have been averted if companies had been subject

to mandatory reporting on environmental, social and governance (ESG) issues. In the

Declaration The Board urges governments to step up their leadership and expectations for ESG

reporting by making reports from companies, public bodies, private and state-owned investment

agencies and government pension funds mandatory. The Declaration also scrutinizes the

prevailing acceptance of the voluntary nature of ESG reporting and the assumption that the

voluntary status is adequate in terms of corporate transparency and accountability

(globalreporting.com).

The GRI Board’s stance on the issue of voluntary reporting is truly unprecedented because it

signifies a rising level of dissatisfaction, from an internationally respected, high profile

organization, with the current state of CSR and the way in which it is regulated. The call to

action set forth in the Amsterdam Declaration represents a new trend in a call for responsibility

from above, in the upper echelons of international civil society, rather than from grassroots civil

society and stakeholder groups alone.

5.1.6. Social Accountability International

Social Accountability International (SAI) is a globally focused non-profit organization dedicated

to promoting human rights for workers and communities around the world. The organization has

created an influential and far-reaching web of partnerships with NGOs, companies, trade and

labor unions, social auditing groups and others to improve global working conditions and

promote ethical practices by employers. SAI is most famous for its initiative the SA8000,

developed as a social accountability tool and standard for ethical employment practices and

upholding human rights in the workplace. According to the SAI, the SA8000 is “widely accepted

as the most viable and comprehensive international ethical workplace management system

available” (sa-intl.org). The SA8000 is a voluntary initiative, drawing on thirteen different

48

international human rights conventions, and is meant to be used as a standard for measuring

social performance of corporations.

Like the GRI, the SA8000 requires that signatories report on their social performance and attain

independent certification of their adherence to international labor and human rights standards.

Corporations must be accountable to the guidelines set forth in the SA8000, most notably that

they do not employ forced or child labor, uphold certain standards of health and safety in the

workplace, comply with legal standards for remuneration and working hours, refrain from

discrimination and corporal punishment or abuse of employees and allow for the formation of

and membership in trade unions (sa-intl.org). In order for a company or organization to become

SA8000 certified they have to apply for a third party audit to be performed by an SAI-accredited

auditing firm who will visit individual sites to judge compliance with the standards set forth in

the SA8000. SAI provides a list of legitimate certification bodies that are authorized to certify

companies’ compliance to the SA8000.

The SA8000 is concerned with companies’ legal obligations in terms of human rights and

working conditions, which are in the category of negative duties, as discussed in the assignment

approach, and also in the category of expected deliveries, as discussed in the BLIHR Deliveries

Matrix. Therefore, the initiative is meant to regulate issues that should, in theory, be universally

practiced already. However, as made evident by the need for an initiative such as the SA800, this

type of “universal” legislation is not universally abided by. This is especially the case in LDCs

where national laws governing human rights and working conditions are undeniably sub-par and

nowhere near the standards that are in place in wealthier, more developed countries.

Unfortunately this has created a dangerously attractive environment for MNCs who outsource

their production or base their operations in LDCs since labor costs are much lower and national

regulations regarding the treatment of workers and the preservation of their human rights are

relatively weak if they exist at all (Shah, 2006). In the case of mining and minerals companies

this is especially relevant since MNCs with extractive operations in LDCs often source manual

labor from the local labor markets and national laws are often insufficient to protect the human

rights of the workers and the neighboring communities.

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5.1.7. Voluntary Principles on Security and Human Rights

The Voluntary Principles on Security and Human Rights (VPSRH) came to be in 2000 through a

dialogue on security, human rights and CSR between the governments of the UK, the US,

Norway and the Netherlands in addition to selected companies from the extractive and energy

sectors and numerous human rights-focused NGOs (voluntaryprinciples.org). In the context of

the VPSHR the focus of the partnership between governments, NGOs and companies is to

maintain safety and security in business operations while respecting human rights, especially for

companies operating in countries where there is a high level of operational risk due to the

presence of conflicts and/or human rights abuses. As specified in the title the VPSHR are

completely voluntary and are not legally binding. The Principles themselves serve as a guideline

for signatory companies as to how to assess and reduce risks while augmenting their role in

respecting and enforcing human rights in the countries in which they operate.

(voluntaryprinciples.org).

Under the Principles, companies are instructed to recognize the impacts of their operations on

local communities and mitigate the negative impacts, including conflicts, as much as possible.

Companies and governments alike are encouraged to respect and promote human rights, as set

forth in the Universal Declaration of Human Rights, and, in the course of a conflict, they should

respect the highest applicable standards of international humanitarian law. The VPSHR contains

additional guidelines for short- and long-term risk assessment amongst companies, governments

and civil society. The principal issues that should be addressed in a complex risk assessment

include the identification of security risks due to economic, social or political factors, an

assessment of the potential for violent and non-violent conflict, and consideration of the human

rights records of all involved parties.

It appears that the primary goal of the VPSHR is to raise awareness of existing and potential

CSR issues along the lines of conflict, security and human rights. As a result of signing on to the

Principles corporations should be more aware of the risks of operating in a country with a

blemished security or human rights record or one that is currently experiencing violent or non-

violent conflict. In theory, CEOs should understand that operating in such a country entails

increased risks as well as CSR obligations in terms of human rights, and that engaging with host

governments and civil society as well as other stakeholders and effectively alleviate some of the

50

risks and improve the operating atmosphere. However, there is very little direction as to how this

should be achieved and there is no mechanism in place to certify the compliance of signatory

companies.

The initiative is unique in its attention to security and human rights in countries host to

operations of extractive and energy sector companies, and it is therefore very important to this

study. It is well known that in many resource- rich countries there are also an abundance of

conflicts and human rights abuses (Ross, 2003; Cramer,2006), and therefore the guidelines of the

VPSHR have incredible significance. Unfortunately, the VPSHR have been slow to develop

beyond the stage of raising awareness of security and human rights issues and encouraging

dialogue amongst its participants. Despite the voluntary nature of the Principles the number of

participants has remained relatively small, perhaps limiting the impact of the VPSHR.

Participating companies are not formally required to report on their promotion or implementation

of the Principles.

5.1.8. Equator Principles

The Equator Principles (EP) were adopted in 2003 in cooperation with the IFC with the goal of

developing a benchmark for the financial industry to assess and manage extra-financial risks,

such as environmental and social, in project financing (equator-principles.com). The rationale

behind the EP is one of risk management, and signatory financial institutions should be better

equipped to assess and mitigate a variety of risks associated with large-scale project financing,

from environmental to reputational, than institutions that are not members. EP signatory

institutions should apply the Principles to all new capital financing for projects, regardless of

industry sector, amounting to more than $10 million. This amount was lowered from a previous

threshold of $50 million to encompass more projects. The Principles differentiate between

projects in OECD and non-OECD countries and assess projects accordingly. For institutions, the

process of adopting the EP is relatively simple and includes filling out a form, sending a press

release and posting a link to the EP on their website.

The EP stipulates that adopting financial institutions to categorize projects to be financed based

on social and environmental risk along the lines of the categorization process developed by the

IFC. In addition, member institutions must require loan recipients to conduct Environmental and

Social Impact Assessments and subsequent Action Plans in which they show they have complied

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with relevant performance standards. For borrowers whose projects are considered medium or

high risk, financial institutions are committed to working to keep projects in line with social and

environmental performance standards and guidelines, such as those set forth by the OECD and

the World Bank, in the case that the borrower is not individually compliant. One requirement set

forth by the EP is that member institutions report publicly on their implementation of the

Principles. (equator-principles.com)

Though not directly applicable to corporations, the EP is incredibly significant in the discussion

of CSR regulation. This is because the large majority of MNCs are required to obtain loans when

endeavoring on a project, particularly in the extractive sector. Usually only very large,

established and successful companies have the free capital to invest in a multi-billion or even

multi-million dollar project, which is the typical cost of starting production from scratch or

revamping an existing large-scale mining project. Therefore, companies have no choice but to

borrow the capital from one or more of several sources, with financial institutions being an

obvious choice: And if the lending institution is a member of the EP, the borrowing company

will be required to produce an ESIA as well as a follow up Action plan detailing how they will

address the foreseen and unforeseen social and environmental risks associated with their

project’s implementation. The financial institution will oversee the company’s adherence to

existing country and industry specific regulations and well as international guidelines, to

preserve their investment if nothing else.

While the EP is voluntary and financial institutions are not required to join its ranks, there is a

considerable impact on the borrowers of those institutions that do. In order to secure the loans

necessary for their production and viability companies are under obligation to attend to the social

and environmental impacts of their projects, whereas the previously discussed initiatives

specifically applicable to corporations are dually voluntary in that membership is optional and

guidelines are rarely enforced. Furthermore, it is possible that a company who is not a signatory

of any of the aforementioned initiatives or guidelines, but has obtained a capital loan from an EP

member financial institution, may be held to higher CSR standards than a company who is a

member of one or even several voluntary initiatives but who does not borrow funds from an EP

member institution.

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5.1.9. The United Nations Principles for Responsible Investment

The United Nations Principles for Responsible Investment (UNPRI) is an initiative for investors

and investing institutions with the aim of committing institutional investors to practicing Socially

Responsible Investment (SRI) by incorporating environmental, social and governance (ESG)

issues into their analysis and choice of investments. The UNPRI was developed in 2005 by the

United Nations Secretary-General and a selection of the world’s most prominent institutional

investors. The initiative is in partnership with both the UN Global Compact (UNGC) and the UN

Environment Program Finance Initiative (UNEP FI). The UNPRI offers yet another set of

guidelines for CSR, this time tailor-made for institutional investors, and the six Principles for

Responsible Investment include actively incorporating ESG issues in both investment analyses

and in the investors’ own policies and practices as well as seeking disclosures on ESG issues

from companies in which investments are made. The Principles also include guidelines for

accepting, implementing, enhancing and reporting on the UNPRI. Each of the six Principles

includes recommendations as to how they can be upheld. According to the official website of the

initiative, “The Principles are voluntary and aspirational. They are not prescriptive, but instead

provide a menu of possible actions for incorporating ESG issues into mainstream investment

decision-making and ownership practices” (unpri.org). Therefore, while the initiative offers

guidance to socially responsible behavior for institutional investors and the companies they

invest in, the UNPRI cannot be legally enforced and has no power to sanction institutions that do

not adhere to the principles. (unpri.org)

5.2. Mechanisms measuring the compliance of MNCs to CSR guidelines

As mentioned above, CSR guidelines and regulations are often classified as self-regulation,

government regulation, or regulation by civil society. It follows that the mechanisms for

measuring compliance with CSR guidelines and regulations will depend on the source and type

of a specific guideline or regulation. Those that are initiated by government bodies will likely be

subject to government mechanisms of assessment, just as members of civil society such as

NGO’s and non-profit groups will develop their own methods of measuring compliance to the

CSR guidelines or initiatives that they champion. Since there is no mandatory set of international

regulations governing the development of comprehensive CSR policies by MNCs, their activities

are monitored by a range of government, non-government and industry regulatory bodies on

different levels and foci (Vogel, 2005). On one hand this makes it possible to have numerous

53

groups with different interests and specialized mechanisms of regulation involved in monitoring

the CSR of an MNC simultaneously, making sure that the compliance is multi-faceted and can be

crosschecked by looking at reports produced by different groups. On the other hand, this system

creates potential for gaps between the spheres of interest and regulation of the different

regulatory bodies and interest groups, creating loopholes for irresponsible corporate behavior.

Since few of the guidelines, recommendations or codes of conduct for CSR are linked or checked

against each other, it would be possible, and even attractive from the corporate perspective, to

argue that the more such initiatives an MNC has signed up for, the more responsible and

comprehensively regulated it must be. The companies that are the focus of this study were all

members of two or more initiatives that provide CSR guidance and act as a testament to a

company’s desire to be, or at least be perceived as, socially responsible. A company’s status as a

signatory to a code of conduct or member of a regulatory body for CSR is something that is not

hidden; rather it is often advertised on the company’s website, newsletter, annual reports, etc.

The idea behind this seems to be that if they are willing to become a member of an organization

supporting responsible behavior or sign on to an initiative that supports and requires a certain

level of social responsibility from its members, then the company itself must be responsible or at

least aim to be so.

There remains the undeniably problematic fact that few if any of the aforementioned principles,

guidelines, recommendations, and codes of conduct are actually binding. Therefore, even if the

mechanism set forth to measure compliance of an MNC to government, civil society or industry

based CSR guidelines is effective, punishment for those found to be non-compliant is weak or

non-existent. Additionally, it seems that the benefits of signing up to a CSR initiative can be

numerous, especially in how a company is perceived by its shareholders and the public at large.

At the same time the drawbacks of becoming a member or signatory of a CSR initiative appear

to be very few as there are not always mechanisms in place to assure compliance to the

principles member companies ought to follow and even if a company is found to be non-

compliant in some respect there are few seriously negative repercussions to be felt. For the most

part, the repercussions for companies that do not comply with the guidelines or principles set

forth by the initiatives discussed above are relatively mild, such as revocation of membership or

no longer being allowed to use the logo of the initiative on the company website or in public

54

reports. From the self-regulating perspective this may be enough since any loss in competitive

advantage, such as that with associated with a tarnished public image, is a considerable threat to

MNCs to be avoided at all costs (Bryane, 2003).

5.3. Strengths and weaknesses of current methods of international regulation of

CSR

It is clear from the findings discussed above in response to the first objective of this study that

there is no shortage of well-meaning initiatives created to guide MNCs towards more socially

and environmentally responsible. Unfortunately, as also discussed in the preceding section, none

of the regulations are legally binding and this diminishes the potential positive impacts of the

initiatives on CSR since there is no mechanism to enforce them (Vogel, 2005).

If CSR was proven to increase profitability as well as decrease the social and environmental risks

that may threaten MNCs operating in LDCs, the business case for CSR would be augmented and

the argument for industry self-regulation of CSR might be more appealing. In such a case the

incentives for following the guidelines set forth in the aforementioned initiatives would be

considerable from a business perspective and it might no longer matter that they are voluntary.

After all, according to some, the principal social responsibility of the corporation is to make a

profit for its shareholders (Kolstad, 2006). Therefore, if MNCs could be convinced that CSR in

relation to other stakeholders, in addition to their shareholders, would increase their profitability

and viability then voluntary initiatives might be sufficient to guide corporations toward social

responsibility.

Unfortunately, the business case for CSR increasing profits for companies that comply with

voluntary initiatives and CSR guidelines has not been proven 100%. Even staunch supporters of

CSR and ethical business practices admit that increased responsibility does not necessarily mean

increased profitability (Kolstad, 2006). As long as this is the case and corporations cannot be

convinced that CSR is in their best business interests, the CSR initiatives discussed in the

preceding section are insufficient in ensuring ethical business practices due to their voluntary and

non-binding nature.

With that said, this research has also revealed instances in which MNCs are not signatories to the

voluntary CSR initiatives but claim to follow them nonetheless. Membership in many of the

guidelines discussed in this chapter requires members to pay fees as well as attend conferences

55

or workshops one or more times a year, making them somewhat costly and time consuming. For

some companies just starting out, with limited budgets and few employees, cannot ‘afford’ to

become official members of certain initiative as they cannot spare the requisite financial or

human resources. However, some of these companies look to the initiatives for guidance and use

them as a framework in developing their own CSR policies. Therefore the initiatives could be

said to influence the activities and policies of both members and non-members, even if the

compliance of non-members with the guidelines cannot be verified.

5.4. The role of Socially Responsible Investment (SRI) in relation to CSR

SRI can be active in the fields of researching, monitoring, reporting and advising MNCs in their

CSR policies and how they are rated for their social and environmental responsibility. This is a

very interesting and fairly new angle on CSR where investments banks research and review

specific companies and their published information and then make recommendations to their

clients to invest in companies and industries with the most attractive CSR track record. By

mainstreaming social responsibility with other more traditional investment criteria, SRI shows

that CSR really does pay off in the financial sense if socially responsible businesses are more

attractive to potential investors (Robbins, 2008).

SRI analysts hold a privileged position with simultaneous access to companies as well as clients.

This position allows them to access information about many different facets of a given company

and then use this information to influence investors in their investment choices. A traditional

analyst would look at purely financial indicators to decide a company’s rating and encourage

investors to buy, sell or hold stock in the company based on its projects short and long-term

financial performance. SRI analysts on the other hand look behind financial indicators, which are

often superficial and can be more dependent external factors than an individual company’s

present activities or behavior. SRI measures company performance in terms of environmental,

social and governance (ESG) issues and can often give investors a more long-term picture of

company health and performance than strictly financial indicators can. By rating companies

based on ESG indicators SRI analysts can advise investors to put their money into companies

who are more socially and environmentally responsible; not just because it is the ‘right’ thing to

do but also because, at least in SRI theory, those companies will perform better in the long run

and offer better returns to investors than non-responsible companies (Robbins, 2008).

56

This presents another less discussed but incredibly powerful business case for CSR. The idea is

that sound management of environmental, social and governance issues represents overall

superior performance in a company and a greater ability to prevent and overcome problems.

Basically, companies that are more responsible have more longevity because they encourage

sustainability not only within the company itself, but also in the social and ecological

environment in which they operate. Therefore, it is in the company's best interest to behave

responsibly as it enhances the sustainability of its own profit-making activities as well as

sustaining its consumer and resource base. It is purely a business driver for CSR, but it is a

compelling one.

57

6. An analysis of CSR policies of MNCs in the NRRES in terms of human

rights and development

Since CSR is still considered largely voluntary, particularly in the case of corporate-sponsored

development projects, it is of interest to evaluate why some MNCs choose to engage in CSR and

the promotion of development and human rights. In this section, I will discuss how and why

companies formulate their CSR policies to encompass human rights and development. I will also

examine the types of development projects funded by MNCs as part of their broader CSR agenda

and their effects on recipient communities. Finally, I will address the issue of sustainability of

these projects and activities.

6.1. How CSR policies are formulated with respect to human rights and

development

When an MNC formulates its CSR strategy it may be influenced by the rules set forth by the

country in which the MNC is based, the host country regulations, the financial lending institution

from which the project capital has been procured, shareholder expectations, guidelines for CSR

as decided by various voluntary initiatives in which the company is a participant, or a

combination of all of the above. In some cases, an MNC will outsource the formulation of a

framework for its CSR strategy as well as its implementation to a consultancy specializing in

CSR and sustainability reporting if there is not a specific department that deals with this non-

technical aspect of business within the company itself. How the CSR policies are formulated

depends on the motivations and perhaps even the background and experience of the person or

team responsible for them.

For example, a company based in an OECD member country or one that is a signatory of the

UN’s Global Compact may develop significantly different CSR policies than companies who are

not under obligation to OECD Guidelines for Multinational Corporations or the Global Compact

Principles. However, as mentioned above, this research has found that even when a company is

not a member or signatory to an initiative such as the Global Compact due to lack of funding or

CSR personnel they may still employ the guidelines set forth in the formulation of their CSR

strategy.

58

The guidelines and regulations put forth by various governing bodies are explicit in their stand

on human rights and how corporate behavior should advocate human rights legislation in their

activities. The first two principles of the UN Global Compact deal with Human Rights in that

“businesses should support and respect the protection of internationally proclaimed human

rights; and… make sure they are not complicit in human rights abuses” (unglobalcompact.org).

These principles are based on the Universal Declaration of Human Rights (UDHR), which

includes the rights to equality, life and security, personal freedom, and economic, social and

cultural freedoms (unglobalcompact.org). The OECD Guidelines include one policy specifically

on human rights stating that enterprises should “Respect the human rights of those affected by

their activities consistent with the host government’s international obligations and commitments”

(OECD, 2001:75).

An important point must be addressed in this discussion that while MNC’s may endeavor to

include objectives of social development and human rights provision in their CSR agenda, their

primary goal is to make a profit. Therefore, companies will most likely fund social programs

only after it has established a viable, profitable business base for itself. This unfortunately makes

it seem as though development and human rights agendas something of a ‘luxury’ that only

highly profitable companies can afford. It could also be the case that once profitable companies

are forced to abandon their social programs in times of economic hardship as they are often

considered the least essential to its everyday functioning. During the global economic decline in

2008, this became a serious issue in the NRRES as commodity prices for extracted resources fell

considerable and a significant amount of mining and extractive sector companies halted their

investment in host countries and communities all over the world. This translated not only job loss

to extractive sector employees but also loss of funding for social development programs being

funded by extractive sector MNC’s with operations in the Global South. (BMI, 2009).

6.2. Why do MNCs choose to incorporate human rights and development in their

CSR policies?

The decision of an MNC to include human rights advocacy and social development projects in

their CSR agenda is influenced by a range of factors such as moral responsibility, regulatory

guidelines, pressure from stakeholders including shareholders and host communities, political

influence and pressure from the media and civil society. It appears that the more a company feels

obligated to develop and implement development projects to one or more stakeholders, the more

59

likely they are to do so. That may not seem like a groundbreaking observation but the drivers and

levels of stakeholder influence and MNC’s sense of obligation should not be taken for granted.

In theory, the amount of influence of any given stakeholder on corporate activities and behavior

should be proportional to the amount of interest the stakeholder has in the way the company

operates, or how much they will be impacted by the company’s activities. Unfortunately, this is

not always the case since stakeholders with high interest in how a company operates, such as

host communities and local or tribal leaders, may have relatively little influence on corporate

behavior and activities (see figure 2).

Figure 2: Stakeholder Interest vs. Influence Matrix

Influence

Interest

High Interest, Low Influence

•Local Communities directly

affected by extractive operations

in terms of the associated

physical, social and

environmental effects.

•Local government / tribal

councils

High Interest, High Influence

•Company Management and

Directors

•Civil Society/NGOs

•International Aid and Human

Rights Organizations

•National host government

Low Interest, High Influence

•Shareholders

•International governing

bodies

Low Interest, Low Influence

•Media

•Consumers

S

ource: Own research

60

According to John Degnbol-Martinussen and Poul Engberg-Pedersen in their book Aid,

Understanding Development Cooperation, there are four prevailing motives for administering

development aid. In no particular order, these motives are national security, economic interests,

moral and humanitarian reasons and, finally, environmental factors (Degnbol-Martinussen,

2003). All of these motives are present in an MNC’s decision to include social development and

human rights into their CSR agenda, though it would be more suitable if ‘business personnel and

operational security’ replaced the motive of ‘national security’. As one corporate representative

stated during an interview, when reflecting on the turmoil faced by oil companies in Nigeria

including kidnapping of employees and sabotage of pipelines due to the feeling of

disenfranchisement by groups of impoverished local citizens, “you either have to invest in

community level development… or build a really big wall”. In this sense, CSR is seen as

managing potential security risks posed by local communities in the host region where the

resource extraction is taking place. By investing in communities and engaging local stakeholders

in project development and implementation, the MNC is making their own operations less risky

and more sustainable.

My research shows that when an MNC partners with a local or international NGO to design and

implement a framework for their CSR strategy and related projects and programs, as is often the

case, it is the NGO who decides what type of projects and programs to sponsor in the name of

the company, and with the company funds. In the Katanga Province of the DRC the American

NGO PACT International has established itself as a liaison between multinational mining

companies and local communities. Many of the companies from which information was obtained

for this study are partners with PACT and rely on the NGO to help direct their CSR programs

and funds for community level development in communities host to mining operations in the

regions. In this instance it is the team at PACT rather than the MNCs themselves who choose to

incorporate human rights and development in the CSR agenda, though the MNC assumedly

approves all projects and programs before they are implemented.

6.3. Types of social programs and development projects funded by MNC’s as part of

their CSR strategy

The type of development projects and other social programs sponsored by MNC’s is highly

dependent upon the location and type of the company’s operations. Most CSR policies are

directed at the stakeholders in the corporate endeavor, be it extractive or industrial, including its

61

employees, host government, members of local communities who will be affected by its

operations, and shareholders. Another important consideration in CSR is the environment,

especially as many communities are directly dependent on the environment and its products for

their livelihoods. Therefore, social programs funded by MNC’s often deal with the development

needs of the local communities as well as environmental preservation and related concerns (see

figure 3).

Figure 3: Examples of Development Project sponsored by mining sector MNCs as part of

CSR

Location Project Type Project Details

Communities near mineral extractive sites in Katanga Province, DRC

Infrastructure: clean water wells MNC has constructed 27 clean water wells to serve rural village communities located in the vicinity of their mining concession, with plans to expand to serve all 43 communities.

Communities near mineral extractive sites in Katanga Province, DRC

Farmer outreach, project support MNC is providing funds for a local project providing agricultural training as well as livestock, improved seeds and fertilizers to farmers.

Communities near mineral extractive sites in Katanga Province, DRC

Micro-credit MNC has partnered with an international NGO to provide micro loans to small businesses and entrepreneurs.

Communities near mineral extractive sites in Katanga Province, DRC

Education: construction of schools MNC has built and staffed three schools for children living in the concessions, and has committed to providing operational funding.

Communities near mineral extractive sites in Katanga Province, DRC

Health care: integrated malaria prevention and vaccination program

MNC is working with international NGO to educate communities on health threats such as malaria, TB and waterborne diseases, among others, and providing mosquito nets and condoms as well as offering a vaccination program.

Source: Own research

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6.3.1. Infrastructure

It is common that the building of infrastructure is at the top of the list of corporate sponsored

development projects. This is especially true when the company operates in a rural area in an

impoverished or less developed region where infrastructure is poor and the provision of which is

imperative to local development as well as the MNC’s operations there. One example of this is

multinational mining companies who establish extractive operations in Africa. Mineral deposits

are often in rural areas that are less developed than regional capitals and even infrastructure

exists it is usually insufficient for the commercial needs. The mining company is therefore

obligated to invest heavily in building infrastructure such as roads that can handle a high amount

of traffic, water filtration, sewage and sanitation systems, electricity lines as well as medical

facilities for its workers, among other things. While this type of infrastructure development is

necessary to establish and run a commercial mine, mining companies will often identify this as

part of their contribution to socio-economic development in the region. While the main driver an

MNC investing in building infrastructure is arguably to provide for its own commercial and

operational needs, infrastructure such as that listed above can also benefit local communities. For

example, better roads can mean access to markets to buy and sell goods while proper disposal of

waste via sewage and sanitation systems can positively affect the health and wellbeing of a

community by preventing waterborne diseases such as cholera. Medical centers installed to

provide for the health of a company’s employees can also be used to provide healthcare for

community members who would otherwise travel long distances for medical service. Whether

this type of development is sustainable or not will be discussed in a subsequent section (see

section 6.6.).

6.3.2. Education and Training Programs

As part of their CSR agendas MNCs will often sponsor the building of schools and various

education or training programs in communities in the meso-sphere of their influence. Of all the

CSR activities of mining companies studied during this research, educational programs and

infrastructure projects seem to be the most common, or at least the most publicized, recipient of

corporate funding. It is likely that education still comes second to infrastructure in terms of total

amount of funding but, as mentioned above, a significant amount of infrastructure projects

sponsored by MNCs in LDCs are constructed first and foremost to serve the needs of the

corporation and any benefit they serve to the local communities is a ‘bonus’ or an afterthought.

63

This may be why companies choose to put more emphasis on the schools they build and the

educations programs they sponsor on the CSR pages of their websites, in their annual reports and

in response to inquiries from graduate students and others.

First of all, I would like to express my appreciation for these types of programs, despite the

marketing agendas that might lurk behind them. Education in most if not all LDCs is in dire

condition and any effort to ameliorate this must be commended as indeed a positive duty in

securing human rights. The right to education is of utmost importance and some theorists such as

world-renowned author, mountain-climber, educator and peacemaker Greg Mortenson believe

that education is the key to both development and peace in impoverished and war-torn areas

around the world (Mortenson, 2007).

Depending on the amount of funding provided by an MNC and the length of the project cycle

education programs sponsored in communities host to their operations can include building

schools, training teachers, providing salaries for teachers, providing incentives to families who

send their children to school, providing for operational costs, building latrines and other projects.

Companies tend to emphasize the building of schools rather than maintenance and operational

costs but this may be because that is what is picked up on most by the media as well as

consumers and shareholders rather and not because their projects are limited to school

construction. After all, activities such as latrine maintenance and operational costs may be

perceived as less newsworthy than school construction and for this reason are less emphasized by

MNCs. However, the majority of the companies I had discussions with conveyed that their goal

was not to take over the role of the government by extensively providing for communities.

Rather, they aim to build capacity at the local level in the short term, while the government is

strengthening it at the national level, and in the medium term they expect the government to take

over the running of schools and related activities. Therefore, even in the cases where MNCs

build schools and provide operational funding and other costs they rarely do so on a long-term

basis.

Finally, the education programs sponsored by MNCs in the meso-sphere of their influence are

not always restricted to children. Some mining companies fund training programs for adults

aimed at developing marketable skills that can earn an income for the individual’s household,

particularly communities that are heavily reliant on subsistence farming. Sometimes these

64

programs target women in particular, teaching them to make crafts that can be constructed and

sold to supplement farming income. Other programs teach traditional farmers new agricultural

techniques to increase their yields so that they have a surplus to sell or trade to obtain other non-

agricultural products and services. In communities host to mining operations there are often

training programs sponsored by mining companies for artisanal miners who, before the arrival of

the MNC, mined the area using traditional and dangerous practices. Training programs that can

lead to non-mining employment and income create some of the most sustainable benefits for host

communities since education and training received as a result of MNC funding will continue to

benefit the recipients of the programs even after the company has completed its operations and

left the region.

6.3.3. Healthcare

In addition to infrastructure and education MNCs also fund healthcare programs as part of their

CSR activities in LDCs. In some circumstances healthcare and infrastructure projects are linked

since many health threats can be traced to the lack of potable water sources (Whiteford, 2005).

One step in improving the health of a community lacking clean water is securing access to a

water source that is uncontaminated by waterborne diseases. Mining companies operating in the

Katanga Province of DRC have done this by constructing boreholes in communities and advising

against activities that could lead to contamination of the water source. Companies have also, in

some cases, sponsored vaccination programs against diseases such as typhoid and tuberculosis

and have provided households with mosquito nets to decrease the risk of contracting malaria.

As with education, corporate funding for healthcare is also directed at the construction of

hospitals and mobile treatment centers as well as the purchase of medication and the training of

healthcare workers. Also similar to education, some companies expressed that they were not

trying to replace the government by providing completely for the needs of the community

members and, therefore, had established memorandums with the DRC government to share the

costs of running medical centers and other healthcare programs.

6.3.4. Employment

MNCs can also assist in community level development in the regions in which they have

operations by providing employment opportunities for community members. Production sites

may require thousands of unskilled and semi-skilled laborers, of which there is a large pool in

65

most developing countries. The corporate respondents interviewed during this study emphasized

employment of local citizens by the mining company at all stages of production as one of their

most considerable contributions to local development. Local community members are hired in

the initial construction of infrastructure projects such as roads, water and sanitation systems, and

the building of schools and hospitals. Once the mine goes into production the company will

employ a significant proportion of workers from the local labor pool.

While it is undeniably true that providing steady employment and income to impoverished

families is a method of creating social and economic development, there are still several negative

aspects associated with the approach in the context of multinational mining companies with

operations in LDCs. First of all, there is the simple fact that the employment provided is not long

term. Workers who are employed by the company to build infrastructure in the pre-production

phases of the project or as part of development programs are only given temporary employment,

and will again be jobless after a certain number of months or years at best once the projects are

completed. In addition, amongst the companies studied, the average mine has a projected

lifespan of approximately 25 years, so employment working in the mines is not sustainable

beyond that timeframe. So even if the mine employees thousands of locally sourced, unskilled or

semi-skilled laborers throughout the duration of extractive operations, when the mine closes they

will all risk being unemployed again and there will be no possibility for employment of their

children. Finally, because of the range and number of employment opportunities offered by a

mining company in an LDC suffering from high rates of poverty and unemployment, there is the

probability that the area will attract migrant workers from neighboring communities and regions

looking for work. An influx of migrant workers can have dire effects on public health and other

social and environmental issues, a problem quickly identified by the respondents in this study. In

response and to mitigate these negative effects some companies said they have developed

housing for migrant workers and public health and education programs to deal with the spread of

HIV/Aids and other diseases.

6.4. The types of CSR policies that are most effective in promoting human rights

and development

Genuine stakeholder engagement seems to be the most effective way to create policies and

projects that address the human rights and development needs of the communities and

individuals who are recipients of MNC funded programs. This is because members of the

66

communities can convey what they need, want and expect from an MNC in terms of CSR better

than an external expert can. The engagement of the various stakeholders via stakeholder

consultation, village meetings, public outreach through political, social or media outlets and any

other form of engagement is indispensable to effective CSR agendas, especially in terms of

MNC-funded development programs and projects.

There are many highly varied stakeholder groups in the context of an extractive project by a

multinational mining company in an LDC. Normally, they would include the management and

employees of the company, the shareholders of the company or the capital lending institution, the

members of communities affected by the mining project, the host government, the population of

the host country due to benefit from foreign investment and tax payments and finally society at

large (see figure 4). However, according to the definition of stakeholder cited on page ten,

essentially any individual or group who identifies themselves (or itself) as a stakeholder is, since

stake-holding is self-legitimizing (business.dictionary.com). Therefore, stakeholder identification

is not an exact science and the list of stakeholders could vary significantly from case to case.

67

Figure 4: Multiple Stakeholder Identification

Protected

market

Multination

al Mining

Company

Med

ia, c

ivil s

ocie

ty

an

dco

nsu

mers

Mem

bers

ofh

ost

co

mm

un

ity

& n

ati

onal p

op

ula

tio

n a

tla

rge

Government bodies at national,

regional and local levels

Shareholders / Capital

Lending Institution

Company Employees,

Management and Dire

ctors

Source: Own research

The United Nations has developed a ‘Sphere of Influence’ module as a resource for companies to

better understand and evaluate their CSR in relation to human rights. This module, drawing on

the first two principles of the UN Global Compact concerning human rights, implies that there is

a direct or positive relationship between the amount of influence or power a company has in a

given human rights issues and the responsibility of the company to take action to ameliorate the

situation (unssc.org). We can take this to mean that the more sway a company holds in terms of

the promotion, recognition, defense and fulfillment of human rights, the more they are

responsible to use their influence to do so.

In the context of this study, companies are most likely to consult with local community members

and representatives on the subjects of local infrastructure development, such as the planning and

construction of schools, fresh water wells and medical centers. From the corporate perspective,

68

the greatest hurdle is giving communities what they want, usually in order to placate them it

seems and to assure cooperation from communities, but knowing where to “draw the line”. One

corporate respondent acknowledged being overwhelmed during stakeholder consultation sessions

with local communities because they need, literally, everything. MNCs have to be selective when

choosing the programs they sponsor, selecting those that they will realistically be able to sustain

during the course of their operations in the host country as well as considering which projects

will benefit the most people. This is a reaffirmation of the corporate standpoint that MNCs do

not want to replace the government and do not want to be viewed by local communities as a

government substitute upon whom they can transfer their expectations for what the government

should provide. Of course, considering the assignment approach, if the government is not

fulfilling their duties to local communities in terms of human rights and development, and

neither is the international community, then the communities have the right to expect the

corporation to take over those responsibilities as the tertiary duty-bearer.

6.5. Sustainability of CSR motivated programs for human rights and development

This is an extremely problematic issue in even the ‘best cases’ of CSR-motivated development;

when CSR is integrated into corporate policies and culture and MNCs engage stakeholders to

determine how and where to invest in development and what types of programs to fund. While

such policies can result in increased socio-economic development and enhanced human rights,

the programs responsible for this are quite often not sustainable beyond the timeframe of the

corporation’s involvement. One major reason for this is a lack of funding once the MNC has

ceased operations and is no longer physically present in the region. Some of the major drivers for

CSR, such as favorable marketing and positive relationships with stakeholders, all but disappear

once the company has completed its profit-making activities, and has moved on to another

project in a different location. The reasoning behind funding projects such as community level

development, healthcare and education programs is to benefit the company in terms of public

opinion and ease of access to sites of extraction, in addition to the corporation’s moral

responsibility to the local population. Therefore, when their own project is completed the

company is no longer under obligation to its stakeholders, aside from whatever moral obligation

present in individual cases, and can no longer financially justify funding costly programs for

human rights and development. In theory, the government should step in at this point and take

over the programs for which the MNC provided the initial funding and management.

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Unfortunately, this rarely occurs due to factors such as impoverished or corrupt governments,

mismanagement of projects by NGO’s who are not equipped to run them, lack of faith in the

project by the community, and many others.

With that said, some corporations revealed that they are taking the extra step in trying to assure

that the development facilitated by funding during their operations in the region does not

crumble once they have left. This extra step can include capacity building of local NGO’s so that

they are capable and equipped to continue healthcare, education and development programs

without prolonged support from the corporation. Another approach they are taking is to fund

technical training programs for community members so that they may be qualified for

employment outside of the extractive sector. To help MNC’s in the Extractive Sector take the

needed ‘extra step’ to promote sustainability international NGO’s such as PACT inc. offer

assistance in starting and managing such programs. Unfortunately, this extra step is not taken by

all MNCs, some of whom uphold the philosophy that their responsibility as a corporation is

limited only to the time during which they are directly involved in the region, and even then only

second to maximum profit generation. In such cases it is likely that moral responsibility was

never a driver for CSR and that the corporation was more interested in preserving its brand name

via newsworthy, if not sustainable, philanthropic endeavors.

A general finding is that the programs that aid in empowering local communities seem to have

the most endurance in terms of maintaining project goals and achieving real development in the

long term. Empowerment can be achieved through education, training in marketable skills and

trades, increasing women’s rights and access to resources, healthcare, increasing access to small

loans for farmers and entrepreneurs, and communication between community members and

leaders and corporate and state representatives. MNCs whose programs contribute to

empowerment at the local level are more likely to see that the development they help to create

via their CSR driven social programs is more sustainable than if they invest capital in

development without empowering the people.

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7. Findings and Discussion

7.1. Principal Findings

During the course of my research I found that one relatively common line of thinking,

particularly from the corporate perspective, is that the primary social responsibilities of the

corporation are following laws such as those governing payment of taxes and royalties,

abstaining from purposeful human rights and environmental abuses and, of course, to make a

profit for its shareholders. This is especially applicable in the case of the extractive industry

where companies pay taxes to the government of the country host to their extractive operations

since the government is technically the owner, or at least the official representative of the owner,

of the commodities being extracted and exported. The general assumption or expectation is that

the government will spend the tax revenue to benefit its citizenry with state-sponsored social and

economic projects such as infrastructure, education, and healthcare and employment assistance.

Unfortunately, as previously discussed, this is rarely the case and the host countries such as the

DRC often fall into the resource curse. Alternatively, even if the host government does not

squander the money it is often used to fund defense operations, pay back international loans or

build infrastructure in urban centers, never reaching the communities who are directly impacted

by the lucrative mining activities. Nonetheless, some companies feel that because they pay the

legally required taxes than they are under no further obligation, economically speaking, to the

host country and communities of their (extractive) operations and that any assistance above and

beyond the legally required is philanthropic at best and a play for positive media coverage at

worst. Legally, this may well be correct. However, when operating in a country where there is

known corruption in the government or when laws governing taxes, labor and human rights are

subpar with international standards, then, based on the theory of the assignment approach, it is up

to the company to go beyond what is legally required of them if they operate in such a country.

Paying taxes falls under the headline of ‘required deliveries’; it is the bare minimum. From a

development studies perspective, I would hold that obeying laws does not constitute a valid

attempt to contribute to development, especially in the context of countries rife with conflict and

corruption. A company in such a case might claim ignorance or lack of responsibility for the

situation in the host country. This excuse does not hold water in today’s world of advanced

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information technology that has made economic and political news available in many different

mediums all over the world. Since a company cannot claim to be unaware of the economic and

political climate, not to mention the human rights record of the country, the assignment approach

should be universally applied.

Again, on the subject of paying taxes and FDI for industrial activities as sufficient to fulfill

corporate social responsibilities in a developing country, there is definitely a problem of

sustainability and of the possibility of real ‘trickle down’ economic growth and development

effects. Most of the capital poured into countries in the form of infrastructure development is

undoubtedly valuable to the country, but it is built for the purposes of the company and its

operations rather than for the purposes of the locals. Companies tout this as a case of ‘everybody

wins’ since infrastructure built by foreign companies to enable their short and medium term

extractive operations can also be used by the host country population, both during and after the

company’s presence. Those more skeptical of the ‘do-gooder’ role played by corporations might

see the case more in the line of a company getting to write off necessary industrial development

expenditures as community development. From this perspective, companies are behaving self-

servingly and are not fulfilling their role as actors in a moral economy in which the good of

society comes before the profitable activities of the company.

Even if we accept these activities as pro-development, it is still not enough to satisfy the

development needs of host communities. There has to be work from the ground up, not just

trickle down. We know from our experience with the ‘West’ trying to develop the ‘Rest’ that this

does not work, almost ever, and that it is unrealistic and fruitless to expect developing nations to

fit our mold of economic growth (Easterly, 2006). A grass roots agenda is necessary to bridge the

gap between the investment made at the national level, meant to ‘trickle down’, and the local

communities who need it the most. When a country is host to an MNC making billions of dollars

off of their natural resources sold on the global market, the people should not just be marginally

better off; their lives need to be significantly improved. In addition, the improvement to

livelihoods should not wait take twenty years or more to kick in, because people are tired of

waiting for the trickle down and deserve the impacts of investment and economic development

immediately. Waiting for governments to reform and address national and regional problems and

waiting for the international community to take proper notice and advocate reforms is a luxury

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that most impoverished people cannot afford. This is where the CMI developed assignment

approach comes in to play: if the peoples’ basic human rights and livelihoods are not being

protected and developed by the local or national governments, and the international community

has failed in its duties to them, the responsibility falls upon the company operating in their midst.

Furthermore, as part of a moral economy MNCs in the NRRES should be morally obligated to

actively contribute to development and human rights in the impoverished regions where they

conduct their highly profitable operations.

7.2. Right place, Right time

Many MNCs have a unique opportunity to aid in genuine community level development because

of the location of their operations and the unavoidable fact that the vast majority of them have

significant financial reserves. In the case of mining companies operating in remote or

impoverished areas of sub-Saharan Africa in general or DRC specifically, the opportunities for

CSR led development are endless, if the company is willing of course. The problem is that not all

companies are willing and, despite or regardless of this, they maintain their license to operate.

There remain two major challenges in that, first, there is still no dependable way to effectively

measure a company’s CSR performance and, secondly, there is an alarming absence of a

comprehensive, enforceable and internationally accepted set of regulations governing CSR.

Measuring CSR performance is a challenge because, as previously discussed, successful MNCs

often hire consulting companies specializing in CSR and social reporting to develop and

implement a CSR policy for the company. Their services could include conducting ESIA,

developing programs for community development or other philanthropic projects, drafting press

releases or reports detailing the CSR and sustainability goals and achievements of the company

and, finally, helping the company comply with reporting requirements set for by the GRI or

another initiative. Any non-cynical or non-critical reader confronted with the well-crafted reports

and websites of companies detailing their commitment to CSR and sustainable development

would likely be sold on the company’s claims. However, more seasoned and perhaps more

cynical or critical analysts know that this is often, unfortunately, not indicative of the company’s

true motives and activities and can be equated to clever marketing; capitalizing on the isolated

projects that qualify as CSR or sustainable development and disregarding the unsustainable or

irresponsible activities of the company in general. Therefore, it is insufficient to rely solely on

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the information that companies make publicly available in their annual reports or websites

simply because there is no way to verify its validity one hundred percent.

Internal and external audits are one way in which the CSR performance of companies can be

verified. However, despite assurances to the ethical conduct of internal audits, only audits

conducted by a party outside the company can be considered independent and to some extent

more reliable. As in the investment sector, auditing has branched out into extra-financial analysis

with auditing organizations now exploring CSR and ESG issues in addition to financial

performance and indicators. At present, CSR audits are still largely voluntary and must be

requested and paid for by companies or other organizations or institutions. Until reporting and

follow-up on companies’ environmental and social performance is mandated then audits are

unlikely to close the existing gap in CSR assessment and accountability.

As to the second challenge, there is still absence of a comprehensive, enforceable and

internationally accepted set of regulations governing CSR. As discussed in preceding sections,

there is no shortage of aspirational directives, voluntary initiatives and non-binding frameworks

to guide companies in their CSR policies and related projects. The sheer volume of such

initiatives is a positive development because it shows that CSR and sustainable development are

becoming mainstreamed and are no longer being pushed to the sidelines of international debate.

The presence of these initiatives also raises awareness of CSR and sustainability issues amongst

corporations as well as in the media and global society at large. The more these issues are

brought to the attention of the media, the public, civil society, governments, shareholders and

CEOs the more likely it is that advancements in the regulation of corporate social and

environmental behavior would be achieved.

However, there comes a time when raising awareness is no longer enough, when non-binding

initiatives and voluntary guidelines are not getting the job done, when companies are carrying

out social and environmental abuses despite the scrutiny of the UN and the SAI and the

requirements of the GRI and the EITI. I believe that we have reached that point and that there is

a monumental need for international recognized, binding legislation for CSR, including

provisions for the development of communities host to MNC operations. Not surprisingly, the

corporate representatives with whom I broached the subject of making existing voluntary

initiatives mandatory did not agree. One prevailing view from the corporate perspective is that

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voluntary initiatives are the most preferred type of CSR motivation and regulation. When

companies sponsor and implement socially and environmentally responsible activities such as

healthcare or education programs or other community development projects, they are to some

extent doing so to set themselves apart from other companies who do not. A company who is a

leader in CSR is recognized as being ‘ahead’ of others in their sector, and this recognition and

whatever business advantages that may follow are the main incentives for CSR and development

projects. If those activities became mandatory for companies across the board and CSR became

the norm rather than the exception, companies would no longer be driven by the desire to stand

out from their competitors. Some corporate representatives interviewed said this could hurt CSR

because companies would only to the bare minimum to meet the requirements of binding

legislation and there would be less incentive and innovation in CSR, from a business perspective,

than when it was voluntary. However, I believe this perspective to be highly flawed since there

would always be a business incentive to go above and beyond binding regulations, as MNCs are

doing now to set themselves apart from the bare minimum. It is a poor excuse to say that not

everyone should be socially responsible because it would take the spotlight off the companies

who currently do choose to practice CSR beyond mandatory standards. It is unlikely that the

business drive to outshine competitors would disappear just because all companies are forced to

comply with a minimum level of CSR and community development standards.

For the companies who decide to practice an elevated level of social responsibility, in that they

go beyond the legally required standards for CSR, in the poor countries in which they operate for

any of the reasons discussed in this study, their focus needs to be on projects which invest in the

future. It is insufficient to sponsor projects and industries that will, at best, thrive in the short

term and serve communities during the lifespan the company’s extractive operations there and

then die out when the company is finished doing business in the region. It is a start to invest in

local jobs and markets that can work in and supply the mining industry while mining activities

are taking place. However, those activities are innately unsustainable because they are based on

the extraction of non-renewable resources so it follows that the jobs created in and around the

mines, which are wholly dependent on mining activities, are similarly unsustainable. In this

scenario, the members of the host community that were temporarily employed or provided for by

the mining company are essentially no better off than before. This is a travesty because, in order

to justify a large-scale industrial project with significant negative social and environmental

75

effects, host communities should be extraordinarily better off because of the project than before,

not just marginally or temporarily so. MNCs such as mining companies in the DRC need to use

their CSR funds to provide more non-mining training programs such as medical training, teacher

training, sustainable farming techniques, planning and others. While these types of programs do

exist to some extent, they are relatively isolated and are therefore not yet contributing to

sustainable community development at the requisite level. MNCs also need to direct more

resources to capacity building in the regions in which they operate, working with local

governments and NGOs to build sustainable programs that can outlast the duration of their

extractive operations there.

My study also found an overall lack of cooperation on CSR, development programs between

MNCs with neighboring operations in the DRC. This underlines the theory that one of the main

reasons, if not the main reason, for engaging in CSR and community development is to gain

positive attention from the media, public and shareholders for activities, rather than ethical

reasons. Cooperation with others would seemingly take the spotlight away from the “good

deeds” of any one specific company (and the corporate dollars spent in doing those good deeds).

MNCs working in neighboring communities need to work together to be more effective, rather

than avoiding collaboration on projects due to concerns over losing any competitive advantage

they would get from investing in development and human rights individually.

7.3. The Financial Crisis and CSR: a Roadblock or a Jumpstart?

When assessing the current global economic downturn it seems that an economic slump can

affect CSR in two ways; firstly, dwindling profits and financial insecurity will make some

companies wary of investment in any projects outside their core operations, particularly those

projects that are considered non-essential to the functioning of the company. CSR generally falls

into this category for the majority of MNCs, particularly in terms of development programs,

which fall into the category of desirable rather than essential or expected from the ‘deliveries’

perspective (BLIHR, 2003, 2004 ). However, a second and more unexpected result of the

financial crisis is that the financial, social and environmental indiscretions are increasingly

coming under the spotlight and therefore attracting blame for the crisis. By showing that

corporate irresponsibility contributed at least somewhat and perhaps significantly to the

economic crisis, the result is an almost deafening and widespread demand for increased CSR,

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transparency and accountability in sectors that previously passed under the radar of the media

and public.

The perspective that the financial crisis will heighten rather than diminish demand for socially

responsible behavior of corporations, organizations and financial institutions is particularly

prominent in the SRI sector. Of course, this could just be wishful thinking as a move towards

greater social responsibility would further the SRI goal of mainstreaming extra-financial analysis

of ESG issues along with financial performance indicators in the investing world. However, this

is unlikely the case since other organizations and political figures have spoken up on the issue of

inadequate levels of social and environmental responsibility and accountability, calling for an

increase in regulations and mandatory standards for CSR as well as in the banking and finance

sectors. One group calling for an increase in obligatory social responsibility and accountability,

as previously mentioned, is the GRI Board in the Amsterdam Declaration on Transparency and

Reporting (globalreporting.org). Hopefully the movement to mandate social responsibility,

accountability and sustainability reporting will continue to be enforced by reflections on the

financial crisis rather than overshadowed by it.

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8. Summary and Final Thoughts

8.1. Summary

This study was undertaken with the dual objectives of understanding how CSR of MNCs in the

NRRES is regulated at the international level and discerning the effects of CSR policies on

human rights and development in the communities host to MNCs’ extractive operations.

I chose a theoretical framework of moral economy and the assignment approach to illustrate the

archetype for CSR and the responsibilities of a corporation to contribute to development and

human rights. In a moral economy, corporations are governed by ethics rather than simply profit-

driven. According to the assignment approach, corporations have positive and negative duties in

the terms of human rights and development. Negative duties are unconditional duties and require

corporations to refrain from activities that would undermine or infringe upon human rights

(Kolstad, 2007). Positive duties are those that, though not unconditional, must be upheld in order

to secure universal human rights. In respect to positive duties, corporations are considered the

tertiary duty-bearer, which means that if the primary and secondary duty-bearers, the host

country government and the international community respectively, default on their positive

duties to deliver or affirm human rights then it is up to the corporation to fulfill them. This is,

however, an idealistic view of the level of moral and political responsibility taken by the

corporation. In reality, most MNCs see profit generation as their principal social responsibility

and there is little binding legislation to force them to practice CSR or actively promote human

rights and development.

Increased attention to business ethics and CSR in recent years has resulted in the formation of a

tremendous number of guidelines and initiatives meant to serve as a framework for CSR in the

NRRES and other industries. MNCs are increasingly signing on to these initiatives for many

reasons including a boost for their corporate image and ‘proof’ to shareholders and the media

that they engaged in CSR. Unfortunately, there are few if any repercussions for companies that

do not comply with the CSR guidelines set forth. While the voluntary initiatives are effective at

raising awareness of CSR issues, they are for the most part non-binding and unenforceable and

therefore are not a sufficient method of regulating and governing the conduct of corporations in

relation to their social responsibility.

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Companies who do choose to adopt CSR policies which include provisions for human rights and

development, despite the fact that this is not legally required, may do so for several different

reasons including the desire for positive marketing of the corporate brand, pressure from

stakeholders and the genuine desire to give back to the communities in which they operate. Some

ways that MNCs in the NRRES address development and human rights as part of their broader

CSR strategies is by funding infrastructure projects as well as education, healthcare and other

programs in host communities. MNCs can also contribute to local development by providing

employment opportunities for members of the community. Unfortunately, not all of the projects

are sustainable and often die out once MNCs cease operations and leave the site, taking their

project funding with them. The most effective and sustainable projects sponsored by companies

are the ones that empower local communities through education and capacity building so that the

benefits of the short term development projects will continue to be felt even when the company

has gone.

MNCs in the NRRES have an unparalleled opportunity to contribute positively to development

and human rights in the areas in which they operate as a result of their geographic proximity to

communities in need in LDCs and their capacity to fund beneficial projects. However, as long as

these types of activities are considered voluntary or aspirational, there will always be some

MNCs who do not contribute to development and human rights and who continue to be driven

solely by profit generation. If there was binding and enforceable legislation for CSR agreed upon

at the international level, all companies would be required to fulfill their duties to society through

promoting and funding development and human rights in the countries and communities host to

their operations, extractive or otherwise. The current economic crisis could possibly be the

catalyst to elevate CSR at the international level since NGOs, the public, governments and the

media are demanding an unprecedented level of transparency and accountability from banks,

corporations and other institutions.

8.2. Final Thoughts

In 1923, the philosopher and poet Kahlil Gibran wrote, “There are those who give little of the

much which they have – and they give it for recognition and their hidden desire makes their gifts

unwholesome” (Gibran, 1923:19). This theory about giving, though perhaps not originally

intended to apply to contemporary CSR, is nonetheless uncannily relevant to the discussion at

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hand. If the sole motive for CSR is to gain recognition rather than for ethical considerations or

respect for human rights, then corporate giving in terms of CSR is undermined by the absence of

moral value. Corporations can no longer be treated as super-societal entities with no obligation to

humanity other than profit making, unregulated even by human ethics, at the expense of human

rights and dignity and a sustainable future for generations to come. As we move forward, CSR

and the obligations of MNCs to foster development and human rights need to be judged not as

voluntary philanthropy or a sort of means to a profit-making end, but as the principle function

and responsibility of corporations, second to nothing. This would be the role of the corporation

in a truly moral economy.

8.3. Future Research

My interest in the field of CSR and development has been heightened by having conducted this

research project and I hope to continue research and perhaps even pursue a career in this field.

My experience working in the field of socially responsible investment, though brief, has also

opened by eyes to a way of regulating corporate behavior that I knew nothing of only six months

ago, but that I now see as full of potential for mainstreaming CSR. Shareholders are conceivably

the most powerful stakeholder group because, since they own shares of the company, they have a

voice that can be used to represent the interests of less influential stakeholders. I believe that SRI

and shareholder activism merits further research since their potential impact on CSR could be

immense.

Another area that I would be interested to study is the role of CSR consultancies and CSR

auditors in shaping corporate social policies and regulating companies who fail to meet industry

or national standards for CSR. Since many MNCs do not have an in-house CSR department of

social and environmental scientists, they often hire external consultancies who offer services

including the development of CSR policies and projects and assistance with complying with

social reporting guidelines. It would be interesting to see how great the role of these

consultancies is in determining corporate policies and where they fit in the stakeholder interest

versus influence matrix. As for CSR auditing companies, their capacity to hold companies

accountable for their activities could be greater than many NGOs and government bodies since

they often develop specialized frameworks for assessing CSR performance and employ experts

in business and finance as well as the social and environmental sciences.

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The role of consumers in holding MNCs accountable for their social and environmental

performance is another topic that I would like to explore in the future. At this point in time,

consumers are considered stakeholders with both a low interest and influence in CSR but should

not always be the case. Consumers could potentially have a much stronger role in holding

companies accountable for their impacts on society and demand that the producers of the goods

they purchase give back to the communities in which they operate.

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Appendix

Questionnaire for Corporate Representative

1. Can you please describe your position in the company and your background?

2. What do you feel are the incentives for CSR from a business perspective? Similarly, what are the incentives for investing in Development?

3. Is your company a signatory to any initiatives for corporate responsibility and/or transparency?

4. Can you describe how your CSR policies are created? How influential are voluntary initiatives in determining your policies? What/who has the most influence in determining the adoption/implementation of such policies/activities?

5. Why do you choose to incorporate development into your CSR agenda?

6. Can you explain your social development fund? This is beyond what is paid in taxes and profits to the state? Why do this instead of increasing payments to the state? How much of an issue is corruption?

7. When designing and implementing development projects do you outsource everything to consultants and/or NGO’s or do you employ development specialists, anthropologists, etc?

8. What is the role of human rights in your CSR agenda and related social development projects? And in terms of infrastructure?

9. Who is doing community engagement and how? During what time frame does this take place?

10. Have you visited any of the projects sponsored by your company’s development fund? What were your findings?

11. Are these projects geared toward long term, sustainable development?

12. Are your projects and activities externally regulated? Do you have CSR audits performed?

13. What are the CSR challenges of operating in a post-conflict, impoverished country?

14. How do your CSR policies differ between countries of operation?