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TGCSR Briefing Paper Briefing Paper No. 3 APRIL 2002 Towards Global Corporate Social Responsibility Malcolm Keay As the 'battle at Seattle' reminded us, attitudes towards trade liberalization and globalization are polarized. Are they forces for good or evil? Do they benefit economies by generating growth and employment, promoting development and transferring skills? Or do they destroy the environment and undermine local communities without supplying a sustainable alternative? At international governmental level such questions are being grappled with in the new trade round emerging from the World Trade Organization (WTO) discussions in Doha. Can trade liberalization be made compatible with sustainable development? If not, the whole process of globalization may increasingly be called into question. The issue engages everyone with an interest in international development, including companies and civil society as a whole as well as governments. Increasingly, companies are recognizing that they have a wider responsibility to the communities within which they operate – Corporate Social Responsibility (CSR). Whether the impacts of globalization are positive or negative will depend in part on the way in which companies respond to this challenge. This paper discusses current developments in this area and considers where they are taking us. It draws on discussion at the RIIA conference on 'Corporate Social Responsibility - From Words to Action' held at Chatham House in October 2001. BRIEFING PAPER 2 Towards Global Corporate Social Responsibility this is often completely distinct from the company's main business Corporate Social Responsibility: activities. concepts, development and issues Much more difficult is what might be called 'filling the Corporate Social Responsibility is not a new concept. middle ground' – activities such as translating the high- Some companies have always acknowledged a wider level principles into regulations and standards, responsibility towards the community. However, broadly management systems and incentives, or monitoring and speaking, such activities have tended in the past to reporting arrangements within the business. Yet it is come under two general headings: only if this middle ground can be filled effectively that CSR will become a genuine part of corporate culture l Paternalism: companies have often felt a responsibility to and influence its day-to-day decision-making. take care of their employees, or perhaps it would be more accurate to say that company owners have often felt such a responsibility. There can be a variety of motives for engaging with Sometimes the impulse has been essentially feudal – that of the the CSR agenda and uncertainty about what it means. lord for his peasants – and sometimes religious and moral, but still The starting point is the core concept of shareholder with results which would now be considered patronizing and value, to which CSR can contribute in a variety of ways: hierarchical. l Public and consumer relations: a responsible image can be l Philanthropy: while paternalism was normally a function of helpful (and profitable) to a company. Other things being equal, employer/employee relationships, philanthropy (again often customers will prefer to take their business to a company with driven by moral or religious convictions) extended to the wider whose activities they feel comfortable. In many sectors, it is now community and led to the founding by successful business people this initial decision (whether or not to deal with a particular of schools, hospitals and other services. It tended to stem from an company) which is seen as key. For instance, consumers tend not individual's wish to return something to the community which had to shop for individual bargains at a range of different made him (or, less commonly, her) wealthy, rather than from any supermarkets, but to choose a particular store and do the bulk of wish to conduct business in a fundamentally different way. Many their shopping there. Any additional incentive to tempt them in of the greatest philanthropists in 18th-century Europe were slave has real value to a company – as does avoiding any scandal which traders. might keep consumers away. CSR is now seen as something more far-reaching l Reputation and brand management: at a more general level, than paternalism or philanthropy. It engages at a much many companies increasingly see their reputation as one of their wider level with business's operations and relations with key assets. Reputation can be damaged overnight by charges of communities. It embraces the 'triple bottom line', malpractice or irresponsible behaviour – for example, of sweatshop practices in the supply chain or environmentally damaging requiring attention to be paid not just to economic activities. Companies need systems which can monitor their performance, but also to environmental and social activities so that they are confident they can defend their impacts. It is essentially about business's contribution to operations if challenged. sustainable development and how best to maximize that contribution. l Staff recruitment and motivation: generally, employees too However, 'sustainable development' is itself a like to work with a company with whose activities they feel notoriously vague and slippery term. Simply to set it as comfortable. Anything which discourages highly qualified staff in a goal does not take a business very far. Putting CSR particular (who are likely to be well-informed and articulate in into operation, bringing it to the heart of corporate their views) can be damaging. It has been commonly reported, for culture without losing sight of core business objectives, instance, that Shell detected an unwillingness among graduates to while also avoiding the traps of paternalism and work for the company in the wake of the Brent Spar incident and philanthropy, is a complex task, requiring clear-sighted the problems encountered in Ogoni land in Nigeria, and that this motivated a significant effort by Shell to understand and respond analysis and detailed implementation. to public concerns on these issues. Many companies are not very far down this road; their commitment to CSR operates at two extremes: l Risk management: in the 1990s, many companies found themselves saddled with environmental liabilities arising from past l High-level principle: it is relatively easy for companies to make activities when awareness of environmental issues was much a high-level commitment to principles of sustainability and lower. There is at least a possibility of such liabilities arising in responsibility. Even where this commitment is genuine, however, future in the social sphere (see, for instance, the discussion below there is often a big gap between making the commitment and of transnational litigation). A prudent company will ensure that it implementing it in practice. has a sufficiently clear understanding of its operations to know how to avoid or manage such risks. l Ground-level projects: it is also relatively easy for companies to sponsor particular projects, often with outside organizations, These, and related, motivations for promoting CSR which will bring local benefits to the community and the can be fitted without difficulty into an approach based company's reputation. But, like the philanthropy discussed above, Towards Global Corporate Social Responsibility 3 on shareholder value. Greater controversy arises when it This is, or should be, a concern for companies, at is a question of moving on from there to responsibility least those which wish to be sustainable companies, as for sustainable development in general. Do businesses much as for the host countries. They too have an have wider responsibilities towards stakeholders and interest in operating in environments where local communities? populations are not ravaged by civil war or AIDS, where There are counter-arguments of both principle and an educated and healthy workforce is available, where practice. investments are not threatened by unstable institutions and corrupt regimes. Sustainable companies are l In principle a business's sole or primary responsibility (the legal ultimately reliant on the sustainable development of position varies between countries) is towards its owners, the their hosts. While it is not the companies' sole or shareholders, perhaps also with certain responsibilities towards primary responsibility to achieve this, it is important that employees. Activities undertaken for the benefit of other parties, they understand how their activities contribute to such as local communities, are according to this view a diversion sustainable development and that they can act on that from the core role, undermining the business's key function. understanding. Filling 'the middle ground' of CSR should help provide that understanding and l In practice, businesses are not set up to provide social and other services and are not qualified to do so. The task should be left to mechanisms for implementing it. governments. For businesses to try to supplant governments' role is inefficient and (with multinational companies in developing Current developments at countries) neo-colonialist. international level What has been called above 'filling the middle A huge range of initiatives is currently under way aimed ground' helps respond to both these arguments by at filling this 'middle ground'. Often, a sharp distinction clarifying responsibilities and roles. The middle ground is drawn between voluntary and regulatory routes, but consists of formal rules
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