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Corporate
impact
Peter Utting
UNRISD
The current
perception of companies' social responsibility does not meet development
goals. Restrictions should be placed on multinationals with obligations
to step up involvement of key actors in developing countries and
greater respect for existing public regulatory frameworks.
 ver
many decades a heated debate has existed regarding the role and
impact of transnational corporations (TNCs) and foreign direct
investment (FDI) in developing countries. Put simply, some emphasize
the actual or potential contribution of TNCs to economic and social
development via investment, employment, taxation, and the transfer
of technology, knowledge and skills. Others stress the fact that
TNCs have been highly implicated in promoting a style of 'development'
and North-South relations that have put many developing countries,
people and the environment at a serious disadvantage.
The
1980s saw a major shift in this balance of opinion, as international
development organizations and many developing-country governments
abandoned the rhetoric of a 'New International Economic Order'
and actively courted FDI. In doing so, they largely accepted the
policy proposals and conditionalities of international finance
institutions such as the World Bank and the IMF, which encouraged
developing countries to pursue export-led growth, liberalize their
trade and investment regimes, and privatize State enterprises
and public services.
These
trends and policies continue today but have been complemented
by another approach, often labelled 'corporate social responsibility'
(CSR) or 'corporate citizenship'. Over the past decade many high-profile
corporations and business associations have responded to civil
society and consumer pressures, market opportunities, and new
thinking on 'good governance' and management by adopting a range
of so-called voluntary initiatives associated with codes of conduct,
improvements in environmental management systems, improved health
and safety standards, company reporting on social and environmental
aspects, participation in certification and labelling schemes,
and an increase in philanthropy and corporate social investment
in, for example, community development projects. An increasing
number of companies are also participating in so-called 'multi-stakeholder
initiatives'1 and 'public-private partnerships' with non-governmental
organizations (NGOs) and governmental or multilateral organizations.
The United Nations has played an important role in promoting partnerships
with TNCs through arrangements such as the Global Compact,2 various
global health partnerships, and numerous initiatives brokered
or announced at the World Summit on Sustainable Development, held
in Johannesburg in 2002.
The
development debate associated with FDI has now extended to CSR.
The proponents of CSR generally hail voluntary initiatives as
a pragmatic and innovative way of enhancing the contribution of
TNCs to development. Many also regard voluntary approaches as
an effective alternative to government regulation, which is often
seen not only as unfriendly towards business but also difficult
to implement, particularly in developing countries. Much of the
criticism of CSR has centred on two main concerns: first, many
CSR initiatives amount to 'greenwash', or attempts to camouflage
what is essentially 'business-as-usual'; and second, that CSR
is a genuine attempt on the part of big business to improve social,
environmental and human rights conditions but more companies need
to come on board, more issues need to be addressed, and the implementation
of standards needs to be strengthened. What has really been the
impact of CSR and partnerships? Unfortunately much of the 'evidence'
for and against CSR is based on supposition, anecdotes and a limited
number of 'best' or 'bad' practice examples. There has been little
systematic research on the developmental implications of CSR,
related to social, environmental, economic and participatory aspects.
Preliminary
findings from research currently being conducted by the United
Nations Research Institute for Social Development (UNRISD) suggests
that an increasing number of large national and transnational
corporations are indeed engaging with the CSR 'movement', not
simply in a reactive sense - although many are responding to pressures
linked to civil society, consumer and shareholder activism, as
well as to regulatory threats. But engagement is becoming more
proactive, given a range of benefits for companies associated,
for example, with competitive advantage, risk management and supply
chain management. In this sense contemporary CSR amounts to more
than window-dressing or slick public relations. It is also apparent
that many CSR companies, business associations and business-interest
NGOs are involved in an active learning process and are evolving
gradually towards more comprehensive standards and practices.
It
is evident, however, that the scaling-up of CSR, in terms of the
number of companies effectively engaged, confronts serious limits,
as does the quality and scope of many CSR initiatives. Furthermore,
institutional arrangements associated with the implementation
of codes of conduct, reporting and certification are often weak
and extremely complex and costly.
This
mixed report card is also apparent in relation to certain public-private
partnerships involving the United Nations and TNCs. The Global
Compact, for example, has proved useful in raising the profile
of labour, human rights, environmental and anti-corruption issues
in a global policy context where, for many years, attention focused
narrowly on issues of economic liberalization, stabilization and
structural adjustment. It has reinvigorated certain aspects of
international 'soft law', such as the ILO Core Conventions
and the Universal Declaration of Human Rights, as well as the
Precautionary Principle agreed at the 1992 'Earth Summit' in Rio
de Janeiro, and it has served to reconnect TNCs with their responsibilities
and obligations under international law. It has also stimulated
discussion and dialogue on specific problems such as the responsibilities
of business in conflict zones and in relation to HIV/AIDS.
As currently constituted, however, many UN-business partnership
initiatives are characterized by weak screening mechanisms to
select appropriate partners, weak compliance mechanisms to ensure
that companies significantly improve their social and environmental
performance, and weak procedures to ensure that partnership projects
address national priorities and problems in developing countries.
There are also concerns that partnerships provide the corporate
sector with undue influence in the governance structures of multilateral
institutions and the public policy process, and that initiatives
like the Global Compact are being used as a justification for
avoiding the consideration of regulatory approaches that may have
more teeth, such as the recently proposed 'Norms on the Responsibilities
of TNCs and Other Business Enterprises with Regard to Human Rights',
put forward in 2003 by the United Nations Sub-Commission on the
Promotion and Protection of Human Rights.
Development
Impacts of CSR
Apart from assessing the scale, scope and implementation of specific
CSR policies and practices, it is important to consider their
wider developmental implications. There is a fairly generalized
perception, shared by many individuals and organizations promoting
CSR, that both CSR and partnerships, in any shape or form, must
be good for both development and 'good governance'. This assumption
needs to be looked at carefully given the following characteristics
and impacts of CSR:
1)
The CSR agenda tends to be somewhat 'Northern-driven' with limited
participation of key actors and stakeholders from developing countries
in relevant decision-making processes. Important issues often
get sidelined such as the tax avoidance and evasion, the ongoing
deterioration of labour standards through liberalization and casualization,
the situation of informal sector and women workers, and the ways
in which CSR and partnerships can bypass or undermine established
institutions associated with national planning and labour market
regulation.
2)
Small and medium-sized firms in developing countries that form
part of TNC supply chains are often expected to pay the costs
of CSR. TNCs, large Northern retailers and Northern consumers
may not only do little, if anything, to share these costs, while
buyers continue to impose onerous conditions on suppliers in terms
of price and delivery schedules. CSR may reinforce trends involving
the concentration of corporate power by squeezing small firms
from supply chains and concentrating production in larger firms
with greater capacity to implement CSR initiatives. CSR may also
have protectionist implications by restricting access of Southern
firms to Northern markets, and CSR and partnerships may enhance
the competitive advantage of TNCs at the expense of firms in developing
countries.
3)
The CSR agenda often ignores the bigger picture, in particular
the structural causes of maldevelopment, such as certain macro-economic
policies, inequitable power structures, and injustices in North-South
relations, as well as patterns of investment and economic growth
that have negative social and environmental impacts. The bigger
picture also relates to the broader institutional context associated
with governmental and social regulation that needs to be in place
if CSR is to be effective. Many developing-country governments,
constrained by international pressures associated with debt servicing
and 'down-sizing', are unable to develop the type of regulatory
and incentive structures that facilitate CSR, while trade unions,
watch-dog NGOs and investigative media may be weak.
If
CSR is to make a more significant contribution to development,
its proponents face several challenges. First, greater attention
needs to be paid to 'corporate accountability' and ways in which
voluntary approaches can be better integrated with both government
and trade union regulation, rather than the present situation
where voluntary initiatives are often held up as a superior alternative
to the latter. Second, the CSR agenda needs to become more 'South-centred'.
For this to happen, the relevant actors will have to start by
addressing some difficult questions: What are the actual or potential
developmental problems and contradictions associated with the
CSR agenda, as currently constituted? Are the investment and competitive
strategies of TNCs, as well as their lobbying and fiscal practices,
compatible with basic development objectives? Does the CSR agenda
really respond to the development needs, concerns and priorities
of workers, communities and firms in developing countries? Are
these and other Southern actors effectively shaping the CSR agenda?
And is CSR working for or against democratic policy-making, regulatory
and planning processes in developing countries? Unless these questions
of regulation and broader participation are addressed, then CSR,
as currently constituted, may do more for the conscience of corporate
managers, Northern consumers and the international development
establishment than for workers and communities in developing countries.
1)
This term refers to all actors concerned with corporate performance.
2) In January 1999, at the Davos Economic Forum, Kofi Annan launched
the idea of a partnership between the United Nations, NGOs and
the business world.
According to the UN Secretary-General, the Global Compact initiative
aims to "unite the strength of the economy with the authority
of universal ideals" and take into account the social and
environmental impacts of globalization.
The Global Compact proposes signing up to nine main principles
in the fields of human rights, and labour and environmental issues.
www.unglobalcompact.org
| The
United Nations Research Institute for Social Development is
an autonomous UN agency engaging in multidisciplinary research
on the social dimensions of contemporary problems affecting
development. Through its research, UNRISD stimulates dialogue
and contributes to policy debates on key issues of social
development within and outside the United Nations system.
www.unrisd.org
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74 - Social Sciences