[governance] Corporate Responsibility

Fri Apr 7 15:33:26 EDT 2006

P erhaps of interest in this context as well...

MG   

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PUBLIC POLICY INTELLIGENCE REPORT
04.06.2006

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Ending the CSR Debate

By Bart Mongoven

The debate over the moral responsibilities of corporations to society
has taken on a more solid form with the release of the first draft of
the standard known as ISO-26000. When finished, the standard -- drafted
by the International Organization for Standardization (ISO) -- can be
used by corporations to determine (and prove) that they are acting in a
socially responsible manner. The standard will not be published until
2008, and the current draft reportedly is in a highly unfinished form,
with many significant questions still to be answered. Nonetheless, the
release of the draft marks a turning point in the long-running debate. 

The need for a standard on corporate
<http://www.stratfor.com/products/premium/read_article.php?id=260444>
social responsibility (CSR) is clear. Nongovernmental organizations,
labor unions and international organizations like the United Nations not
only are calling for multinational corporations based in the West to
bring their global operations into line with the norms of advanced
Western countries, but -- going a step further -- are coming to view
these companies as instruments of cultural change. They see corporations
as mechanisms through which to advance certain values in countries
lacking the West's approach to civil rights and liberties. 

With the completion even of this early ISO draft, the field of debate
begins to change. Growing criticisms and the potential for litigation
about corporate complicity in human
<http://www.stratfor.com/products/premium/read_article.php?id=258335>
rights abuses -- as well as ongoing debates over where corporations'
responsibilities begin and end -- likely will cause corporations to
flock to ISO-26000. After years of trying to find ways to show the
public that they understand the concept of social responsibility -- but
lacking both a guide and a way to measure progress -- multinationals
will be able to use the standard as a set of ground rules to follow, and
the public will have a benchmark against which to measure the companies'
performance.

Over time, once the standard comes into effect, the debate over
corporate social responsibility can be expected to grow more moderate;
with a guiding standard in place, there will be far less drama in the
debates, and activists who use questions about CSR as a strategy to
effect social change will have an uphill struggle. Instead, corporations
will face a new set of issues, relating to the root of their rights in
society, that will usher in a more thoroughgoing debate about the power
of corporations and how they are viewed by the public.

Explaining the Standard

ISO-26000 is designed as a guide to help businesses understand where
their responsibilities to various stakeholders begin and end. The
standard, long in demand by Western businesses, will provide a company
with a system to ensure it is properly monitoring its social
responsibility performance and that it has in place the relevant
mechanisms to achieve its goals in this realm. Following the standard
will not necessarily mean that a company is acting in a socially
responsible manner, but it will make it easier to achieve these goals
and for management and observers to know if the company is, or is not,
meeting its social responsibility objectives. 

Like the larger CSR debate to which it is a response, ISO-26000 will
focus primarily on corporate operations. It will address the human
rights, labor, environmental and community relations-related effects of
corporate operations. It also will examine methods of ensuring
social-responsibility goals associated with products, which is a
relatively newer and less-established field of study (and one where
significant work will have to be done in the next two years). The
standards ISO-26000 will introduce will help to clarify lines of
responsibility on all of these topics. 

Few corporations would deny that they have a responsibility to live up
to higher standards than those of certain countries in which they do
business. Every multinational oil major, for example, maintains strong
prohibitions against bribery; large manufacturers refuse to use child
labor or to do business with suppliers that do. 

At the same time, even those companies recognized as the most socially
responsible chafe at an open-ended approach that places the burden on
companies to change the culture where they operate. Google, which is
dedicated to the motto "Don't Be Evil," nonetheless finds it sometimes
cannot avoid being placed, for instance, between human rights
campaigners and the Chinese government. Advocates of an international
standard hope such a measure will present corporations with a globally
accepted and recognized alpha and omega for corporate social
responsibility.

Beyond these outcomes, corporations expect the push for standards to
yield even more concrete benefits. Those supporting the ISO process
perceive the standards as providing companies with the basis of a legal
defense in the face of litigious critics. To cite perhaps the most
obvious example, the growing use of the Alien Tort Claims Act (ATCA) in
the United States -- which allows foreign nationals to sue corporations
in U.S. courts for human rights violations committed in other countries
-- unnerves corporate counsels, who cannot predict where ATCA will be
used or how it will be interpreted in the future. By following the
systems laid out in ISO-26000, a company will be better able to
determine that it is not doing things that put it at risk of ATCA
litigation, and also gives it the ability to show in court, if need be,
the steps the company took to avoid committing human rights violations.

After CSR

When ISO-26000 is completed in 2008, the business world likely will
flock to it. The document will be flexible. It will leave a place, for
instance, for the emerging human rights standards being developed by the
International Finance Committee (IFC) and for the conclusions that the
U.N. special representative on business and human rights, John Ruggie,
draws in his assessment of the human
<http://www.stratfor.com/products/premium/read_article.php?id=263255>
rights obligations of businesses -- whether that means the U.N. Norms
for Business or (more likely) some new human rights code of conduct. ISO
will give companies a guide for monitoring their adherence to these
codes of conduct and other emerging codes and treaties. 

Ultimately, the publication of the draft standard tells the world that
the day is coming when CSR will be well understood and normalized. With
that, the vagaries will be gone and the debates over what can reasonably
be expected of a company will fade. This is not to say that the
responsibilities of corporations to society no longer will be subject to
debate, but for the most part, the issue will be discussed within the
context of a series of established authorities -- ISO, the U.S.
Securities and Exchange Commission, and perhaps the United Nations. 

The publication of the ISO-26000 draft particularly tells the players at
the extreme edges of the debate -- the most strident NGOs and the most
recalcitrant corporations -- that, like it or not, CSR will be debated
in a fairly staid, narrow band with terms defined by ISO and arbitrated
by lawyers who are experts at splitting hairs.

Corporate Power and Rights

The long-term goals of the activists who have been most diligent in
pushing corporations to act in a more socially responsibility manner
echo those of the anti-globalization movement. These goals can be
summarized as trying to reduce the effect of major corporations on the
societies in which they operate, and to carve out space for communities
to define themselves and their culture without the influence of
financial interests (or companies, primarily). 

With the current CSR debate drawing to a close, it is important to
identify what is left: questions about corporate power and the cultural
impact of corporations on society. From this, it seems likely that the
outstanding business not addressed by CSR campaigning thus far concerns
the social implications of corporations' products (and thus, the
corporations' responsibilities) and the legal structure that gives
corporations the power to change culture, domestically and globally. 

At the core of this new debate will be -- not the question of the role
or responsibilities of multinational corporations -- but rather a
re-examination of the limitations society places on large corporations. 

Central to this discussion will be the question of corporations'
influence on political systems. These questions have persisted to some
degree or another since the 1950s, but they have also been refined by
changes in the economy and culture. In the United States, the central
questions today revolve around the power of corporations to lobby
government and to advertise. 

At a fundamental level, the American public tends to view the right to
speak and to lobby government as having been guaranteed to corporations
by the First Amendment, but activists increasingly are inverting the
question and asking whether the First Amendment -- or other parts of the
Bill of Rights -- applies to corporations. The activists claim that only
a series of Supreme Court decisions during America's so-called Gilded
Age extended constitutional rights to corporations, and argue that the
Bill of Rights applies only to people, not organizations. Thus, it
follows that free speech (advertising) or addressing grievances with
government (lobbying) are not inalienable rights for corporations. Out
of this line of discussion rises a clamor for a "true democracy," "real
democracy" or "participatory democracy" in which the public clearly and
intentionally defines what rights corporations have and do not have. 

Though the argument is based on tenuous historical reasoning -- and the
mechanisms by which the public would define the rights of corporations
are almost impossible to imagine -- the question of whether corporations
have inalienable rights (or whether the people have the right to rescind
or otherwise limit those rights) will resound soon after ISO's standard
comes into effect in 2008. 

The debate will take different forms in different countries. At the
core, however, will remain the question of what power society gives to
corporations, and what corporations owe to society in return. 

Send questions or comments on this article to analysis at stratfor.com.

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