CSR & Development: an introduction to issues & institutions. Main Concepts of CSR

Transcription

1 CSR & Development: an introduction to issues & institutions Context, concepts, key issues Emerging institutions in CSR Implications for firms Implications for development Dr. Anthony Miller United Nations Conference on Trade and Development Main Concepts of CSR CSR (Carrol, 1979) Firms have responsibilities to societies including economic, legal, ethical and discretionary (or philanthropic). - See also DeGeorge (1999) on the Myth of the Amoral Firm Social Contract (Donaldson, 1982; Donaldson and Dunfee, 1999) There is a tacit social contract between the firm and society; the contract bestows certain rights in exchange for certain responsibilities. Stakeholder Theory (Freeman, 1984) A stakeholder is any group or individual who can affect or is affected by the achievement of an organisation s purpose. Argues that it is in the company s strategic interest to respect the interests of all its stakeholders. 1

2 Main Concepts of CSR Milton Friedman the doctrine of social responsibility involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses. there is only one social responsibility for companies and that is to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom. Main Concepts of CSR David Henderson [CSR] s adoption would reduce competition and economic freedom, and undermine the market economy. [CSR] is liable to hold back the development of poor countries through the suppression of employment opportunities within them. 2

3 Main Concepts of CSR CSR = political economy The rights and responsibilities assigned to private industry. Context: Globalisation & the Imbedded Firm Liberalisation of markets reduction of the regulatory approach Emergence of global giants, consolidation of market share Development of the embedded firm and the global value chain Development of supplier networks in developing countries 3

4 Key Issues in CSR Labour rights: child labour forced labour right to organise safety and health Environmental conditions water & air emissions climate change Human rights cooperation with paramilitary forces complicity in extra-judicial killings Poverty Alleviation unemployment public revenues skills and technology Emerging Institutions in CSR NGO Activism SRI Litigation UN initiatives 4

5 NGO Activism The Seattle Effect Boycotts, brand damage, influence legislation, domino effect e.g. Shell in Nigeria, Exxon in Cameroon, Apparel Industry (Nike, Gap), GMO, Wood Products, etc. Facilitators: IT (esp Internet), media, low cost travel Domino Effect in the US Wood Products Industry: 7 out of top 10 shift policy on old growth within 18 months Date of Policy Shift Aug Nov Nov Jan Aug Aug Dec Company Home Depot Home Base Wickes Menards Lowes 84 Lumber Payless Cashways Industry Rank

6 Socially Responsible Investing (SRI) Roots of: South Africa Apartheid Divestment Significant size: US SRI = 2.3 trillion $ in 2005 or 10% of all professionally managed investments Shareholder activism: shareholder resolutions; voting process Influence corporate reporting and disclosure requirements New rules on CSR reporting in the UK, France, Australia Shareholder Activism at Exxon Mobile From 2000 to 2003, over 70% of shareholder resolutions filed at XOM were related to social & environmental issues. No. Resolutions Filed % 20% 15% 10% 5% 0% Avg. Vote in Support CG CSR & X-over Vote CG Vote CSR & X-over 6

7 Principles for Responsible Investment Signatories will 1 incorporate ESG issues into investment analysis and decision-making processes. 2 be active owners and incorporate ESG issues into our ownership policies and practices. 3 seek appropriate disclosure on ESG issues by the entities in which we invest. 4 promote acceptance and implementation of the Principles within the investment industry. 5 work together to enhance our effectiveness in implementing the Principles. 6 each report on our activities and progress towards implementing the Principles. 7

8 The Materiality of ESG Issues Survey of Pension Funds (PRI) Please indicate the extent to which you feel the following ESG issues are important in evaluating the likely performance of investments: 70% 30% Corporate Governance 69% 6% 25% Sustainability 56% 16% 28% Infrastructure Development 50% 25% 25% HIV/Aids 50% 22% 28% BEE and Gender Empowerment Issues 47% 28% 25% Employee Relations 44% 22% 34% Environmental Management 34% 31% 34% Human Rights 31% 28% 41% Health Issues 25% 31% 44% Climate Change 22% 44% 34% Very Important Somewhat Important Not Important Investor opinion survey (IFC) Asset owners. Do you expect to implement ESG policies in your emerging market investments within the next 3 years? Yes 81.5% No 18.5%

9 Litigation Foreign Direct Liability Alien Tort Claims Act (ATCA): human rights, environmental rights Unocal Burma $30,000,000 settlement Coca-Cola Columbia Rio Tinto Papau New Guinea Del Monte Guatemala The Gap Saipan Shell Nigeria Other tools: RICO, False Advertising E.g. Saipan sweatshop cases; Katsky v. Nike United Nations Initiatives UN Global Compact UN Principles for Responsible Investment UNEP Equator Principles ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) UNHCHR Business and Human Rights UNODC Anti-corruption UNCTAD Corporate Responsibility Reporting, World Investment Report 9

10 Emerging Governance Institutions: a mutually reinforcing set of institutions NGO Litigation National Govt & UN SRI TNC as an organ of society every individual and every organ of society [should] promote respect for these rights and freedoms and to secure their universal and effective recognition. - UN International Declaration of Human Rights It would be a strange tort system that imposed liability on state actors but not on those who conspired with them to perpetrate illegal acts through coercive use of state power Eastman Kodack Co. v. Kalvin International principles apply only to governments Trend in international law International principles apply to governments and companies 10

11 Sphere of Influence Who is to be influenced? Sphere of Influence What issues are to be influenced? 11

12 Sphere of Influence How are those issues to be influenced? Sphere of Influence Example: Mattel Who: suppliers, JVs and branch plants What: OSH How: focus on manufacturing processes, HR, factory design 12

13 Corporate Compliance Management: Governing the Global Value Chain How do companies govern socio-environmental & legal compliance issues within their value chain? Code of Conduct Compliance Management Accounting and Reporting Code of Conduct: Widespread adoption among TNCs Adoption of More than half of the 100 largest firms by global revenue (Fortune Global 100) More than a third of the 100 largest firms by foreign assets (UNCTAD WIR 100) 57% of all foreign assets 51% of all foreign sales 65% of all foreign employees Heavy Industry 27% Codes found among all industrial sectors. Not Specified 12% Light Industry 17% Multi-Sector 7% Technology 17% Services 20% Source: OECD 1999 survey of 233 codes 13

14 Code of Conduct: Issue emphasis varies by industry Heavy Industry Light Industry Services Technology Environment Fair Employment & Labour Rights Rule of Law Fair Business Practices Multi-Sector Source: OECD 1999 survey of 233 codes % of Codes addressing issue Code of Conduct: Emerging consensus on key issues Source: Conference Board 1999, Survey of 123 Codes Bribery/improper payments Conflict of interest Security of proprietary information Receiving gifts Discrimination / equal opportunity Giving gifts Environment Sexual harassment Antitrust Workplace safety Political activities Community relations Confidentiality of personal information Human rights 0% 25% 50% 75% 100% % of codes addressing issue 14

15 Code of Conduct: Cascade effect 100% 82% as % of all codes surveyed 75% 50% 25% 50% 22% 34% 0% Company Contractors Subcontractors Customers Source: OECD 1999 survey of 233 codes Code of Conduct: Cascade effect JV Partners Suppliers/ Vendors Giving gifts Receiving gifts Bribery/improper payments Conflict of interest Environment Discrimination / equal opportunity Sexual harassment Workplace safety Human rights Political activities Whistleblowing Child labor Nepotism Source: Conference Board 1999, Survey of 123 Codes 0% 10% 20% 30% 40% 50% % of COE applying to JV partner or Supplier/Vendor 15

16 Compliance Management: Systems approach Sustainable business development does not come about of its own accord. Rather, commitment to sustainability demands that corporate processes be reliably controlled and that everyone's actions - in finance as much as in environmental and social areas - be coordinated. Prerequisites for this are binding guidelines, unambiguous corporate goals and a clear organizational structure. - Deutsche Telekom Compliance Management: Management structure Example: Chiquita Board of Directors Audit Committee of Board President & CEO Group Presidents Chief Financial Officer VP of Human Resources General Counsel Corporate Responsibility Officer Steering Committee 16

17 Compliance Management: Plan, Do, Check, Act method Plan Consult stakeholders Establish code of conduct Set targets Do Establish management systems and personnel Promote code compliance Act Corrective action Reform of systems Check Measure progress Audit Report Compliance Management: Governing the value chain 17

18 Compliance Management: Management by certification QS 9000 by Region Europe NAFTA (excl. USA) Asia USA S. America Australia & S. Pacific Sub- Saharan Africa Middle East & N. Africa Introduced 1994 By 2002: 24,000 factories, 70 countries Compliance Management: Management by certification ISO by Region Far East Aust./ New Zealand Africa/ W. Asia SA 8000 by Region Europe Europe S. America N. America Introduced 1995 By 2002: 37,000 factories, 112 countries Asia Africa N. America S. America Introduced 1998 By 2005: 763 factories, 47 countries 18

19 Compliance Management: Management by certification ISO 26000: Social Responsibility To be Introduced in 2009 or 2010 NOT a Management System (?) NOT a Certifiable Standard (?) ISO Roadmap Principles of SR 1. Ethical behaviour 2. Respect for rule of law 3. Respect for international norms of behaviour 4. Respect for and considering of stakeholder interests 5. Accountability 6. Transparency 7. Precautionary approach 8. Respect for human rights Core Subjects Organizational Governance Implementing SR 7.3 Working With Stakeholders Labour Practises Environment Human Rights Consumer issues Social & Economic Development Fair operating practises 7.2 Defining scope 7.4 Integrating into organization 7.5 Implementing in daily practise 7.7 Evaluating performance 7.8 Enhancing credibility 7.3 Communicating 19

20 Compliance Management: Supply chain specific Accounting and Reporting: CR reporting becomes mainstream % of Large Firms Issuing a CSR Report 64% 20

21 Accounting and Reporting: Growth of report verification % of CSR Reports with External Assurance Statement 30% 33% Accounting and Reporting: Emerging standards Global Reporting Initiative (GRI) A multi-stakeholder initiative International Standards of Accounting and Reporting (ISAR) A project of UNCTAD 21

22 Implications for Development CSR cascade effect on members of the global value chain labour conditions (e.g. OSH, right to organise, wages) environmental controls transfer of new management techniques Compensation for weak legal environment in LDCs Impact on economic development & national competitiveness??? Implications for Development: Experiments in quantification 40,000 Does an increase in CSR correspond with an increase in labour costs? 35,000 Labor Cost per worker in manufacturing ($ per year, ) 30,000 25,000 20,000 15,000 10,000 R 2 = ,000 Indonesia Costa Rica National Corporate Responsibility Index (2003 Score) 22

23 Implications for Development: Experiments in quantification Does an increase in CSR correspond with a decrease in real GDP growth? 10.0% China 8.0% Ireland Real GDP Growth Avgerage % New Zealand 4.0% Indonesia 2.0% Turkey Thailand 0.0% % Russia -4.0% National Corporate Responsibility Index (2003 Score) Principles for Responsible Management Education 23