Learn from the mistakes of others

stratfor.com PUBLIC POLICY INTELLIGENCE REPORT 04.06.2006

Ending the CSR Debate
Bart Mongoven

note: the text here came from an email from stratfor.com - which requires you to pay to access most of their content ... the mark-ups here are my own - i didn't see any point leaving in links that i couldn't use. [the text is in usa english. sorry.]

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 The standard will not be published until 2008, and the current draft reportedly is in a highly unfinished form, with many significant questions still to be answered.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.

there is debate about whether "corporate social responsibility" even exists ... and what, if anything, it might actually mean.

the idea of an international standard for corporate social responsibility intrigues me greatly. (hence, i suppose, this post :)

trust is getting bandied about a bit now and then as an important - even crucial - factor in corporate success. at the very worst in the form of 'branding' [or as i put it recently, blanding]

The need for a standard on corporate 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.

nike and mcdonalds as agents of cultural change. we really, really need to talk about this guys!

mind you, our fedgov does seem to have the same attitude ... just look at the way they're using corporations to change our social fabric ...

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 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.

poor multinationals. so lost. so confused. so in need of someone else to show them the way ...

frankly, what if corporations were expected to act as though they were comprised of human beings who were expected to consider other people as human beings, a whole lot of this might be a tad simpler for them to understand and ... well, do.

perhaps the corporate veil ought no longer conceal the inner workings of the beast?

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.

or it may provide a new opportunity to niggle and fray at the edges of a new game?

Explaining the Standard

please do

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.

it has? oh, you mean, they've been waiting for someone else to do it for them. so it's not their fault. ok.

all this stuff has been in the purvue of ordinary corporations law for as along as we've had corporations law. it's just not a very popular thing for politicians to play with - campaign funding being what it is and all.

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.

i wonder how this will interact with australia's brand-spanking new™ industrial (ir)relations laws?

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.

O_o

perhaps not in front of a camera ...

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.

isn't google's motto "don't do evil"? and why can't i find it on their website. i can find everything else there.

i hope the standard isn't the be-all-and-end-all of the social responsibility debate. that would be very disappointing. to kill growth and development, public debate and so on so swiftly nad thoroughly. that would be doing 'evil'.

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.

standards ought not enable a corporation to point and say, "we met the standard, you can't expect us to do more".

corporate counsels might be 'unnerved' by the ability of foreign nationals to pursue corporations in the place of their incorporation - but international law has held that to be true for more than a century. the usa simply chose to establish a domestic procedure for it.

private international law, or choice of law, holds that a person (natural or legal) can be sued in the place they cause harm, in the place of their normal domicile (residence or incorporation), or in another place connected with either the aggrieved or the alleged wrongdoer.

if they hope to wriggle out of that, they will have to accept the consequences for their own legal rights. but i think not.

if an international standard provides any concrete benefit, it ought to be a common benchmark for conduct and organisation. if it becomes the lowest common denominator, it had better be designed that way - as a high standard.

After CSR

after corporate responsibility? after? this had better mean, after a common standard has been unveiled.

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 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.

now i'm really interested in this finance committee - their role in establishing human rights standards, and what those rights might be? just wish i could find some reference to them post-2002. the past 20 minutes have been the most frustrating online searches since, oh, probably 1999.

here i go again.

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.

"will be well understood and normalized" ... [now i have the tune to "over the rainbow" playing in my head.] "vagaries gone" ... then they remember that companies are run by accountants advised by accountant-lawyers ...

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.

yeah. lawyers. "who are experts at splitting hairs". nyah nyah nyah!

ok. enough of the silliness.

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).

basically trying to find a way to address the deficiencies of market economics without dismantling market economies.

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.

and these are questions that are near and dear to my own ranging, "please find me a perserveration" aspie mind. dear goddess! i may be getting close to something here.

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.

and there we have it folks. the grand finale! what limitations do, and can, societies place on these creations of industrial revolution societies. how far should we let them drive the agenda, shape the game?

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.

key questions that i began to mess about with a few years ago with my first attempt at a phd examining the potential legal liability of media corporations for disseminating propaganda that promoted or prolonged war.

damn i'm good. even if i don't really grasp it at the time.

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.

the core issue, i suspect, is that people are beginning to ask "why should these creations have the same (or more) rights than real people?"

corporations are "legal persons" because that is/was a convenient legal framework to allow corporations to do the kinds of things they wanted to do - and people at the time wanted to allow them to do. thee is nothing natural about corporations owning things or having the right to sue in their own name. but it is/was necessary for them to be able to achieve some of the things that were considered "social goods" back in the day.

i'm not suggesting we take those away, necessarily, but the questions ought to be asked - and answered. a corporation is just a vehicle for doing certain things. they're not living things in their own right.

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.

it's pretty easy to imagine how "the people" might get to have their say about such things. the usual ones would suffice nicely.

the real problem is not the mechanisms, but the politics of how that might come about. particularly while the fantasy that money is more real than human beings, that a fictional entity like a corporation gets to have a more real voice than the thousands of people who work for the handful of people who think they run it all.

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.

the form of the debate will differ perhaps, but apparently with this new standard telling us all that corporations are now supposedly all equal, the real argument will be over how equal are we in all this? and do we get to have a say about that? and do we trust our politicians enough to leave it to them to let us in on it all?

i imagine that debate might not be so different.