![Implications for Enterprises:
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
International
principles apply only
to governments
International
principles apply to
governments and
companies
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. - 1997 Eastman Kodack Co. v. Kalvin
Trend in international law](https://image.slidesharecdn.com/csvppt2019-190718101812/85/Csv-ppt2019-15-320.jpg)
![Implications for Development:
is CSR good for growth?
“…[CSR] is liable to hold back the development of poor
countries through the suppression of employment opportunities
within them.”
David Henderson
“[CSR]’s adoption would reduce competition and economic
freedom, and undermine the market economy.”](https://image.slidesharecdn.com/csvppt2019-190718101812/85/Csv-ppt2019-40-320.jpg)
Csv ppt2019
- 1. Corporate Social Responsibility • Concepts, key issues, context • Key CSR drivers • Implications for enterprise • Implications for development
- 2. Main Concepts of CSR 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. 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”
- 3. Main Concepts of CSR CSR = political economy The rights and responsibilities assigned to private industry.
- 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 – job creation – public revenues – skills and technology
- 5. Context Globally • 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
- 6. Key drivers of CSR Around the world • NGO Activism • Responsible investment • Litigation • Gov & IGO initiatives Developing Countries • Foreign customers • Domestic consumers • FDI • Government & IGO
- 7. Key Drivers: NGO Activism • Facilitators: IT (esp Internet), media, low cost travel • Boycotts, brand damage, influence legislation, domino effect • e.g. Shell in Nigeria, Exxon in Cameroon, Sinopec in Sudan, Apparel Industry (Nike, Gap), GMO, Wood Products, etc.
- 8. 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 Company Industry Rank Aug - 1999 Home Depot 1 Nov - 1999 Home Base 6 Nov - 1999 Wickes 9 Jan - 2000 Menards 3 Aug - 2000 Lowes 2 Aug - 2000 84 Lumber 4 Dec - 2000 Payless Cashways 5
- 9. Key Drivers: Responsible Investment • 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
- 10. 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. Principles for Responsible Investment
- 11. Asset owners. Do you expect to implement ESG policies in your emerging market investments? Investor opinion survey (IFC)
- 12. • Foreign Direct Liability • Alien Tort Claims Act (ATCA): human rights, environmental rights o Unocal Burma o Coca-Cola Columbia o Rio Tinto Papau New Guinea o Del Monte Guatemala o The Gap Saipan o Shell Nigeria Other tools: RICO, False Advertising – E.g. Saipan ‘sweatshop’ cases; Katsky v. Nike Key Drivers: Litigation $30,000,000 settlement
- 13. 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
- 14. Implications for Enterprises The Extended Firm Regional Plants / JV Partners Suppliers / Distributors • New social and product liability patterns • Development of Codes of Conduct and CSR reporting • Expanding sphere of influence – Application of Code of Conduct to value chain – CSR management: value chain management = compliance management CSR Drivers Transnational Corporations
- 15. Implications for Enterprises: 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 International principles apply only to governments International principles apply to governments and companies 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. - 1997 Eastman Kodack Co. v. Kalvin Trend in international law
- 16. Implications for Enterprises: CSR Management How do companies address socio-environmental & legal compliance issues? • Policies - Code of Conduct • Systems - Compliance Management • Reporting - Accounting and Reporting
- 17. CSR 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
- 18. CSR Management: Management structure Example: Chiquita Board of Directors President & CEO Group Presidents Chief Financial Officer VP of Human Resources General Counsel Corporate Responsibility Officer Steering Committee Audit Committee of Board
- 19. CSR Management: Plan, Do, Check, Act method Plan • Consult stakeholders • Establish code of conduct • Set targets Do • Establish management systems and personnel • Promote code compliance Check • Measure progress • Audit • Report Act • Corrective action • Reform of systems
- 20. 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 Multi-Sector 7% Technology 17% Services 20%Light Industry 17% Heavy Industry 27% Not Specified 12% Codes found among all industrial sectors. Source: OECD 1999 survey of 233 codes
- 21. Code of Conduct: Issue emphasis varies by industry 0 20 40 60 80 100 Multi-Sector Technology Services Light Industry Heavy Industry % of Codes addressing issue Environment Fair Employment & Labour Rights Rule of Law Fair Business Practices Source: OECD 1999 survey of 233 codes
- 22. Code of Conduct: Emerging consensus on key issues Source: Conference Board 1999, Survey of 123 Codes 0% 25% 50% 75% 100% Human rights Confidentiality of personal information Community relations Political activities Workplace safety Antitrust Sexual harassment Environment Giving gifts Discrimination / equal opportunity Receiving gifts Security of proprietary information Conflict of interest Bribery/improper payments % of codes addressing issue
- 23. Code of Conduct: Cascade effect 82% 50% 34% 22% 0% 25% 50% 75% 100% Company Contractors Sub- contractors Customers as%ofallcodessurveyed Source: OECD 1999 survey of 233 codes
- 24. Code of Conduct: Cascade effect Source: Conference Board 1999, Survey of 123 Codes 0% 10% 20% 30% 40% 50% Nepotism Child labor Whistleblowing Political activities Human rights Workplace safety Sexual harassment Discrimination / equal opportunity Environment Conflict of interest Bribery/improper payments Receiving gifts Giving gifts % of COE applying to JV partner or Supplier/Vendor JV Partners Suppliers/ Vendors
- 25. Sphere of Influence Who – is to be influenced?
- 26. Sphere of Influence What – issues are to be influenced?
- 27. Sphere of Influence How – are those issues to be influenced?
- 28. Sphere of Influence Example: Mattel Who: suppliers, JVs and branch plants What: OSH How: focus on manufacturing processes, HR, factory design
- 29. CSR Management: Governing the value chain
- 30. Compliance Management: Management by certification ISO 14000 by Region Europe Far East N. America Aust./ New Zealand S. America Africa/ W. Asia • Introduced 1998 • By 2005: 763 factories, 47 countries • Introduced 1995 • By 2002: 37,000 factories, 112 countries SA 8000 by Region Asia Europe N. America S. AmericaAfrica
- 31. Compliance Management: Management by certification ISO 26000: Social Responsibility • To be Introduced in 2009 or 2010 • NOT a Management System (?) • NOT a Certifiable Standard (?)
- 32. 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 Organizational Governance HumanRights LabourPractises Environment Fairoperatingpractises Consumerissues Community&society development Core Subjects Implementing SR 7.2 Defining scope 7.5 Implementing in daily practise 7.7 Evaluating performance 7.8 Enhancing credibility 7.4 Integrating into organization ISO 26000 Roadmap 7.3 Working With Stakeholders 7.3 Communicating
- 33. CSR Management: Supply chain specific
- 34. CSR Management: CSR reporting becomes ‘mainstream’ % of Large Firms Issuing a CSR Report 64%
- 35. CSR Management: Emerging standards in CSR Reporting Global Reporting Initiative (GRI) A multi-stakeholder initiative www.globalreporting.org International Standards of Accounting and Reporting (ISAR) A project of UNCTAD www.unctad.org/isar
- 36. 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???
- 37. Implications for Development: CSR management CSR performance among 100 emerging market enterprises Source: UNCTAD, 2008 Environment overall 0% 20% 40% 60% 80% 100% Policy Systems Reporting Advanced Good Intermediate Limited No evidence
- 38. Implications for Development: CSR management CSR performance among 100 emerging market enterprises Source: UNCTAD, 2008 Countering Bribery overall 0% 20% 40% 60% 80% 100% Policy Systems Reporting intermediate limited no evidence
- 39. Implications for Development: CSR management CSR performance among 100 emerging market enterprises Source: UNCTAD, 2008 Human Rights overall 0% 20% 40% 60% 80% 100% Policy Systems Reporting intermediate limited no evidence
- 40. Implications for Development: is CSR good for growth? “…[CSR] is liable to hold back the development of poor countries through the suppression of employment opportunities within them.” David Henderson “[CSR]’s adoption would reduce competition and economic freedom, and undermine the market economy.”
- 41. Implications for Development: Experiments in quantification R2 = 0.6079 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 30 35 40 45 50 55 60 65 70 75 80 National Corporate Responsibility Index (2003 Score) LaborCostperworkerinmanufacturing ($peryear,1990-1994) Indonesia Costa Rica Does an increase in CSR correspond with an increase in labour costs?
- 42. Implications for Development: Experiments in quantification Does an increase in CSR correspond with a decrease in real GDP growth? -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 30 35 40 45 50 55 60 65 70 75 80 National Corporate Responsibility Index (2003 Score) RealGDPGrowthAvgerage1991-2001 China Turkey New Zealand Thailand Russia Ireland Indonesia
- 43. Thank you