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close this bookBusiness Responsibility for Sustainable Development (UNRISD, 2000, 62 p.)
close this folderV. Moving Forward
View the document(introduction...)
View the documentVoluntary initiatives
View the documentPartnerships
View the documentRethinking regulation and partnerships
View the documentBuilding alliances

(introduction...)

How might initiatives associated with corporate responsibility be scaled up and “deepened” so that business can make a more meaningful contribution to sustainable development? And are approaches, which are currently in vogue, centred on voluntary initiatives and partnerships, likely to be effective? This concluding section addresses these questions.

As noted earlier, regulatory pressures constitute perhaps the most powerful driver of corporate responsibility. But ask business what should be done to move the corporate responsibility train forward, and a very different set of conditions is likely to be proposed. One group of business leaders has put at the top of its list “freer and more open markets... stable and predictable trade rules... business should be encouraged voluntarily to achieve agreed standards... [and] governments should work with business... to set targets that recognize the realities under which business operates...” (Schmidheiny et al., 1997:54). Such a list of recommendations does not appear to be very different from one that would have as its objective the promotion of economic growth and profit maximization. While such a response might be expected from the business community, it is perhaps less expected from other development actors. But increasingly, international organizations and national governments, as well as some NGOs, are sounding a similar tune. Two institutional arrangements, in particular, stand out in the contemporary drive to promote corporate environmental and social responsibility: voluntary initiatives and partnerships (Nelson, 1996; UNEP, 1998; UNCTAD, 1999).

Voluntary initiatives

The growing popularity of voluntary initiatives derives partly from a widespread perception that nation states have become weaker, lack capacity to implement so-called “command and control” regulations and, at any rate, should be freeing up rather than controlling the market. The pendulum swing away from stricter forms of regulation is evident not only at the level of some national governments, but also in the international arena. It was symbolized to some extent by the demise of the United Nations Centre on Transnational Corporations (UNCTC) in the early 1990s, and reinforced in 1999 when the Secretary-General proposed to representatives of big business gathered at the World Economic Forum in Davos a compact in which the United Nations would support the idea of an international trade and investment regime largely free of social and environmental clauses. In return he called on the business community to take voluntary initiatives to uphold human rights and labour and environmental standards (Annan, 1999).

Research on issues of corporate environmental and social responsibility suggests - as does the very heated global debate on this issue - that it may be too early to declare international trade and investment rmes off-limits to further social and environmental standards. While there are certainly some corporations and sectors of business that may be prepared to heed the call for greater responsibility or “corporate citizenship”, there are a great many more that will respond weakly, if at all.

There are important benefits that can derive from voluntary initiatives, but, in some contexts, there may also be a considerable downside, most notably perhaps for countries of the South. The way in which voluntary initiatives are being promoted raises several important concerns in relation to the challenge of promoting sustainable development, some of which were noted earlier:

· Voluntary initiatives are often drawn up without regard to principles of transparency, independent verification and worker/community participation, as well as core international standards to protect labour, the environment and human rights. As pointed out by the NGO Taskforce on Business and Industry (ToBI),42 these types of “closed” agreements often result in “noncompliance, double standards, inadequate targets or standards, or greenwashing” (ToBI, 1997).

42 ToBI is an international collaborative network of NGOs established in 1996 with the original purpose of preparing an independent assessment of corporate conduct, responsibility and accountability for the five-year review of the Earth Summit in 1997.


· Voluntary initiatives have mainly been adopted in the richer industrialized countries. Their apparent success in a number of countries has been contingent on certain institutional conditions associated, for example, with the growth of green or ethical markets, pressures associated with the NGO sector and the relative autonomy and power of certain state institutions. Such conditions are often absent in many developing countries where consumer power may be relatively weak, state regulatory authorities may lack independence, as well as basic enforcement and monitoring capacity, essential laws related to disclosure and freedom of information may not be in place or enforced, and the NGO “movement” may be relatively weak or absorbed in service-delivery activities (Hanks, 1999; UNRISD and UNA, 1998).

· It is often assumed that voluntary initiatives should and can be adopted across very different product sectors. With globalization and the increasing global reach of TNCs and changing forms of corporate organizational structures, extensive and complex product or “commodity chains” have developed in many sectors (Gereffi et al., 1994). Participating in these chains are very different types of actors, with very different capacities to respond to environmental and social concerns and subject to very different pressures, opportunities and constraints (von Moltke et al., 1998). The feasibility of adopting voluntary initiatives “across the board” and their capacity to translate into improved corporate environmental and social performance can vary considerably in different sectoral contexts.

· Some of the major voluntary initiatives associated with the promotion of corporate environmental and social responsibility in the South have been essentially designed by Northern actors. Corporate interests, often acting through business and industry associations, are becoming increasingly influential in international decision-making processes associated with the design of environmental and social standards. Business-NGO partnerships, which attempt to modify the way corporations operate in the South, involve primarily Northern NGOs. Some Northern NGOs claim to speak on behalf of Southern interests, but fail to effectively involve Southern NGOs in their decision-making and consultation processes (Murphy and Bendell, 1999).

· Historically, progress associated with corporate social and environmental responsibility has been driven, to a large extent, by state regulation, trade union activism and collective bargaining. Increasing reliance on voluntary initiatives may be undermining these drivers of corporate responsibility. Such initiatives are often presented as effective alternatives to state regulation, when in fact their success in many industrialized countries has often involved an important regulatory component (Porter and van der Linde, 1995). Furthermore, the NGO sector, which is promoting voluntary initiatives, sometimes minimizes the involvement of trade unions or even attempts to substitute for them in dealings with TNCs. There are concerns that the task of defining and assessing workers’ rights is shifting away from states and unions to companies, auditors and NGOs. Indeed, some companies appear to have adopted codes of conduct as part of strategy to minimize and weaken the role of trade unions “preferring to offer a paternalistic package than to have a recognized negotiating body to deal with” (Gallin, 1999b).

· Voluntary initiatives associated, for example, with codes of conduct, environmental certification and eco-labelling, may have certain negative developmental implications in terms of acting as a non-tariff trade barrier and restricting Southern access to Northern markets and the ability of smaller companies to compete (UNCTAD, 1999; Zarrilli et al., 1997). In practice, it is often larger and (managerially) more sophisticated companies in developing countries that can meet their norms. In certain product chains, smaller firms are being squeezed out given the difficulties they encounter in complying with environmental standards (UNCTAD and SGS, 1998).

Partnerships

Growing attention to the issue of partnerships involving business and other development actors is generally justified on the basis that new forms of governance, involving multi-stakeholder collaboration rather than confrontation, are necessary in an increasingly globalized and integrated world. Not only do governments lack the power to shape contemporary patterns of economic development, but many of their powers are actually being weakened. In such a context, it is argued, the private sector and civil society need to work together and with government in “public-private partnerships” to deal with the “complex and interdependent issues, which can only be tackled by co-operative, integrated and inclusive solutions, both within... and between nations” (Nelson, 1996:13).

There is considerable appeal in this, seemingly, pragmatic, constructive and co-operative approach. Indeed it is so appealing that many organizations are rushing headlong into “partnerships” with business without much critical reflection on their implications. In practice, there are a number of concerns that need to be addressed:

· How will the agenda of the partners change? There is concern that NGO-business partnerships can be part and parcel of a process of “incorporation” or co-optation, in which the critical positions of public officials and activists are increasingly diluted. Through partnerships, many NGOs move along a path that takes them from “activist” to “consultant”, selling technical advice and other services. This is particularly evident in the field of corporate environmental management and social auditing. As one activist/researcher turned independent verifier once confided to this author: “Look at me. Having had to work so closely with CEOs, I’m beginning to look and sound like one. At some point a new generation of NGOs will probably have to come along to check on people like me”. A related problem concerns self-censorship and reduced freedom of expression among officials of international agencies. As some UN organizations get closer to business there is a feeling among certain staff members that their freedom to criticize business is being constrained.

· How will partnerships affect the capacity of different actors to influence decision-making processes? Partnerships enable business to have greater access not only to civil society organizations, but also to policy makers in government and international organizations. Partnerships can be used as a mechanism for so-called “institutional capture”, whereby corporate interests come to dominate or heavily influence the decision-making processes of public-interest institutions. There is concern that this has occurred, for example, in the field of food standards and environmental certification, through such institutions as the Codex Alimentarius Commission43 and ISO (Dawkins, 1995; Krut, 1997; Krut and Gleckman, 1998). There is also concern that corporate interests are exercising undue influence in certain United Nations specialized agencies both through funding and participation in consultation and policy processes. An analysis of the difficulties experienced by the World Wide Fund for Nature in implementing a more “people-oriented” approach to environmental protection, suggests that this is partly due to resistance from organizational structures that must respond to the interests of corporate partners (Jeanrenaud, 1998).


43 The Codex Alimentarius Commission was set up by FAO and WHO in 1963 to establish food safety and quality standards.


· What criteria are used to select partners? Organizations, such as United Nations agencies, which have considerable legitimacy because of their association with ethical causes, need to be particularly careful about whom they select as partners. Whereas many NGOs have had to struggle to get recognition within the UN process, the vetting procedures to which some corporations have been subjected appear to be lax. The United Nations Development Programme (UNDP) has been criticized for the way in which it has gone about choosing corporate partners for the Global Sustainable Development Facility (TRAC, 1999). As indicated in Box 2 above, various TNCs involved in this initiative have been singled out for their poor environmental and/or social record. The World Health Organization (WHO) is also promoting a closer relationship with business. There are concerns, however, that the guidelines that are currently being drafted for collaboration with the private sector are weak and that the consultation process for drafting them has not included key stakeholders. Similarly, UNHCR has recently been criticized for having linked up with certain corporations to form the Business Humanitarian Forum, an association set up in January 1999 to develop relations between business and humanitarian organizations (UN Wire, 1999).

· An agenda of change, which aims to promote sustainable development, will need to be backed by strong institutions and alliances. At best, the process of building partnerships may be a way of broadening this base of support and engaging as allies certain actors normally associated with the status quo. At worst, partnerships may split alliances and activist institutions. There are concerns that this has occurred to some extent within civil society movements, as some organizations decide to participate in “multi-stakeholder dialogues” with TNCs, and others stay away - possibly becoming marginalized in the process (Rowell, 1999). As indicated below, some forms of NGO-business partnerships have resulted in tensions between NGOs and trade unions. There is also concern that some United Nations organizations are being divided, as certain departments warmly embrace collaboration with business and others oppose it.

Perhaps the most significant concern with some forms of voluntary initiatives and partnerships is that they may serve to weaken key drivers of corporate responsibility, namely governmental and intergovernmental regulation, the role of trade unions and collective bargaining, as well as more critical forms of NGO activism and civil society protest. If one examines the history of corporate environmental and social responsibility, and some of the major reforms of corporate policies and practices - from the early 1900s when Ford and others in the United States introduced improved working conditions, to the post-World War II years when social welfare legislation was scaled up in Europe, to the early 1980s when the International Code of Marketing of Breastmilk Substitutes was adopted, to the recent response of Shell to environmental and social issues - one or a combination of these factors has been crucial.

Rethinking regulation and partnerships

A more critical perspective on voluntary initiatives and partnerships suggests that some do little, if anything, to advance the cause of sustainable development. Certain initiatives that are a form of “co-regulation” can play, potentially, an important role in promoting corporate social and environmental responsibility. Some so-called “negotiated agreements”, where government and business work together to design and implement programmes that retain the element of state sanction in case of non-compliance, have proved fairly effective (Hanks, 1999). Another co-regulatory form is “civil regulation” (Murphy and Bendell, 1999), where NGOs and trade unions have a greater influence in determining how business relates to society and the environment. Civil regulation suggests an alternative mode of compliance, where business complies not only with national and international law, or with its own norms and standards (corporate self-regulation), but also with those determined to a large extent by civil society organizations (Murphy and Bendell, 1999). There are currently a number of important initiatives where multi-stakeholder or public-private partnerships have been engaged in designing international codes of conduct (for example, SA8000), environmental reporting standards (e.g. the Global Reporting Initiative) or standards for ethical trading (e.g. the Ethical Trading Initiative).44

44 Lead institutions associated with these initiatives are CEPAA, CERES and the Fairtrade Foundation/NEF, respectively.

A key feature of these initiatives, and a crucial area of civil regulation, involves independent verification. To overcome the weaknesses inherent in industry or company codes of conduct and environmental and social reporting, it is important that greater reliance be placed on independent monitoring and auditing by civil society organizations. But who are these verifiers? The fact that they carry the civil society label does not necessarily imply that the verification process will be reliable. The ILO, for example, is concerned that independent monitoring of codes of conduct might be carried out by private organizations or NGOs not associated with the organization, which might “lead to considerable confusion about the verification of compliance with basic standards” (Hagen, 1998). Furthermore, as indicated below, key stakeholders such as trade unions, may be marginalized in the verification process.

The issue of monitoring by appropriate organizations is also pertinent to the types of partnership being entered into between UN agencies and business. To avoid the accusation that UN organizations are too eager to join forces with big business, and are adopting loose guidelines or criteria for the selection of corporate partners, those agencies pursuing this route could engage more rigorously with civil society. NGOs and trade unions could be asked to monitor the corporations involved and verify whether they meet the standards set by the agency in question. The standards themselves should be set in consultation with civil society organizations. If this were to happen, UN-business partnerships would involve, in effect, a trilateral, as opposed to a bilateral, relationship.

Key to the success of co-regulation are not only the “soft” features of dialogue and compromise, but also the hard ones of government sanctions, laws related to disclosure of information, freedom of association and expression, and various forms of civil society protest. Also key is the legitimacy of the civil society organizations involved in drawing up codes of conducts, certification and verification.

A crucial point, which is often missed in the “command and control” versus “voluntary initiatives” debate, is that these two modes of influencing corporate behaviour are intimately linked - it is not an either/or situation. This is apparent in various respects, some of which have already been mentioned. We have seen, for example, how voluntary initiatives are often a response to some form of directive-based regulation or the threat of such regulation - they are not independent of it. Clearly, some types of regulations need to be rethought - for example, environmental regulations that focus exclusively on “end-of-pipe” solutions to deal with pollution and discourage innovation to prevent pollution (Porter and van der Linde, 1995). Considerable mileage can be gained from regulations associated with disclosure of information. According to UNEP, “the US experience... suggests that companies that are forced - or encouraged - to publish sensitive performance data soon begin to launch emission reduction programmes” (UNEP, 1994:19).

Certain forms of governmental regulation also facilitate another key driver of corporate responsibility, namely civil society activism. This is apparent not only in regard to basic human rights legislation such as freedom of association and expression which helps to cement the foundations of civic opposition and protest, but also in other respects. Continuing the example just given, UNEP also points out that “the trend [towards launching emissions reduction programmes] is accelerated by the activities of NGOs and ethical investment groups, which increasingly use the published data to benchmark environmental performance of companies operating in key sectors” (UNEP, 1994:19).

Internationally agreed standards - whether binding or not - can play a similar role. A recent analysis of the International Code of Marketing of Breastmilk Substitutes suggests that, while implementation of the Code has been subject to numerous constraints, its mere existence facilitated international citizen action:

The usefulness of the International Code should be assessed not only in terms of the number of countries which have implemented it, but also in terms of its being a tool to raise and maintain public awareness about the issue and to help build public pressure on corporations to change their inappropriate marketing practices.... Had policy makers given in to industry proposals - either to let the industry regulate itself or to work out voluntary agreements with national governments - instead of adopting the International Code, the debate would have become fractured and privatized to such an extent that effective international citizen action on transnational practices would have been much more difficult (Richter, forthcoming).

Given the somewhat chaotic state of codes of conduct, environmental and social reporting and eco-labelling, it is crucial that there be some degree of harmonization of standards, the establishment of clear indicators for measuring progress and mechanisms for independent verification (see Box 4). This would seem to be an area where the United Nations could, potentially, play a constructive role. The standard-setting process needs to make far greater use of internationally agreed benchmarks contained in Agenda 21 and various ILO and Human Rights Conventions. As an UNCTAD report on voluntary international industry environmental guidelines concludes:

... it is crucially important for environmental improvements to be measured against externally defined benchmarks of sustainable environmental practice... [T]here is a major role for national regulation and international governance in setting frameworks for corporate environmental activity, and assessment and monitoring, to ensure that industry moves toward global sustainable development (1996:86-87).

International governance in this field fell into a state of lethargy in the early 1990s. Clearly it needs to be revived. Certain recent initiatives suggest that this may indeed be happening. In its 1999 World Investment Report, UNCTAD has called for “a more structured dialogue between all parties concerned” that might examine how certain core principles related to human rights, labour standards and environmental protection45, as well as other development considerations, “could be translated into corporate practices.” (UNCTAD, 1999:369) In August 1999, the Sub-Commission on the Promotion and Protection of Human Rights agreed to a three-year inquiry to examine the activities of transnational corporations and the possibility of developing a code of conduct based on human rights standards.46 The Commission on Sustainable Development is currently supporting a review of voluntary initiatives and work by a multi-stakeholder group to define a coherent set of guidelines and principles for developing such initiatives (CSD, 1999).

45 The principles involved are those that were outlined by the United Nations Secretary-General, Kofi Annan, in a speech at the World Economic Forum, Davos, on 31 January 1999 (Annan, 1999).

46 See the Report of the Sessional Working Group on the Working Methods and Activities of Transnational Corporations on its First Session, Sub-Commission on the Promotion and Protection of Human Rights, Commission on Human Rights, 12 August 1999.

If decision-making on issues related to corporate environmental and social responsibility is to move increasingly into the international arena, it is important that the organizations involved be democratic and “participatory”. This process needs to start at home, with civil society groups attempting to influence their governments and the positions they take to international forums. Concerns raised in relation to the ISO 14000 environmental management standards47 could apply to various international organizations, including some NGOs: decisions are being unduly influenced by corporate or “Northern” interests. Furthermore, in the case of the ISO, the standards set have quickly acquired the type of status normally reserved for intergovernmental agreements (Krut and Gleckman, 1998). Clearly the doors of various international organizations need to be opened up far more to civil society organizations and participants from developing countries (Krut, 1997), although difficult issues concerning the legitimacy and accountability of NGOs need to be addressed. Similarly, there needs to be much stronger participation of Southern NGOs and grassroots organizations in the policy-making processes of a number of Northern NGOs, which claim to speak on behalf of certain Southern interests (Murphy and Bendell, 1999).

47 These concerns have been particularly well articulated by Riva Krut and Harris Gleckman (1998).

Box 4: An NGO Perspective on Voluntary Initiatives:
Elements contributing to the effectiveness of voluntary initiatives (VIs)

Substance: VIs need to contribute to solving, not avoiding problems of environmental deterioration and social inequities. That is they need to be substantive and the ideas and language need to be unambiguous, undiluted and meaningful.

Incentives: VIs require appropriate incentives to motivate industry to adopt and implement them.

Integration/Internalization: Companies need to incorporate social and environmental values into their policies and operations. These values need to be integrated into companies’ definitions and measurements of progress and success.

Independent verification: In order for companies to gain significant credibility among stakeholders, independent monitoring and verification is needed.

Inclusiveness/Public participation: This is one of the most important requirements as well as one of the prevalent weaknesses in many VIs. NGOs stress the active participation of stakeholders - especially those in the communities directly impacted by a company’s operations.

Transparency: Adequate and timely information about company products and processes needs to be made available to the public to allow effective tracking and assessment.

Accountability: Appropriate regulatory and civic mechanisms may be needed to complement or provide the necessary motivation to successfully follow through on the agreements made. Many VIs require an enabling regulatory framework to succeed.

Source: Jeffrey Barber (1998), Coordinator, NGO Taskforce on Business and Industry.

Building alliances

Whether or not such institutions are democratic and participatory will depend not only on the whims of those who formally create the institutional structures in question, but also on the strength of those who are demanding a greater voice. Very often this voice is fractured - environmentalists are often at odds with one another, or with trade unions or consumer groups. The growing interest in partnerships should, therefore, also embrace the question of how to build a stronger civil society movement for change by strengthening links between NGOs and trade unions. Historically, trade unions and institutions such as collective bargaining have been crucial in promoting certain features of corporate social responsibility. Yet there are dangers that trade unions are being marginalized in the current drive to transform business policies and practices associated with voluntary agreements and partnerships. Various tensions currently strain relations between these two sectors.

Environmental and consumer NGOs, for example, sometimes adopt a narrow agenda, ignoring issues associated with the protection of livelihoods, labour standards and human rights, which are likely to be of more immediate concern to workers, women and farmers in developing countries. If the promotion of “sustainable forestry”, for example, involved greater attention to social issues, trade unions might be more active supporters of forest certification schemes (Development and Cooperation, 1999). Similarly, if the NGOs attempting to promote a “sustainable banana economy”48 were as concerned about basic human rights issues - such as freedom of association of banana workers in countries like Costa Rica - as they are with issues of pesticide use and fair trade, then a potentially far stronger alliance with trade unions might exist.

48 In May 1998, the European Banana Network (EUROBAN) and the International Union of Food and Agricultural Workers (IUF) organized the first-ever world conference to explore routes “towards a sustainable banana economy” (IUF, 1998).

But there must also be a certain mutual respect for the distinctive roles of these sectors. NGOs often claim a high degree of moral authority, which may lead some to assume that they know best how trade unions should relate to TNCs or attempt to substitute them in negotiations with the corporate sector on certain issues. Many trade unions, for their part, need to deepen their concern for environmental issues. Attention to problems linked to pay, working conditions and job security, as well as the potential conflict of “environment versus employment”, has meant that the energies of trade unions have often been channelled in other directions. While some international and regional trade union secretariats and labour leaders are now engaging with the environmental agenda, large sectors of the labour movement are not. As the director of health, safety and environment programmes at the ICFTU points out, there is, therefore, a great need for training and education within trade union structures on these issues.49

49 Lucien Royer, quoted in Trade Union World, 1999.

Globalization has given rise to major new challenges and opportunities for the labour movement. In the words of one former leader, not only are new trade union structures needed to deal with the growing power of TNCs and international forces, but so, too, are alliances with other sectors of civil society, in order to build a broad-based social movement that can shape the path of development more effectively (Gallin, 1999a). In countries such as Brazil, Korea and South Africa, there are signs that some union organizations are working more closely with community and other groups to build such a movement (Gallin, 1999a).

In the absence of governmental and international regulation and more concerted, co-ordinated civil society pressure, the process of promoting corporate environmental and social responsibility in developing countries will remain lukewarm at best. The above analysis of the forces underpinning change indicates that TNCs and other major companies will continue to adopt various measures associated with social and environmental responsibility. In this respect, changes in corporate policy and practice are not simply a public relations or “greenwashing” exercise, as is claimed by some commentators. However, the initiatives involved, are likely to constitute a fairly minimalist, fragmented and uneven agenda that is fraught with contradictions. By facilitating the smooth functioning of production and marketing processes, and often diluting alternative agendas for change, such initiatives may be more conducive to economic growth and stable capitalism than sustainable development.