Chapter 15 The social responsibility of the global firm

1. Chapter 15The social responsibility of the global firm

4. What is corporate social responsibility (CSR)? • It concerns how business enterprises relate to and impact upon society’s needs and goals • It is also concerned with the firm’s operational behavior and its impact on surrounding society • It goes beyond philanthropy and compliance with the law Source : Unctad, The Social Responsibility of Tansnatioonal Corporations, WIR, 1999

5. Are global corporations bad global citizens? • Destruction of the Ozone Layer • 50% of the emission of greenhouse gases • Persistent organic pollutants • Pollution-intensive mining, refining and smelting of metals • Unsustainable agriculture • Deforestation • Over-fishing • Human rights • Non-respect of normal labor practices • Corruption • Political backing of repressive regimes • Dual standards

6. 14 South Africa 7.5 1 Belgium 8.8 14 South Korea 7.5 1 Canada 8.8 14 Taiwan 7.5 3 Netherlands 8.7 17 Italy 7.4 3 Switzerland 8.7 17 Brazil 7.4 5 Germany 8.6 19 India 6.8 5 United Kingdom 8.6 5 Japan 8.6 20 Mexico 6.6 8 Australia 8.5 21 China 6.5 9 France 8.1 22 Russia 5.9 9 Singapore 8.1 9 United States 8.1 Bribe Payers Index (BPI) (From 0 = high level of bribery to 10 = negligible) Low propensity to bribe High propensity to bribe

7. 168 Angola 1.9 1 Denmark 9.3 168 Equatorial Guinea 1.9 1 New Zealand 9.3 170 Burundi 1.8 1 Singapore 9.3 171 Chad 1.7 4 Finland 9.2 172 Sudan 1.6 4 Sweden 9.2 172 Turkmenistan 1.6 6 Canada 8.9 172 Uzbekistan 1.6 7 Netherland 8.8 175 Iraq 1.5 8 Australia 8.7 176 Afghanistan 1.4 9 Switzerland 8.7 176 Myanmar 1.4 10 Norway 8.6 178 Somalia 1.1 Corruption Perception Index (CPI) (From 0= high level of corruption to 10 = highly clean) High corruption Low corruption

8. Corruption and development

9. Causes of corruption Administrative resource allocation Lack of institutional checks and balances and information Insufficient funding of public services Social and cultural factors Abundant natural resources

10. Effects of corruption Direct effects Discourages domestic and foreign indirect investment Skews public capital expenditure Reduces the productivity of public investments and reduces the collection of taxes • Indirect effects • Reduction in work productivity as a result of demotivation • Dislocation of social fabric • Loss of integrity inside the bribe-giving companies • Corruption money is often linked to criminal and terrorist activities

11. Anti-corruption measures for the public sector • Issue and implement anti-corruption legislation • Adopt human resource policies based on transparency of recruitment, fair remuneration and adequate education • Establish an enforceable code of conduct for public employees • Set up transparent, open and fair public procurement procedures • Simplify regulations and procedures and limit or suppress administrative authorisations in the hands of single officials • Set up a system of transparent reporting and control • Do not allow tax reductions for non-transparent monetary transfers

12. Anti-corruption measures for the private sector • Public endorsement of anti-corruption measures • Clearly articulated written policy prohibiting any paying of or receiving bribes and ‘kickbacks’ • Implement the policy with due care and take appropriate disciplinary measures • Provide training for employees to carry out the policy • Record all transactions fully and fairly and conduct internal audits to assure that all payments made are proper • Report annually on the firm’s bribery and corruption policy • Have the annual report in line with the above audited

13. Require all agents of the firm to affirm that they have neither made nor will make any improper payments Require all suppliers of the firm to affirm that they have neither made nor will make any improper payments Establish a monitoring and auditing system to detect any improper payments Report publicly any solicitations for payments Establish a system to allow any employee or agent to report any improper payment without fear Anti-corruption measures for the private sectorcont.

14. Economic pressures on biodiversity Sector Direct pressures Indirect pressures Source: OECD (2001), OECD Environmental Outlook, Paris

15. Economic pressures on biodiversity cont. Sector Direct pressures Indirect pressures

16. Sector Direct pressures Indirect pressures Positive Negative Positive Negative Mining • Pollution through leaching etc. • Habitat destruction through infrastructure construction • Pollution of ecosystems linked to use of inputs in extraction (e.g. effluents, noise, etc.) Transport and related infrastructure • Facilitating access to fragile ecosystems, fragmenting habitats, pollution • Use of land for transport infrastructure • Water pollution and over-use destroying habitats and ecosystems • Bringing people to conservation sites, increasing awareness • Pollution associated with transport use, including greenhouse gas and air pollution emissions Water and sanitation • Creation of special habitats • Water conservation, measures beneficial to ecosystems Industry • Pollution of ecosystems • Loss of habitat through infrastructure development Source: OECD (2001), OECD Environmental Outlook, Paris Economic pressures on biodiversity cont.

17. Source: OECD (2001), OECD Environmental Outlook, Paris

18. Source: OECD (2001), OECD Environmental Outlook, Paris

19. Source: OECD (2001), OECD Environmental Outlook, Paris

20. Some answers • In Rome… • What is legal can be done • Competitive forces • Unproven evidence • Corporations are economic agents and it is • not their duty to substitute governments • PR campaigns • Lobbying We do not acknowledge the notion of social responsibility as defined by some NGOs. ….We comply with the laws of countries. Brian Flannery Science Strategy and Programs Manager Exxon Mobil, Nov 2000

21. Actions Governments Collective Corporate Lobby Finance research Advertise Deny Advertise Threaten? Block Passive Fight Participate in clubs, roundtables Legislate (Anti-Corruption Acts) Initiate international agreements Fund international organisations Report Audit Plan Target Proactive Codes of conduct

22. Eco-efficiency actions • Reduce material intensity • Reduce energy intensity • Reduce waste dispersion • Enhance recyclability • Make maximum use of renewables • Extend product durability • Increase service intensity SourceLehni: Eco-efficiency: creating More Value with Less Impact, World Business Council for Sustainable Development, Geneva, 2000

23. Business value from sustainable development The move to the “Show me” world High “Trust me” Trend “Tell me” Trust “Show me” Low Transparency High Low As trust diminishes, the demand for transparency in the form of assurance mechanisms increases

25. Research conducted in 2001 on a sample of the 996 largest global corporationsshowed that: 1 out of 3 publish environmental and social information 4 out of 10 enforce worldwide minimum environmental standards 1 out of 10 conduct a systematic financial analysis of their environmental policies and measures (e.g. “full cost pricing”) 1 out 3 monitor environmental performances for most of their operations 6 out of 10 have implemented environmental and social policies 1 out of 2 have at least partially adopted an EMS (Environmental Management System) including objective setting, measurement, reporting and performance evaluation for environmental performances 1 out of 2 have a code of conduct valid for all employees Practices

26. Socially responsible investing: doing well by doing good?