Corporate Social Responsibility – Quo Vadis? Where are we coming from and where are we going?

1. Corporate Social Responsibility – Quo Vadis?Where are we coming from and where are we going? Prof. Dr. Frank Emmert, LL.M. John S. Grimes Professor of Law Director, Center for International and Comparative Law Project Director Egypt Robert H. McKinney School of Law - Indianapolis

2. Overview • What is CSR and What Does it Do? • Definitions of CSR • Incentives for Corporations to Adhere to CSR • Issues Addressed by CSR • Examples of Important International CSR Initiatives • Problems with CSR • What the Future of CSR Could and Should Bring

3. What is CSR and What Does it Do? • The Palm Oil Story: • Greenpeace and others uncover illegal destruction of protected forests in Indonesia and Malaysia by palm oil producers • Cargill, the world’s largest trader of agricultural commodities, as well as Nestlé and Unilever, cancel or suspend contracts worth tens of millions of US$ with the Indonesian and Malaysian producers • See Financial Times, 25 March 2010, page 1

4. Definitions of CSR • No universally accepted definition • Common elements of different definitions: • Voluntary adherence by corporations (self-regulation) • To standards that go above and beyond legal and/or contractual obligations to include respect for ethical and cultural norms and the avoidance of negative impact on human rights, the environment, consumer, employees, communities, and other stakeholders (Google: “Do No Harm”) • And possibly further, to the active promotion of public interest (sustainable growth, development, etc.) and support for the economic policy choices of the host country/community

5. Incentives for Corporations • Public Relations • Avoid bad publicity • Get good publicity (brand differentiation) • Risk Management via pro-active corporate culture • Avoid legal trouble (corruption, human rights violations re workers and communities, environmental issues like Palm Oil…) • Pre-empting of mandatory/legislative measures with stricter and enforceable standards • Human Resource Benefits • Contractual Benefits • Access to Public Tenders => CSR can make good business sense

7. So, again, WHY should a corporation, large or small, adhere to CSR, defined as- going above and beyond the law- with the effect of reducing shareholder profits? (at least short term)

8. Issues Addressed by CSR 1) Labor Relations • Clear and fair terms of employment • No forced employment or employment of children • Clean, healthy and safe working environment • Fair remuneration levels and policies at all locations • Policies and mechanisms preventing any forms of discrimination or harassment at all levels of staff • Human resource development with skills and other training opportunities • Freedom of association and right to collective bargaining • Cooperation with trade unions and other labor representations • Mechanisms to address grievances and labor disputes

9. Issues contd…. 2) Human Rights beyond labor relations • Policies and mechanisms to promote human rights in all countries and communities where commercial activities are taking place • Active investment in countries with good HR records, divestment from worst offending countries • HR policies for selection of contractors and suppliers • Policies and mechanisms to address and prevent HR violations by contractors and suppliers, such as forced and child labor, human trafficking, etc

10. Issues contd…. 3) Environmental Protection • Environmental impact awareness • Policies and mechanisms to ensure compliance with environmental regulations and industry best-practice standards • Active promotion of environmentally responsible conduct by all staff, contractors, suppliers, and customers • Systematic efforts to reduce negative environmental impacts

11. Issues contd…. 4) Community Relations beyond environmental protection • Respect for cultural, social and economic needs • Active contributions to community development • Policies and mechanisms against unethical lobbying • Policies and mechanisms against bribery of local bodies and officials • Policies and mechanisms for communication with local communities, including mechanisms with clear time lines for dealing with complaints

12. Issues contd…. 5) Contractual Relations with Customers and Suppliers • Fair and honest dealings with contractual partners • Adherence to agreed upon contractual terms, in particular payment terms • Policies and mechanisms preventing bribery and corruption • Policies and mechanisms to ensure ethical behavior by suppliers and contractors

13. Issues contd…. 6) Shareholder Relations • Clearly communicated and appropriate standards and policies of corporate governance • Adherence to locally required and internationally recognized standards of financial accounting • Appropriate risk assessment policies • Policies and mechanisms preventing insider trading and other misuse of information • Policies and mechanisms for dealing with inquiries, complaints and disputes

14. Examples of Important International CSR Initiatives OECD Guidelines for Multinational Enterprises (1976, as last amended in 2000) • The first major international initiative of its kind • Applicable across industries and sectors • Recommendations by the OECD governments to MNEs • At first rather vague, later amendments brought increasing levels of specificity, for example about bribery • However, no assessment or review procedures, let alone effective mechanisms to ensure compliance and address complaints

15. International Labor Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (1977, as amended in 2000) • One of the first initiatives of its kind • Applicable across industries to all MNEs • Non-binding (“should”) • Relatively vague language (MNEs “should take fully into account established general policy objectives of the countries in which they operate.”) • Contains dispute settlement procedure, but only for the interpretation of the Declaration itself and only providing standing to governments, employers associations, and trade unions but not to individuals and/or companies

16. Examples of Industry Specific Codes and Standards • Fair Labor Association (FLA) Workplace Code of Conduct for the apparel and footwear factories • Rainforest Alliance Certification for businesses involved in agriculture, forestry or tourism with impact on land-use and biodiversity • The Extractive Industries Transparency Initiative and the International Council on Mining & Metals (ICMM) have standards for oil, gas, and mining industries • The Equator Principles offer guidance for the financial industry on social and environmental issues in project financing

17. Examples of For-profit Companies and/or NGOs Offering/Conducting Assessments • Good Corporation (UK), together with the Institute of Business Ethics, has developed a standard and offers assessment against this standard or against a corporations own CSR standards for fee paying clients • Social Accountability International (SAI) developed SA8000, a global standard for human rights at work, and has accredited over 2,000 companies and factories around the world, employing over 1 mio workers

18. Problems with CSR Today • 1) Proliferation of Codes (already several hundreds!) • 2) Industry Specific Codes can be tailored to show only the good things and steer clear of any bad things • 3) Lack of Accountability and Effective Complaints- and Review Mechanisms Example: Enron published an Annual Report on CSR and was considered a model by the CSR movement

19. we have finally accomplished the alchemist’s dream, Our PR departments are using CSR language to turn dirt into gold

20. What the Future of CSR Could or Should Be – Some Discussion Points The most (?) interesting initiatives: • UN Global Compact and John Ruggie’s Framework for Business and Human Rights: Protect, Respect and Remedy • ISO Guidance Standard 26000 on Social Responsibility Will they address and fix the concerns?

21. Where Do We Go From Here? ACTION PLAN • Book Project Corporate Social Responsibility in Comparative Perspective Q • Data gathering (more studies like Prof. Mattar’s research on CSR in Lebanon…) • Development of a MENA Code on CSR – Why? • Including a system for certification like ISO

22. Thank you!Comments or questions? -> femmert@iupui.eduWebsites:->http://mckinneylaw.iu.edu/faculty- staff/profile.cfm?Id=166-> http://www.epsilen.com/femmert-> http://www.cilpnet.org-> http://ssrn.com/author=622007-> http://www.TheIMAC.co