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contributor perspectives

Jul 19, 2007 | 18:52 GMT

Corporate Social Responsibility: The Next Wave

Contributor Perspectives offer insight, analysis and commentary from Stratfor’s Board of Contributors and guest contributors who are distinguished leaders in their fields of expertise.
By Bart Mongoven A significant shift is coming in the way corporate social responsibility (CSR) issues are dealt with in the United States. The current era has been characterized by a focus on globalization, specifically on the demand by activists that companies operating globally meet international standards — not the often-lax or nonexistent ones in the countries where they operate — on labor, the environment and human rights. Until now, the activist focus on these issues has mirrored broader society's interests and concerns. However, with the possible exception of immigration, globalization-related issues no longer are driving themes. Replacing them is a narrower set of issues dealing with personal choices in the marketplace. This movement, typified by the emerging concern over sustainable consumption, advocates better corporate responses to consumer demands — demands that might not yet exist — for energy-saving light bulbs, cars that get better gas mileage, products whose materials do not pose a health risk to users and so on. With this emerging shift in the guiding theme of social thinking, the CSR movement must change. As it currently stands, however, the broad CSR movement is more likely to be split by the emerging issues. On one side will line up moderates, who will focus on the responsibility of the corporation to get ahead of the consumer and develop products that reflect buyers' changing values. On the other side will be the more ideological advocates, who will continue to fight for a more fundamental examination of the role corporations play in society and the power they wield over politics and commerce — and thus daily life. The International Organization for Standardization (ISO) continues to work toward a social responsibility standard that will clarify terms for the new debate, and John Ruggie, the U.N. special representative on the issue, has been given an additional year to develop his conclusions about where the responsibilities of corporations begin and end. Together, these two will give corporations and CSR advocates clear direction, but they also will deprive more ideologically driven CSR activists of the ability to use CSR as a cover for anti-corporate activism. The Basics The basic concerns of those involved in CSR issues are most clearly expressed through the work of the U.N. Global Compact, whose annual meeting ended July 6 in New York. Founded in 2000, the Global Compact is seen as presenting baseline corporate codes of conduct on human rights. Global Compact members agree to follow 10 fundamental principles relating to human rights. The principles focus on the impact corporations have on society, but also on their potential positive effects.
Broadly, CSR stems from the proposition that corporations must consider their impact on "stakeholders," including employees, consumers, neighbors and supply chain workers, as well as their impact on the environment. Many former anti-globalization, anti-free market activists have come to embrace the idea that effective human rights protections and sustainable development requirements might mitigate some of what they view as the negative effects of globalization — and even could turn corporate power into a tool for social improvement. As a concept, contemporary CSR dates to the 1970s. The first waves of calls for an international agreement on corporate responsibility to society were strongly ideological, meaning their backers were radically anti-capitalist. The CSR movement first crystallized in the coalition that took on Nestle in the late 1970s over the company's infant formula marketing practices. The Nestle boycott was initiated by an anti-corporate, left-wing coalition, but over time it attracted a long list of organizational and religious supporters who were drawn to the moral questions raised by the infant formula issue. Coinciding with the boycott was a push for a global set of laws governing corporate activities through the U.N. Center on Transnational Corporations (CTC). The CTC debate was almost entirely an ideological battle. Supporters, influenced by Cold War and post-colonial politics, saw it as a Robin Hood issue, a way to take from the industrialized world's wealthy and give to poorer countries. The Soviet Union strongly supported CTC's work — until negotiators removed the exemption for state-owned enterprises. With Soviet companies subject to the same rules as Western countries, CTC lost its key supporter and ceased being an important concern. At roughly the same time, the Nestle boycott ended when the company accepted a code of conduct it developed with its critics and the World Health Organization. The lessons from this were clear: Activists could change corporate behavior by negotiating issue-specific codes of conduct — but binding international treaties would remain a bridge too far. Another key development was the alliance of anti-corporate and anti-capitalist organizations with mainstream groups concerned chiefly with ethics and specific issues. These two sides were most clearly represented by the leaders of the Nestle boycott in the United States: the Interfaith Center on Corporate Responsibility (ICCR), representing the ethics side of the equation, and Corporate Accountability International, representing the ideological side. Although the CSR community's concerns have shifted over the past two decades — to codes of conduct, ratings, ranking and, most recently, globalization — this core alliance has held. The emphasis on globalization began in earnest in the early 1990s, and by the end of the decade most organizations involved in CSR activities were squarely in the "anti-globalization" camp. The current main thrust of CSR advocacy is centered on ways of ameliorating globalization's worst impacts. It views multinational corporations both as violators of human rights and as the most powerful agents for positive change in poorer countries, where governments are unwilling or unable to protect the fundamental rights of communities and workers. Contemporary CSR Although it is beginning to change, the work of CSR advocacy remains focused on globalization, and, in practice, the 10 principles of the Global Compact almost entirely focus on what corporations must do in developing countries. No issue embodies this approach more than the corruption issue — the 10th principle added late to the Global Compact by former U. N. Secretary-General Kofi Annan. The leading corruption initiatives, Publish What You Pay and the Extractive Industry Transparency Initiative, are designed to bring greater transparency to resource-rich developing countries. They address the concern that the leaders of these countries siphon off much of the income from extractive companies, and that the people receive little of the wealth. The emerging answer from the CSR community is to force corporations to publish their royalty payments to these governments, thus allowing international bodies (the World Bank, International Monetary Fund, etc.) to hold the governments accountable for their corruption. At the heart of this is the belief that corporations have the power to drive the necessary changes. Similarly, the majority of the new and developing corporate codes of conduct place restrictions on corporations with the intention of changing behavior on the ground in developing countries. Changing Priorities As the CSR movement succeeds and corporations and governments are perceived as making progress, globalization-related issues no longer resonate as they did five years ago. In Europe and the United States, concern about the negative implications of globalization is giving way to discussions about issues that directly touch consumers. If anti-globalization was the driving activist theme of the past decade, the next one appears to focus on reasserting the relationship between the corporations and society on one hand and between the consumers and the products on the other. The first — questions about the relationship between corporations and society — is a natural outgrowth of CSR's evolution into a mainstream concern. Increasing attention to CSR has brought with it demands for standardization. Through this, ideological CSR advocates are close to achieving a crucial strategic goal — minimizing the debate over specific issues raised by corporations so questions about their power in society can be addressed. With this, these groups — still typified by Corporate Accountability International — will again question the fundamental rights of corporations. The other side of the movement, the more moderate advocates typified by ICCR, will deal directly with the public's growing attention to the corporate impact on their own lives. Specifically, then, rather than focus on how activists want corporations to behave, the next wave of CSR advocacy will address what consumers want, or will want, from corporations. This growing side of CSR advocacy is typified by the sustainable consumption movement, but also is seen in the global environmental health movement and the campaign against Wal-Mart. Although this movement expects corporations to lead the way, it also will demand that people see the impacts of their purchases on their health, their safety and the environment they share with others. In other words, by convincing the corporations to produce safe, eco-friendly products such as hybrid cars and nontoxic computers, consumers will realize they wanted them all along. Sustainable consumption activist Paul Hawken, founder of Smith & Hawken garden supply store, has written a book about the emerging values-based movement and appears to be leading the way in advocating this new set of corporate standards. Hawken envisions a new industrial revolution — akin to the first revolution of mass production and resource use in the 20th century — that will be marked by a new relationship among businesses, society and the environment. In this environment, CSR will call on businesses to first consider the impact of their activities on people, including consumers, but also to declare their own corporate values through their products. This is already visible in the increasing adherence by consumer product companies to the "green chemistry" ethic relating to materials. Hawken's appeal, as radical as it sounds, will be far more attractive to CSR's more moderate side, which always has been concerned about ethics and the impact of commerce on people. Both the moderates' and Hawken's visions have room for free-market capitalism (not to be confused with liberal laissez-faire capitalism). CSR's more ideological proponents, on the other hand, have from the start viewed CSR as a vehicle for changing the underlying power of corporations and their relationships to society. And this is where the split emerges.

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