“Sustainable-development” practices may weaken corporate responsibility

By way of voluntary initiatives and partnerships with players in the development arena, big business is increasingly embracing the language of corporate social responsibility. The danger behind this growing trend, warns a UN research report, is that such initiatives, by diluting alternative agendas for change, could facilitate the continued smooth functioning of an economic model that runs counter to the cause of sustainable development.

by Someshwar Singh

GENEVA: The growing trend of establishing partnerships with big business, a trend which many UN system organizations have embraced, could weaken the “key drivers” of corporate responsibility, says a UN research report.

“Business Responsibility for Sustainable Development” by Peter Utting, published by the United Nations Research Institute for Social Development (UNRISD), assesses the reality behind claims that an increasing number of large firms are adopting policies and practices conducive to the promotion of sustainable development, particularly in developing countries.

“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 inter-governmental regulation, the role of trade unions and collective bargaining, as well as more critical forms of NGO activism and civil society protest,” says Utting’s research.

If one examines the history of corporate environmental and social responsibility, and some of the major reforms of corporate policies and practices - beginning with the early 1900s when Ford and others in the US introduced improved working conditions, through the post-World War II years when social welfare legislation was scaled up in Europe and 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.

In some countries, processes and policies associated with globalization and neoliberal reform have weakened the regulatory capacity of certain state institutions, says the report. Similarly, at the international level, various attempts to influence transnational corporations’ (TNC) practices through ‘codes of conduct’ have been abandoned. In a context where such institutions have weakened, corporate self-regulation and voluntary initiatives have emerged as dominant approaches for promoting business responsibility.

Culprits of unsustainable development?

During the 1990s, several important TNCs and business associations not only jumped on board the sustainable-development bandwagon but also attempted to lead it. Increasingly, big business is embracing the language of corporate social responsibility and taking measures to reform management systems.

Historically, much of big business has pursued investment, production and marketing strategies that have resulted directly in extensive waste and degradation of natural resources or encouraged consumption patterns that do the same, the report notes. Logging and mining enterprises, pulp and paper mills, and agribusiness, oil, chemical, cement, iron and steel companies, as well as many other enterprises and industries, have degraded or destroyed large areas of tropical forests, marine and coastal resources, freshwater sources, agricultural land and the urban environment, as well as global climate and the ozone layer.

Not only the environment has often been ignored, so too have the concerns of various stakeholders - workers who must endure poor conditions and pay, indigenous peoples whose livelihoods and cultures have been threatened by corporate activities, community residents affected by pollution and waste, and consumers’ health and nutrition levels.

By focusing narrowly on objectives such as market share and profitability, much of big business, then, has disregarded environmental and social aspects, which are central to the concept of sustainable development, says the report.

“Given their size and global reach, TNCs have often been singled out, rightly or wrongly, as major culprits of unsustainable development. Today, this sector comprises approximately 60,000 parent firms with over half a million foreign affiliates, which in 1997 accounted for one-third of world exports. The economic power of the largest TNCs is such that the revenues of just five corporations are more than double the combined GDP of the poorest 100 countries.”

The UNRISD paper finds that regulatory pressures constitute perhaps the most powerful driver of corporate responsibility. One group of business leaders, the paper notes, has put at the top of its wishlist “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 ...”

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, the paper observes. “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.”

Voluntary initiatives

The growing popularity of voluntary initiatives derives partly from a widespread perception that nation states have become weaker, lack the capacity to implement so-called “command and control” regulations and, at any rate, should be freeing up rather than controlling the market.

“The swing of the pendulum away from stricter forms of regulation is evident not only at the level of some national governments, but also in the international arena,” says the research paper. “It was symbolized to some extent by the demise of the UN Centre on Transnational Corporations (UNCTC) in the early 1990s, and reinforced in 1999 when the [UN] 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.”

It may be too early to declare international trade and investment regimes off-limits to further social and environmental standards, the paper maintains. 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.

While there are important benefits to be derived from voluntary initiatives (VIs), there may also be a considerable downside, most notably perhaps for countries of the South, says the UNRISD paper. For instance, VIs 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. These types of “closed” agreements often result in “noncompliance, double standards, inadequate targets or standards, or greenwashing.”

VIs have mainly been adopted in the richer industrialized countries, where their apparent success has been contingent on certain institutional conditions associated 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.

Moreover, some of the major VIs associated with the promotion of corporate environmental and social responsibility in the South have been essentially designed by Northern actors, says the report. 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,” says the UNRISD paper. “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.”

While such VIs are often presented as effective alternatives to state regulation, their success in many industrialized countries has, in fact, often involved an important regulatory component. Moreover, 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 also 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 a strategy to minimize and weaken the role of trade unions, “preferring to offer a paternalistic package than have a recognized negotiating body to deal with,” says the report. VIs 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.”

Perils of partnerships

The growing attention to partnerships involving business and other development actors is generally justified on the basis of ‘new forms of governance’. In fact, this seemingly pragmatic, constructive and co-operative approach appears to be 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, the report cautions. 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.

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, the report points out. “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. 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 [Office of the UN High Commissioner for Refugees] 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.”

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 report observes.

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.”

The number of partnerships involving business and UN organizations such as UNCTAD, UNEP, UNIDO and WHO has also increased sharply in recent years. In 1999 some 15 TNCs participated in the preliminary phase of a project of the UNDP to establish the Global Sustainable Development Facility (GSDF) - an attempt “to find new and additional ways to promote sustainable human development in partnership with the global corporate sector which has heretofore had limited contact with the UN System.” That same year, the International Chamber of Commerce (ICC) endorsed the call by UN Secretary-General Kofi Annan for a compact between the UN and business in which corporations would voluntarily comply with UN standards associated with environmental protection, labour conditions and human rights and work with UN agencies towards that end.

The report cites some of the TNCs which, ironically enough, are associated with the best and the worst practices:

   *  Asea Brown Boveri (ABB), a sponsor of the GSDF and an active member of the World Business Council for Sustainable Development (WBCSD), but also facing “sustained campaigns” by environmentalists and human rights advocates against its involvement in various hydro projects, including the Three Gorges Project in China and the now indefinitely postponed Bakun Dam in Malaysia;

   *  Aracruz Celulose, the world’s largest exporter of bleached eucalyptus pulp, often cited for its efforts to promote sustainable development in Brazil, but facing allegations that “...its eucalyptus trees have dried streams, destroyed the local fauna, impoverished the soil, impeded the regrowth of native plant species, and drastically reduced the area available for cultivating basic foodstuffs ... This is not to mention land concentration and the expulsion of the rural population ...”

   *  Dow Chemicals, a US corporation selected to participate in the GSDF for “abiding by the highest standards of human rights, environmental and labour standards and norms”, but which, according to the Transnational Resource and Action Center (TRAC), “is probably the world’s largest root source of dioxin.”

   *  General Motors (GM), the world’s largest automobile manufacturer, involved in various environmental protection initiatives and partnerships, but member of “the hardline [Global Climate Coalition] ... [which] continued to be a bastion of reaction and misinformation ... and the Business Roundtable, which opposes the Kyoto Protocol ...”

   *  Mitsubishi Group, which actively cultivates an image of environmental responsibility through advertising and specific environmental projects but is reputed to be “a leading destroyer of tropical (and non-tropical) forests.”

   *  Novartis, the Swiss “life science corporation”, another participant in the GSDF and member of the WBCSD, which is accused of ignoring the fundamental Precautionary Principle of the Earth Summit in 1992 in its promotion of genetically modified crops.

   *  Rio Tinto, the British mining company, which is often cited for its standards of environmental reporting and for promoting “continued social development” and “sustainable livelihood”, and has partnerships with UN agencies such as the UN Conference on Trade and Development (UNCTAD). Yet, according to TRAC, the corporation “has created so many environmental, human rights, and development problems that a global network of trade unions, indigenous peoples, church groups, and community activists have emerged to fight its [alleged] complicity in, or direct violations ... in Indonesia, Papua New Guinea, Philippines, Namibia, Madagascar, the United States and Australia ...”

A notorious feature of much of the writing on corporate environmental and social responsibility, says the author, is that the “evidence” seems to be derived from a handful of anecdotes and case studies and/or broad generalizations about how firms behave in the context of capitalism and globalization. Surveys to quantify how many companies have improved their environmental and social performance are relatively few in number and generally measure changes in corporate policy and procedure rather than environmental and social impacts.

“The illusion of more profound change stems partly from the fact that the TNCs and business or industry associations involved are big players on the international stage and are actively publicizing their new approach through the media, corporate advertising, publications, conferences and international institutions. It is also partly due to the vast body of literature that exists on ‘best practices’ and the policies and practices of a relatively small group of companies that have taken a lead in the field of corporate responsibility. Such information is sometimes misleadingly construed as somehow representative of a larger universe of companies.”

   The limited nature of change can be summed up, according to the report, in terms of extremely piecemeal changes in corporate policy and procedures, a substantial gap between corporate rhetoric and practice, and the fact that the dominant model of economic growth continues to encourage business practices that degrade the environment and disregard the concerns of various stakeholders. (SUNS4691)