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The Guardian: Beyond the bottom line

The Guardian: Beyond the bottom line

Andrew Pendleton and David Vidal

Saturday June 12, 2004

Why would anyone oppose socially responsible companies? asks David Vidal; because it’s a facade, says Andrew Pendleton

Dear David,

One of the dangers of corporate social responsibility (CSR) is that it sounds like such a good thing. Who could be opposed to the idea of companies behaving in a socially responsible way?

Unfortunately companies cannot be left to self-regulate. Take Shell, for example. Until the company’s recent fall from grace over the misreporting of oil reserves, it had successfully made its CSR sound like a good thing. And yet in Nigeria, where the killing in 1995 of anti-oil activist Ken Saro-Wiwa by the former military dictatorship precipitated some of the company’s past troubles, its relationship with many communities is still woeful.

Shell also still spills far too much oil in Nigeria – 20,000 barrels in 2002 – and fails to clean up some of these spillages before they have polluted people’s drinking water and killed their fish. The irony is that while Shell’s reserves fiasco has brought a rapid rebuke from regulators, its impact on people in Nigeria scarcely raises a regulatory hackle.

So it’s time to look behind the shiny façade of CSR, with its plethora of glossy reports and high-earning consultants, and check the substance-ometer for signs of impact. This is what Christian Aid did in its recent study, which argues that, in spite of a decade of hard work on global standards for companies, too many poor communities are still losing out because of big companies’ actions.

Yours sincerely, Andrew

Dear Andrew,

We live in a very dangerous world indeed. But I hardly think that the attractive “sound” of CSR rises to the level of the kind of danger that surrounds us all these days. So why don’t we call it an issue instead of a danger?

That said, I have to tell you that it really is a dangerous thing to make the perfect the enemy of the good! Holding companies to a standard of perfection in CSR performance is a false promise. My advice is to peremptorily dismiss the perfection standard as unwise and unachievable in this life.

I would not pretend to respond on behalf of Shell, but it is disheartening to see how companies that appear willing to confront difficult issues in full public glare are held up to discredit but not to credit. Governments fail miserably and try to hide their failures. Civil society organizations serve a wonderful public purpose in often bringing malfeasance to light, but are not themselves paragons of transparency. CSR is not for the faint of heart and we should applaud those willing to take on its risks.

Yours, David

Dear David,

I would still prefer to talk about danger. Had you been living in a south-Sudanese village three years ago, then you might have thought that being bombed and burned by a government keen to make the area safe for western oil companies was dangerous. Some of the companies there had extremely polished CSR policies. But when crunch time arrived, they refused to put people ahead of profit and suspend operations in order to put pressure on the Sudan government.

Ask the communities who live around Coca-Cola’s bottling plant in Kerala, India, whether they consider it dangerous that their wells have dried up. And yet Coke kept pumping water from the ground when a sensible precaution might have been to stop until the problem was solved. The company’s CSR promise to “refresh everyone it touches” no doubt seems ironic in Kerala.

We are not against companies acting responsibly of their own accord. But allowing corporate social and environmental standard-setting to remain in the purview of voluntary initiatives is wholly inadequate and leaves companies free to transgress with impunity – as many do. It’s time that a global approach was taken to corporate regulation to put an end to the double standards where companies have to meet stringent rules in the west, but can throw away the rule book when they touch down in the third world.

Yours sincerely, Andrew

Dear Andrew,

You are correct that there but for the grace of God go we. But you have also constructed a syllogism that is a bit of a stretch: premise a) being bombed is dangerous; premise b) the danger comes from a government trying to please companies; therefore conclusion c) companies are to blame and their CSR policies are not far behind in being guilty too.

But you have a larger point that I fully concur is the crux of the issue today – as it has been throughout most of human history – and not just as it relates to business conduct but also to human conduct. Do we prefer rules or do we go for norms? Must it be regulation in the white trunks in this corner and voluntary initiatives in the black trunks in that corner? And never the twain shall meet? Here I fundamentally disagree with your direction.

By themselves, rules do not causally result in the conduct we aspire to. Both rules and norms are needed, and too much reliance on rules gives us the kind of fundamentalisms that are at war with society all over the world today. Surely we can do better than that.

Yours, David

Dear David

The primary legal responsibility of companies is to make profit for shareholders, and it is this which skews the whole debate. While business is overwhelmingly accountable to shareholders in the rich world, other people who are affected in the poor world, such as employees and nearby communities, have to rely on the goodwill of companies to get (or often not to get) their just deserts.

Add to this the desperation of many developing countries to attract investment by multinationals and in doing so enter a game of “how low can our ethics go”, and you have a recipe for disaster.

CSR is a laudable attempt to square this circle without changing the rules of the game. But it is a compromise. It allows business to proceed as usual with little risk of detection if one or other part of a business fails to uphold its CSR policies.

Worst of all, if there is a deficit of rules and a surplus of expectations, then it is impossible when a company fails to meet those expectations, for the victims to seek justice.

Yours sincerely, Andrew

Dear Andrew,

The witty economist John Kay said that “the view of business as necessarily selfish, narrow and instrumental is, as it always has been, nonsense”. I agree. To restrict our appreciation of business motives and outcomes to pure accountability to shareholders belies commercial history and our daily experiences in the marketplace. Transparency is on the rise, and not because shareholders are clamouring for it.

Yours, David

Dear David

In Britain in the early 19th century, there was a handful of progressive business people, such as the Rowntrees and the Cadburys, who began of their own accord to improve the conditions of their workers. But the lot of factory employees did not improve across the board until the Factories Act was passed and inspectors were sent round to find the transgressors.

In the 21st century, the “norms” are now well-enough understood. We’ve had the Universal Declaration of Human Rights for more than 50 years, and plenty of time to digest the information about the impact of climate change. And we doubtless have some “Rowntrees” and “Cadburys” too. As one hard-headed City investor recently told me: “Regulation is an expression of our collective knowledge.” We have the collective knowledge, so why not now make it law?

Yours sincerely, Andrew.

Dear Andrew,

Absolutely correct. The Quakers have had an impact far beyond their numbers in the ethical growth of the societies they have lived in and in the institutions they have run. It is a tribute to their commitment to a higher authority, and reflects a norm of applied ethical conduct we can all aspire to.

Of course, rules, regulations and laws do matter, but not exclusively so. In business as in life, good conduct is not only about compliance with the law, but also about motive, as the great Quaker business innovators amply demonstrate.

Yours, David

· Andrew Pendleton is head of trade policy at Christian Aid and author of the charity’s recent report Behind the Mask: the Real Face of CSR. David Vidal is research director, global corporate citizenship, at the Conference Board, which undertakes research on corporate governance and business ethics.

http://www.guardian.co.uk/comment/story/0,3604,1236970,00.html

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