Underpinning ethical commitments with binding regulation

Financial Express.bd, (Bangladesh): Contradiction between rhetoric and reality

“Christian Aid, then, wants to give companies’ ethical commitments ‘teeth’ by underpinning them with binding regulation.”

Monday 5 September 2005

9/5/2005

All day a steady file of people make their way up and down the potholed main road running through Umuechem, going to and from a polluted stream that is now their only source of water. Large trucks thunder by at regular intervals, on their way to and from the oil pumping station on the outskirts of town. For, despite the lack of basic amenities, this is the oil-rich Niger Delta of southern Nigeria.

As well as taps that are dry, this town of 10,000 people also has a hospital that has never treated a patient, a secondary school where no lessons have ever been taught, a post office that has never handled a letter and a women’s centre that has never held a meeting. All were supposed to have been supplied under ‘community development’ schemes, funded from oil money — local wells produce 15,000 barrels a day. But all have failed or remain unfinished.

Four of these projects were ‘generous’ gifts from the Shell Petroleum Development Company of Nigeria – the oil giant’s subsidiary that runs the flow station near Umuechem and is the country’s dominant oil company. The others, including the water system, came from the state-financed Nigeria Delta Development Corporation, which works alongside Shell — to similar effect.

Sadly, this story of failure is not new. In 1990, when the country was under military rule, local young people mounted a protest about the lack of such facilities. Shell called in the police, most of the town was burned to the ground and 80 people were killed. To this day, no one has received a penny in compensation and the basic amenities are still missing.

This is the story of corporate social responsibility — or CSR — writ large.

Certainly, it is a story that stands in stark contrast to Shell’s professed commitment to ‘core values of honesty, integrity and respect for people’.

Outside certain areas of business and investment and supporters in the public sector, few people will know much about what CSR is, where it comes from and how it works. If they have ever heard of it, they will probably just think that it sounds like a good thing (which it does, that is part of the point). But this is now a big, and growing, industry, seen as a vital tool in promoting and improving the public image of some of the world’s largest corporations.

In simple terms, companies make loud, public commitments to principles of ethical behaviour and undertake ‘good works’ in the communities in which they operate. It sounds and looks like a modern version of selfless philanthropy and no doubt in many individual cases is motivated by a genuine wish to help and has led to some benefits. What’s different is that companies frequently use such initiatives to defend operations or ways of working which come in for public criticism.

‘We can’t be so bad,’ would go a company’s clichéd CSR-backed response. ‘Look at all the nice things we do.’

CSR, in other words, can merely become a branch of PR. Sometimes this looks like the only reason for spurts of development activity by large companies. Shell, for instance, was at the forefront of CSR in Britain, following the joint public relations disasters of the Nigerian government’s execution of human rights activist Ken Saro-Wiwa and the row over Shell’s plan to dump the Brent Spar North Sea oil platform — both in 1995. Certainly for some, such as those living in Umuechem, Shell’s CSR programme has brought no tangible benefits.

Christian Aid, of course, supports responsible and ethical action by business. The problem with CSR, we say, is that it is unable to deliver on its grand promises. The case studies in this report highlight that the corporate world’s commitments to responsible behaviour are not borne out by the experience of many who are supposed to benefit from them.

In some cases, the rhetoric and the reality are simply contradictory.

Shell in Nigeria claims that it has turned over a new leaf there and strives to be a ‘good neighbour’. Yet it still fails to quickly clean up oil spills that ruin villages and runs ‘community development’ projects that are frequently ineffective and which sometimes even widen the divide in communities living around the oilfields.

British American Tobacco stresses the importance of upholding high standards of health and safety among those working for them and claims to provide local farmers with the necessary training and protective clothing. But contract farmers in Kenya and Brazil claim this does not happen and report chronic ill-heath related to tobacco cultivation.

Coca-Cola emphasises ‘using natural resources responsibly’. Yet a wholly owned subsidiary in India is accused of depleting village wells in an area where water is notoriously scarce and has been told by an Indian court to stop drawing ground water.

Christian Aid is saying that CSR is a wholly inadequate response to the sometimes devastating impact that multinational companies can have in an ever more globalised world — and that CSR is actually used to mask that impact. Those who suffer the most as a result are the poor and vulnerable people in developing countries and the environments in which they live.

Business, moreover, has consistently used CSR to block attempts to establish the mandatory international regulation of companies’ activities. Their basic argument is that CSR shows how committed corporations already are to behaving responsibly and that introducing such regulation could destroy this good will. Business leaders are also constantly saying that regulation is bad for their profits — the two statements are, of course, not unconnected.

Modern CSR can be seen to have been born during the 1992 Earth Summit in Rio de Janeiro, when UN-sponsored recommendations on regulation were rejected in favour of a manifesto for voluntary self-regulation put forward by a coalition of companies called the World Business Council for Sustainable Development. Its version of events was endorsed by the US, the UK and other western governments. The British government, for example, is still a vocal supporter of voluntarism.

Such resistance to regulation, this report argues, has left the worst corporate abusers effectively unrestrained, and the victims of their actions without adequate means of redress. Whatever responsible initiatives companies choose to carry out on their own behalf, binding international standards of corporate behaviour must be established to guarantee that the rights of people and the environment in developing countries are properly protected.

‘There are some companies that will only take social responsibility on board if they have to,’ one retail-sector source told us. ‘You’ve got to use regulation to make them.’

This is not pie-in-the-sky wishful thinking. There is already a model of how such regulation could work in moves currently being made to curb bribery. Since 1997, some 35 rich countries of the Organisation for Economic Cooperation and Development (OECD) have signed up to a convention that outlaws the bribery of foreign public officials by business people.

This is the first modern example of internationally agreed, legally binding regulation for non-financial reasons.

Britain, after a bit of OECD prodding, has now fulfilled its obligation by enacting new anti-bribery laws. More than 100 UN member states appear likely to take this one stage further and have already signed a UN convention on bribery. These activities have led to a far greater interest among business in tackling bribery.

Christian Aid is now calling for a similar framework of international regulation, backed up by legislation at a national level, to ensure the enforcement of real social responsibility in the corporate world. Introducing the threat of prosecution and legal action, with resulting detailed disclosure of company documents, would create a powerful incentive for companies to behave responsibly.

At a national level, we want the UK government to:

adopt new laws to make corporate social and environmental reporting and disclosure mandatory for British companies — including the disclosure of payments to overseas governments, information on the social and environmental impact of overseas operations and information on legal actions against companies.

frame new responsibilities for company directors to give them a ‘duty of care’ for communities and the environment, making them legally accountable for the actions of their companies overseas.

change the law to enable people harmed by British companies’ overseas operations to seek redress in UK courts and to provide the resources to enable them to do so.

The European Union also has a critical role to play internationally, as its member states are home to some of the world’s largest and most influential multinational corporations.

Christian Aid, then, wants to give companies’ ethical commitments ‘teeth’ by underpinning them with binding regulation.

We are advocating a move beyond corporate social responsibility to corporate social accountability – meaning that companies in future will have a legal obligation to uphold international standards.

Then and only then, we believe, will the corporate world as a whole be able to live up to its professed commitment to high standards and sustainable development in its dealings with some of the world’s poorest people.

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