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Business Partners for Development
Natural Resources Cluster
Re-thinking Corporate Social Responsibility:
A Partnership Approach
Protests against globalisation from Seattle to Genoa, and effective boycott
campaigns, provide evidence of a growing discomfort with the progress of
economic globalisation, and in particular with the conduct of global companies in
foreign countries. Regardless of the merits of individual campaigns, this
discomfort underlies some serious questions about the magnitude of the social
responsibilities of corporations in some of the poorest regions of the world.
Pressures from investors, competitors, other stakeholders and new international
legislation are affecting many corporations. In response, strategic decisions at the
corporate level have gone beyond infrastructural concerns about access to assets,
new technologies and capacity, to include ethical decisions that range from
questions on the local environment, to social cohesion and good governance.
With reputation and operating environments at risk from disgruntled local
communities, the challenges are real. Increasingly investment banks are
incorporating environmental and social conditionality into loan terms. Pressure
groups are purchasing shares to influence strategic decisions at annual meetings.
Even consumers are aware of their buying power in the global marketplace.
Evidence is also mounting that higher social standards may ultimately lead to
improved profits, reduced cost liabilities and greater shareholder value. Despite
these sticks and carrots, not all agree that corporations should join the ethical ‘band
wagon’ of corporate social responsibility.
Some believe that corporate social responsibility distorts the market by deflecting
business from its primary role of profit generation. David Henderson, the former
chief economist at the Organisation for Economic Co-operation and Development
argues that the ‘fad’ for corporate social responsibility is doing real harm,
privatising public policy and hence removing governments from their core
responsibility. A recent editorial in the Economist (22 December, 2001, “The
Future of the Company: A Matter of Choice”) notes that governments are
increasingly using regulation to force companies to pursue ‘what used to be their
own social ends’; and with regard to foreign operations, that ‘multinationals are
now seen as tools, via fair-trade regulations, to sort out the evils of third-world
poverty’. It is not altogether surprising then that some commentators are
beginning to question whether the time has not been reached when governments,
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corporations and civil society organisations should ‘step back’ and re-think
corporate citizenship altogether (Zadek. S. Foreign Policy Centre, Global Thinking,
Winter 2001).
One answer to this need for a ‘re-think’ is the emergence of a new approach to
corporate social responsibility developed by the Business Partners for
Development’s Natural Resources Cluster (BPD-NRC).
BPD and Tri-Sector Partnering
The BPD-NRC is a three year programme of work aimed at improving the way in
which oil, gas and mining (i.e. natural resource) corporations operate in developing
countries. Created by the World Bank Group, the UK’s Department for
International Development, CARE International, and several of the leading oil, gas
and mining corporations, including Shell International, BP plc, Rio Tinto, Anglo
American, and Placer Dome, the programme is one of four clusters exploring how
business, governments and civil society, including nongovernmental organisations
(NGOs) and local communities, can work more closely together through Tri-Sector
Partnering: strategic alliances for managing social issues that draw on the talents of
organisations from across the three sectors of society: business, government and
civil society
At a fundamental level, foreign investment provides revenue for a country through
royalties and taxes that corporations pay to the government, part of which is
reinvested into the development of communities. However poor resource
management, civil unrest and lack of transparency have often resulted in revenue
failing to reach these communities. In addition, corporations terminating their
investment often leave behind weak infrastructures unable to sustain communities.
Lastly, local demands on companies to increase their levels of voluntary social
investment can eat into cash reserves, especially at the time of set-up or closure -
stages of the operation when revenues are generally low.
From the corporate perspective, Tri-Sector Partnering is a step forward for building
a more durable ‘social’ license to operate, enabling companies to leverage
additional resources to manage social issues, and sharing the risks of social
investment.. It is being branded as ‘smart’ or ‘intelligent’ corporate social
responsibility; “a management tool to deliver business and development outcomes
by optimising the effectiveness of different partner’s resources and core
competencies,” according to Michael Warner of the BPD-NRC Secretariat who has
played a key role in coordinating the work and drawing lessons from its outcomes.
From a development perspective, the approach brings to some of the poorest
regions of the world the performance and technical strengths of oil, gas and mining
corporations, but puts them to use in ways that ‘facilitate’ the implementation of
government development programmes, rather than ‘replacing’ them. In addition,
the presence of the company, and of its own ‘in-house’ strategies for corporate
social responsibility, provide an entry point for communities, non-governmental
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organisations and international donors to realise poverty reduction targets across a
wider population.
The BPD-NRC Partnership Projects
BPD-NRC has developed the concept of Tri-Sector Partnering in collaboration
with investing companies in mining, oil and gas projects around the world. Six
partnership projects have been developed and tested. The range of projects include
deploying the partnership approach to: restore the income of communities affected
by mine construction (Integrated Coal Mining in India); promote local business
(Anglo American in Zambia); provide health care services to the local population
(Placer Dome in Venezuela); close a mine site (Rio Tinto in Indonesia); reduce
social tensions (Shell, Nigeria); and contribute to regional development (BP in
Colombia).
Regions like Casanare in Columbia struggle to attract future economic
opportunities due to poor infrastructure and nationwide armed conflict. Here BP
and its operating partners have established a steering committee with regional
government and NGOs. BP’s Mary-Jane Klocke says the company set out “to
promote the creation of a participative and educated civil society that builds the
Casanare of our Dreams through the protection of natural resources and the
sustainable development of competitive agriculture and livestock production.”
The Niger Delta is an area with a legacy of mistrust between local communities
and oil companies. Shell has become active in the BPD programme in an effort to
rebuild this trust, using the studies undertaken to assess the environmental impacts
of new oil and gas field projects as the vehicle for tri-sector partnering on a range
of social priorities.
New investment by natural resource companies often brings expectations of
prosperity amongst local communities, as well as conflict through families being
displaced and livelihoods being lost. Integrated Coal Mining Ltd (ICML), a
subsidiary of the Calcutta-based electricity generating and distribution company
CESC, met with rising levels of dissatisfaction during the delayed development of
the Sarshatali coal mine in West Bengal, India.
West Bengal is an area where 65% of the households fall below the poverty line;
infrastructure is poor with no hard surfaced roads, no electricity and infrequent
health care. The prospect of complicated and costly income restoration and
community development stimulated a partnership between ICML, two regional
NGOs, the Office of the District Administrator and community leaders to develop
income earning opportunities, a local road and health care facilities. As with all
partnership approaches advocated by BPD-NRC, responsibilities were divided up
according to the core competencies of the different partners. ICML provided
construction equipment, technical personnel and shared costs for infrastructure
development with local government, whilst NGOs mobilized community
participation and conducted market research on income restoration plans.
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Investment plans in Venezuela were also in danger of becoming socially unstable
when, due to low international gold prices, Placer Dome decided to suspend its
plans to develop a mine in Bolivar State. With limited financial resources for social
investment, Placer Dome elected to engage in a partnership approach with local
communities, regional health authorities, an international NGO and a local brigade
of the National Guard. The partnership led to construction of a major health
facility serving not only future mineworkers but the whole surrounding area.
It is not only the development stage of project investments that requires a re-think
in the way companies discharge their social responsibilities. The termination of a
mining operation is accompanied by a loss to the host country of revenue and,
more locally, it frequently leads to the collapse of the infrastructure (both physical
and social) that had been supporting the mine. To prepare for closure, ways need
to be found to diversify the local economy and fund and manage public
infrastructure.
In Zambia, work continues to explore ways in which an Anglo American company
– Konkola Copper Mines – might partner with its investors and others to provide
venture capital and new markets to local businesses. In East Kalimantan, Indonesia,
Rio Tinto is preparing a mine for closure in 2004. A series of working groups have
been established drawing on the talents of the company, communities , NGOs and
government, with the aim of finding solutions to the social issues surrounding the
eventually withdrawal of the company.
Re-Thinking Who Does What
The key element of the BPD/NRC approach to partnership is that all partners
contribute their core competencies. The ‘pooling’ of complementary competencies
is proving highly cost-effective, with each party contributing resources within their
normal range of activities, thus affecting only its ‘variable’ costs rather than
introducing new ‘fixed’ costs. This contrasts with some corporations which, in the
recent past, have invested millions of dollars developing ‘in-house’ capacity for
community development and poverty reduction - competencies with which
communities, NGOs and donor agencies have over 50 years of experience. In
contrast, as new ‘fixed costs’ for the company these competencies are vulnerable to
cut backs in times of economic uncertainty.
The health facility in Venezuela was successful and cost effective because all
sectors were responsible for, and felt ownership of, a particular part of its
development. The company organised the project management of construction,
providing financing and building materials; the Ministry of Health sponsored
training for local residents; a regional NGO supplied the medical equipment; and
communities supplied voluntary labour and food.
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Re-Thinking Who Can Affording Corporate Social Responsibility
Tri-Sector Partnering is an approach that may well work for any size of company .
For example, the Sarshatali coalmine in West Bengal is a small investment by
comparison to those of the major multinationals, yet the partnerships developed
through the BPD programme have had a significant impact on the capability of
local people to restore their incomes following the acquisition of land by the
company. The approach has also led to cost savings and reputational benefits for
the company. An indicator of the success of the approach is the current plan of the
company and local NGOs to develop new partnerships, independent of any
assistance from the BPD programme.
Re-thinking How We Get There
We refer to tri-sector ‘partnering’ because the approach is, in effect, a continual
process of negotiation and re-negotiation. Bringing non-traditional parties
together involves a style of negotiation designed to generate a new consensus in
society and new patterns of working between the state, private sector and civil
society. The BPD/NRC programme has invested heavily in developing and
testing techniques of negotiation and facilitation, as well as exploring how best
decisions and responsibilities among the partners should be structured. The
BPD/NRC has developed guidance to help each party undertake an ‘internal
assessment’ of the risk, costs, benefits and alternatives of entering into partnership,
and for negotiating voluntary Partnering Agreements that capture the partners’
shared vision, objectives and roles. As Michael Warner notes, drawing on first
hand experience as a partnership broker in the BPD programme, “this is not about
the ‘hard-ball’ negotiation of formal contracts, where each party tries to win
regardless of the cost to the other. It is about a ‘consensual’ style of negotiation
which re-defines, by agreement, the lines of responsibility and benefit across the
three sectors of society”.
Re-Thinking the Profession
There is growing concern that, although leading corporations (particularly those in
the UK) have made remarkable efforts in implementing policies for corporate
social responsibility, when compared to the professionalism inherent in
implementing environmental policies (ISO 14001, Environmental Impact
Assessment procedures, legal frameworks for environmental quality standards etc.)
implementation of social policies lags far behind. What Tri-Sector Partnering
provides is a systematic management tool for companies to translate social policies
developed at the corporate level, into action at the operational project level. An
example of this can be seen with the recent partnership between Transredes S.A. (a
Shell/Enron/Bolivian pipeline operating company in Bolivia), CARE Bolivia (an
affiliate of CARE, the international community development NGO) and local
government municipalities. Through the partnership, the company has been able
to honour its policy commitment to communities affected by oil spills that
compensation programmes would foster long-term, sustainable, community
development.
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Business Partner for Development
The BPD-NRC is one of the few global programmes on corporate social
responsibility that has attempted to develop specific tools and techniques to
professionalise the discipline. Evidence-based tools are available from the
programme to guide partners and brokers in assessing the merits of the partnership
approach against the alternatives, in negotiation Partnering Agreements, and in
evaluating the value of partnerships for business, community development and
governance. This guidance, along with detailed case-studies and training modules,
are available through the BPD/NRC web-site: www.bpd-naturalresources/org.
Not without risk, nor without benefit
The NRC/BPD programme remains work-in-progress and has argued at length that
the approach is not without risk. For example, companies that play a key role in
establishing partnerships that eventually fail, are at risk of being most strongly
associated with this failure; NGOs risk loosing their independent credibility status;
and governments face political risks from ceding partial control of social services
in the short term, as well as the risk of receiving only limited credit for social
improvements delivered through partnership.
Nonetheless, all parties also feel the benefits. The partnership projects assisted
through the BPD/NRC programme have shown that Tri-Sector Partnering is far
more than public relations and stakeholder consultation. By harnessing
competencies from across the spectrum of society, tri-sector partnering can lead to
more sustainable community development, increased transparency and
accountability within the public sector, and benefits for companies in the form of
reduced liabilities associated with social responsibilities, more efficient use of
resources allocated to social programmes, reduced risks to investments and
improved regional competitiveness and reputation.
Guaranteeing the continuity of the partnerships over time, finding incentives that
encourage partners to share control, and knowing how to use the core competencies
of companies more intelligently to reduce poverty, are challenges that still need to
be overcome. However, through trial and error, the BPD/NRC has learned lessons
that demonstrate the ‘art of the possible’: a re-think of the way that corporations
discharge their new social responsibilities, and one that involves ‘all’ parts of
society, not just business.
Prepared by the Secretariat of the Natural Resources Cluster, Business Partners for
Development, c/o CARE International, 10-13 Rushworth Street, London SE1 0RB,
Tel 0207 934 9334; Fax: 0207 934 9335;
e-mail bpd@uk.care.org.
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