Corporate Social Responsibility and Commonwealth Countries – potential for triple wins for government, businesses and communities Veronica Broomes* Introduction Can Commonwealth states realise more benefits for citizens from inward investments made by transnational businesses (TNs)? The answer may be a resounding yes if governments are able to take on board the strategies for Corporate Social Responsibility (CSR) envisioned and/or practiced by the potential transnational investor. Evidence so far suggests that many transnational businesses headquartered in developed countries embrace the principles of CSR or Corporate Citizenship as good business practice. Moreover, such companies are not shy of revealing their CSR credentials in the form of philanthropy or providing health care to employees. Governments in Commonwealth states, however, need to harness the potential benefits of practices and link them directly to investment frameworks. Government officials need to recognise CSR as an opportunity for investors to bring more than just jobs, foreign capital and source of taxes from employee earnings. Instead, CSR should be viewed as a mechanism through which businesses can make greater contributions to the economies of their host states. Contributions that are of direct benefit not only to the wider society but also for communities from where they source human and natural resources and new businesses that form part of their supply chain. Simultaneously, investors need to highlight aspects of their CSR strategies in investment proposals, that will allow them to add greater benefits to the societies in which their investments are made. Together, these approaches can result in greater benefits for communities/civil society. In return, this could culminate in wins not only for businesses and governments, but will result in communities becoming significant beneficiaries and not mere onlookers. Context for Corporate Social Responsibility The term CSR continues to be used widely even as other terms are coined. Among these are „inclusive business‟ by member businesses of the Sustainable Business Council on Sustainable Development and „corporate citizenship‟. There has been much debate about the suitability of the term Corporate Social Responsibility because it is applied to situations as disparate as philanthropy and taking a * Veronica Broomes, in association with CPSU, is pursuing funding for a project on Commonwealth states and Corporate Social Responsibility. Based in the United Kingdom, and with developing country experience, Veronica works as an independent consultant on environment and sustainability issues. Triple Bottom Line (TBL) approach to business, i.e., business not only for profit but considering social and environmental issues also. In developed countries, drivers of CSR have been consumers, shareholders and campaigning groups. The UK‟s Department for International Development (DFID) observed that companies integrating social and environmental issues in the mainstream of their business, i.e., applying a TBL approach are viewed favourably by investors. They identified the four drivers of CSR1 as: (i) (ii) (iii) (iv) consumers investment climate civil society employees Both the Commonwealth Secretariat2 and Commonwealth Business Council (CBC) have interlinked CSR with corporate governance, as defined in the Commonwealth Principles on corporate governance. In partnership with the Commonwealth Association for Corporate Governance (GACG), the The Commonwealth Secretariat had been at the forefront of work on corporate governance3. This resulted in events such as: First African Regional Forum on Corporate Governance (2001); Monterey Summit (2002) –where the importance of corporate governance for development was addressed, and Caribbean Forum on Corporate Governance (2003). For the purpose of this article the definition of CSR refers to voluntary actions by businesses that go beyond mere compliance with legislation and is consistent with the TBL approach which encourages businesses to consider not only profits, but people (social) and the planet (environmental). Approaches to CSR practices More than 50% of Commonwealth states are developing countries rich in natural resources or have economies that are heavily dependent on tourism. TNs in the larger 1 Corporate Social Responsibility (undated) http://www.dfid.gov.uk/pubs/files/corporate-social-resp.pdf 2 McKinnon, Don (2006). “The Social Responsibility of Businesses Called into Question. Remarks by Rt Hon Don McKinnon, Commonwealth Secretary-General at a plenary forum at the Conférence de Montréal (International Economic Forum of the Americas) 5 June 2006. 3 Commonwealth strategy on corporate governance for 2007 and beyond. Rt Hon Don McKinnon, Commonwealth Secretary-General . 20 February 2007, Marlborough House, London. economies of Commonwealth states such as the United Kingdom, Canada and Australia have set out their positions on CSR. This, however, does not seem to be the case in many of the smaller states and emerging economies. Increased understanding by policy makers in developing member states about CSR and implications for inward investments could inform them about the potential to leverage CSR practices by TNs. Leverage that could result in greater benefits for economies and strengthen government private sector partnerships. Pivotal to such informed decision making, however, is current and validated information about how TNs operating in developing countries interpret their company‟s policy on CSR when doing business in developed countries and the actions, if any, taken by investment agencies to explore and/or use the CSR agendas of TNs. Furthermore, approaches to CSR in developed countries may not necessarily be relevant to developing countries, many of which are Commonwealth countries. Early CSR reports were viewed by many as actions taken by businesses primarily in pursuit of marketing/public relations agenda, rather than integral to the operation of the business and its competitiveness. More recently, however, a less tunnelled vision has resulted in the mainstreaming of CSR initiatives in business operations. Greater understanding of what occurs in Commonwealth countries on the issue of CSR could lead to the provision of fiscal or other incentives for businesses to implement practices that reflect a triple, instead of single bottom-line approach, i.e., focusing on economic, social and environmental issues. More often than not, the CSR agenda is perceived as being driven by European-based shareholders and consumers of publicly traded and global conglomerates and campaigning groups in civil society. Increasingly, however, concerns about responsible business practices have become part of the ethos of TNs because of the business case for competitiveness. In addition to investments from European countries, there is a trend of south-south investments in Commonwealth states spawned by business growth in India and South Africa, both Commonwealth countries, and China, a non-Commonwealth country but with a growing presence in Commonwealth states in Africa. Greater understanding and knowledge of CSR by officials in government ministries and investment agencies, parliamentarians and civil society organisations such as chambers of commerce and trade unions could lead to revisions in national investment frameworks. This could result in the provision of fiscal incentives for specific social and environmental initiatives taken by investors that could impact positively on livelihoods and minimise, if not avoid, adverse environmental impacts. Such strategies could cause changes in the widely held perception that many governments in developing countries cannot negotiate from a position of strength with trans-national corporations. The eagerness of developing country governments to create jobs in their respective countries will no longer be viewed as indicating a willingness to generate those jobs at any price. Information gained through research could help Commonwealth governments to leverage the CSR strategies of TNs for the benefit of citizens, businesses and governments. This in turn could be linked to clearly identified initiatives that could speed up the rate of progress towards achieving specific Millennium Development Goals (MDGs). Considerable potential for this exists in respect of MDG 1 (eradicate poverty and hunger), MDG 7 (ensure environmental sustainablity) and MDG 8 (global partnership for development). Taking such an approach will require a paradigm shift in the way governments assess the parameters and performance indicators that constitute investment agreements made between governments and investors. Sector experiences of CSR Case studies about experiences from corporate businesses in developed countries in implementing and interpreting CSR are based on companies in developed Commonwealth states such as the United Kingdom, Canada, Australia and New Zealand. There are fewer examples from developing and emerging economies of Commonwealth states. The Copenhagen Business School shares experiences about corporate citizenship in developing countries, including three Commonwealth states4, South Africa, Kenya and Pakistan. Again with a focus on corporate citizenship, there was a ten-year review of CSR in Africa5. At the sector-specific level, the World Bank and International Finance Corporation (IFC) through the Multifibre Agreements6 considered the textiles and clothing industry in 10 countries including three Commonwealth states (Bangladesh, Sri Lanka, Lesotho). This work culminated with the formation of an in-country forum made up of representatives of government, business and trade unions to improve standards in the workplace. A few months before CHOGM 2005 in Malta, the International Institute for Environment and Development (IIED) published its perspectives on how CSR can deliver in Africa. It was noted that although the concept of CSR had gained some prominence within policy debates in Kenya and Zambia, implementation was limited and often restricted to philanthropy7. IIED observed also that “Creating space for national dialogue between government, business, civil society and donors on the role of the private sector in development can help to localise the CSR agenda, and to build trust and mutual understanding of the potential –and the limits – of businesses‟ contribution to development.” Sector-driven initiatives stem from the work on textiles and clothing closely associated with issues arising from discussions at World Trade Organisation (WTO) discussions. In the extractive industries, CSR has made some advances, again along the lines of governance and transparency. The Extractive Industries Transparency Initiative (EITI), 4 Corporate Citizenship in Developing Countries -New Partnership Perspectives (2006). Edited by E.R Pedersen and M Huniche. Copenhagen: Copenhagen Business School Press. 5 Corporate Citizenship in Africa -Lessons from the Past; Paths to the Future. Edited by Wayne Visser, Malcolm McIntosh and Charlotte Middleton. July 2006. 6 Institute of Social and Ethical Accountability (2006) Mapping the end of the MFA –A report by AccountAbility for the MFA Forum. 7 Kivuitu, Muno, Yambayamba, Kavwanga and Fox, Tom (2005). How can Corporate Social Responsibility deliver in Africa? Insights from Kenya and Zambia. Perspectives on Corporate Responsibilty for Environment and Development. Number 3 July 2005. International Institute for Environment and Development. announced by the then UK Prime Minister, Tony Blair, at the World Summit on Sustainable Development, brings businesses, governments, international agencies, and non-governmental organisations (NGOs) together to promote transparency over payments in the extractives industry8. In general, therefore, action has been taken in developed countries. When developing countries have been included in studies, these are often at the instigation of developed country interests. Developing Commonwealth states tend to be on the periphery of CSR through a focus on corporate governance, implementation of health and safety and human rights standards. There is, however, no distinct body of work on Commonweath states that could assist governments to revise their investment policy frameworks so as to seize the opportunities inherent in the CSR practices of transnational businesses. CSR and MDGs Governments and civil society should see CSR as representing opportunities, rather than challenges and as a superficial exercise by businesses to grow their markets and raise their profiles. If, and when, national governments mainstream some elements of the social and environmental actions/contributions of businesses into investment guidelines, there will be enormous potential to create triple wins – for businesses, governments and communities. Governments (individually or regionally) could broaden their investment packages to include more fiscal incentives, as standard policy rather than selective patronage, for investments that impact positively on social and environmental issues. This increases the likelihood of success and rate at which progress is made in realising the Millennium Development Goals by many Commonwealth member states. An example of this could be a company indicating in its investment proposal that it will source part or all of its electricity requirements from non-fossil based energy sources, e.g., solar, hydro power, to which governments can respond by providing specific fiscal incentives. This could include lower or zero rated duties and/or taxes on equipment and technology. There could be a double benefit to multi-nationals because of the potential to offset simultaneously carbon emissions arising from their developed country operations. Governments and communities stand to benefit also from additional energy available nationally, introduction of new technology to the country and lower levels of environmental impacts. This demonstrates that there can be opportunities for businesses to gain recognition for their contribution as responsible corporate citizens in partnering with national governments in making progress towards realising the Millennium 8 http://www.dfid.gov.uk/pubs/files/corporate-social-resp.pdf Development Goals: an observation made earlier in respect of corporate governance by the Commonwealth Secretariat9. Further benefits include: Businesses generating higher returns for shareholders as they are able to benefit from fiscal incentives offered by governments for contributions made in the social and environmental arena. Broadening of the criteria used by governments to measure successful investments so as to accord greater recognition and negotiating terms from considering indirect impacts of foreign investment, e.g., new enterprises arising from supply chain/procurement practices, capacity building in local communities. Forging partnerships rather than patronage could be attractive to investors, as businesses will be able to attain and sustain high levels of corporate governance. Role for Commonwealth states and organisations In urging governments to respect the voluntary nature of CSR, outgoing Commonwealth Secretary General (SG), the Rt. Hon. Don McKennon, observed that “CSR can never replace the government‟s role in implementing and enforcing the legislation through which its principles and practices can flourish.”10 The importance and relevance of CSR on the agenda of Commonwealths states was highlighted again by the SG in an address earlier this year to representatives of civil society, international partners and the private sector.11 He observed that corporate governance is about the principles and practices of the way societies are run; and, consequently, the effects, both positive and negative, are felt by people –citizens whose lives will be affected. The SG‟s remarks are consistent with ones made several months earlier by outgoing Secretary General at the International Economic Forum of the Americas (see Box 1). 9 The Social Responsibilty of Business called into question (2006). http://www.thecommonwealth.org/Shared_ASP_Files/UploadedFiles/C11D4D54-952F-4E1F-81601FE443E3E5DB_060606_CSRMontreal.pdf 10 The Social Responsibilty of Business called into question (2006). http://www.thecommonwealth.org/Shared_ASP_Files/UploadedFiles/C11D4D54-952F-4E1F-81601FE443E3E5DB_060606_CSRMontreal.pdf 11 Commonwealth strategy on corporate governance for 2007 and beyond. Rt Hon Don McKinnon, Commonwealth Secretary-General . 20 February 2007, Marlborough House, London Although acknowledging the potential for corporate governance to put governments in a stronger position to address the MDGs, the Commonwealth Box 1 Commonwealth Secretariat’s perspective on CSR. Secretariat observes that activities of companies could impact both positively and “Finally, I‟d like to look at specifically Commonwealth negatively on the progress perspectives on CSR. These are, you might say, „on the statute books‟. The Commonwealth Business Council presented them to made by governments in Commonwealth Heads of Government in Abuja in 2003, and they achieving the MDGs. were formally endorsed there. They took the form of a so-called In reviewing the Commonwealth Secretariat‟s work on corporate governance, it was recommended that there be increased support for corporate social responsibility as an intrinsic part of corporate governance12. The Secretariat needs to pursue a more integrated, rather than disjointed, approach in strengthening the understanding and application of CSR in Commonwealth states (Box 2). As yet, however, current programmes do not yet reflected this. Joint Plan: 6 promises from Government, 7 from Business, and 2 from Government and Business together. The Plan has been tested in Ghana, Mozambique and Tanzania – in each, a climate of dialogue has led to a climate of investment. Meanwhile, alongside the Joint Plan are the CBC Guidelines for Corporate Citizenship – on company values, company corporate governance, company relationships and the assessment of the different types of company impact. The CBC itself gives practical support, and assembles examples of best practice. I commend to you their website for exceptional examples: of companies supporting health in the workplace and the community (from AIDS, to dental care, to water sanitation) of companies supporting education and skills development (from scholarships to training) and of companies supporting the development of small enterprises.” Extract from remarks made by Rt Hon Don McKinnon, Commonwealth Secretary-General at a plenary forum at the Conférence de Montréal (International Economic Forum of the Americas) 5 June 2006. The Social Responsibility of Businesses Called into Question. 12 Lang, Liz (2005). Evaluation of Commonwealth Secretariat Development Assistance in the area of Corporate Governance 1996-2003. Evaluation Series. No. 75. Commonwealth Secretariat. Call to action in the Commonwealth Actions taken to mainstream social and environmental considerations in broader investment policy frameworks in developing countries of the Commonwealth could reduce investor risk and increase business competitiveness of the member state. It is timely, therefore, for actions to be taken beyond the approach to date of focusing on one or two strands of CSR, e.g., human rights, labour or considering a possible role for governments in shaping the CSR agenda. Governments should not be part of shaping the CSR agenda, this should be left to individual businesses or sectors, as demonstrated in the way health issues, especially AIDS, has been handled in Africa. Further, what is required is not another raft of legislation creating more hoops for businesses to jump through, with potential increase in business risk and associated Box 2 Scope for further advocacy by reduction in business competitiveness. Instead, there Commonwealth Secretariat is a need for governments to increase understanding of CSR at all levels - senior investment brokers, “Although inclusion of corporate social responsibility as part of corporate politicians/parliamentarians and policy makers. Such governance is one of the key distinguishing increase in understanding and awareness, beyond attributes of the Commonwealth‟s corporate governance, will help governments to definition, Secretariat support for CSR has devise additional fiscal incentives for investors – been very limited. There is scope to improve incentives that will create a business climate more this in advocacy, by cultivating better links with organisations working in the field and conducive to implementing longer lasting business by improving the content of some of the initiatives that have more social and environmental corporate governance work, e.g., by benefits. strengthening CSR issues in course The way forward -questions to be answered materials. There is also potential for the corporate governance work to complement and strengthen the work that Secretariat divisions are already doing in CSR-related areas, including environmental work, human rights work and gender work. In any action, the Secretariat should cooperate with the CBC, which has taken the initiative in this area.” Commonwealth countries should not feel that they will be acting in an anti-business way if they not only recognise CSR strategies of companies but offer fiscal incentives to companies based on positive impacts from social and environmental interventions in the communities where they are Extract from evaluation report on corporate governance based. Indeed, in developed countries, large programme of Commonwealth Secretariat. Lang, Liz institutional investors are making ethical choices (2005). Evaluation of Commonwealth Secretariat Development Assistance in the area of Corporate about where they invest and expect, if not insist, that Governance 1996-2003. Evaluation Series. No. 75. companies seeking financing should have in place Commonwealth Secretariat. codes for corporate social responsibility or have signed up to the United Nations Global Compact or the Equator Principles of the IFC. It has been reported that 40 developing countries, including a few Commonwealth states, have prepared their own national or regional codes on CSR13. While this is a start, it does not go far enough in bringing on board more national governments to mainstream elements of the social and environmental actions/contributions of businesses into 13 http://www.thecommonwealth.org/Shared_ASP_Files/UploadedFiles/06A86334-748C-46AF-AFA2E6202F45094F_CorporateGovernance.pdf investment guidelines. Such actions represent have enormous potential to create triple wins –for businesses, governments and communities. In order for governments to provide more benefits to citizens from inward investments, it will be necessary to increase the attractiveness and competitiveness of the investment climate in their countries. They need to go beyond job creation, foreign currency generation, local revenue earnings from personal income tax and general compliance with the laws of the host country, especially in areas of human rights and environmental impacts. Governments (individually or regionally) need to broaden their investment packages to include more fiscal incentives, as standard policy rather than selective patronage, for investments that impact positively on social and environmental issues in their states. In assisting governments in developing Commonwealth states to arrive at a point where they can make informed decisions about how they can leverage CSR practices of businesses, answers are required to the following questions: Have governments in developing Commonwealth states considered that TNs investing in their countries may limit the extent to which they apply CSR practices? What are the potential benefits for communities, businesses and governments, if elements of CSR strategies are integrated/mainstreamed into the investment framework and economic policies? Which sectors have greater potential for applying social and environmental considerations when negotiating investment packages with developed country governments? Which of the MDGs are best suited for partnership with businesses in order to increase the rate of progress?
Pages to are hidden for
"Corporate-Social-Responsibility-and-Commonwealth-Countries-"Please download to view full document