Corporate Social Responsibility - An Introduction

Definition

 

The World Bank defines Corporate social responsibility (CSR) as "the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development."[1]

In other words companies adhere to law, ethical standards, and international norms. Business embraces responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere and does not only consider the economic benefits of its shareholders. Furthermore, business promotes the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the inclusion of public interest into corporate decision-making.

 

What is it about?

 

In an ideal world Transnational Corporations (TNCs) would adhere to CSR spontaneously. The reality is unfortunately different and TNCs generally do not consider anything but profit maximization if they are not forced to.

As it was revealed only a few days ago[2] in 2006 the oil trader Trafigura dumped hundreds of tons of oil waste in Ivory Coast's capital Abidjan, although they knew clearly that the waste was highly toxic and represented a severe health hazard. At least 16 people died because of the poisoning caused by the waste and more than 30,000 suffered health problems. Trafigura had always claimed publicly that the waste was harmless, although they knew very well that this was not the case. Internal emails which became public show Trafigura's total contempt for the consequences their actions - which were the economically most convenient way to get rid of the toxic waste - would have on humans and the environment.

 

TNCs can be forced to accept their social responsibility in two ways: one is through laws, which oblige them to do so. Unfortunately both on European level and on the level of national governments little has been done thus far to hold TNCs legally accountable for their actions abroad.

The other way is through campaigns of NGOs and other civil society actors, which expose their behavior. This public "naming and shaming" often leads companies to change their behavior as they come to deem compliance to CSR as the lesser of two evils compared to ongoing public criticism of their activities, which risks to damage their business in the long term.

 

Why should we act?

 

Of the largest 100 non-financial transnational corporations, more than half of them are headquartered in the European Union. The current legal framework underpinning company structure consisting of separation of legal persons and thus limited liability of the parent company for the actions of the subsidiaries shields TNCs from liability for human rights abuses, environmental abuses and other violations of the public interest. The EU needs to ensure that any European TNC responsible for human rights violations and environmental destruction in third countries is held liable for these activities and put in place prevention mechanisms to prevent them. Such measures would be particularly valuable for third countries where the local institutions are weak or absent or where the government is unwilling or unable to take action itself.

 

Also the United Nations Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises, Professor John Ruggie, called for home countries taking regulatory action to prevent abuse by their companies abroad in his reports on the issue.[3]

 

 

The focus on natural resources

 

One of the areas - but unfortunately not the only one - in which TNCs have displayed a particularly careless attitude towards the impact of their actions on people in Africa is the exploitation of natural resources, which is why inside the CSR dossier there will be a special focus on natural resources. The desire to control economically profitable natural resources has been the driving reason behind several conflicts in Africa and especially inside Congo DRC. TNCs often did not care that their money was ending up in the pockets of armed groups and was so fostering and prolonging conflicts. For example investigations found that the UK-registered company Afrimex, which trades minerals from Congo-DRC through two companies registered in DRC, did nothing to prevent its affiliates from paying rebel groups in DRC during the war, thus contributing to the conflict and benefiting at the same time from the criminal activities of its affiliates.[4] Another British company, Amalgamated Metals Corporation (AMC), was found having a subsidiary, which was buying minerals from suppliers whose middle men had been trading with armed groups in South Kivu.[5]

 

One additional reason to focus specifically on natural resources is the launch of the EU's Raw Materials Initiative in November 2008. One of the pillars of the initiative is improving the EU's access to raw materials in third countries. For this purpose the EU intends to actively pursue a raw materials diplomacy with a view to securing access to raw materials in third countries. The EU also intends to make the access to primary and secondary raw materials a priority in its trade policy. In other words the EU intends to include in its trade agreements provisions, which make it easier for European companies to access raw materials in third countries. Particularly the EU intends to do so in those sections of the trade agreements which deal with services and government procurement. In the case of the trade relations between the EU and Africa this emerges in the negotiations towards Economic Partnership Agreements (EPAs). As the EC states it intends to insert rules in the agreements, which grant foreign (European) companies the same possibility to access raw materials as local (African) ones and wants to force the third countries' governments to accept common rules for the awarding of mining deals and revenues.

These kind of measures would lead to the reduction of policy space of the governments in Africa, which accept such trade agreements, as they would no longer be in the position to priorities local companies over European TNCs, which are generally better equipped and have greater resources, which gives them a competitive advantage.

 

Thomas Lazzeri

 

 

 


[1] http://www.ifc.org/ifcext/economics.nsf/content/csr-intropage

[2] The Guardian, 17th/18th September 2009

[3] Report of the Special Representative of the Secretary General (SRSG) on the issue of human rights and transnational corporations and other business enterprises "Business and Human Rights: Mapping International Standards of Responsibility and Accountability for Corporate Acts", 2007 and "Protect, Respect and Remedy: a Framework for Business and Human Rights, 2008

[4] UK company Afrimex broke international guidelines by sourcing minerals from a Congolese war zone, says British government www.globalwitness.org

[5] http://www.globalwitness.org/media_library_detail.php/797/en/updated_reponse_to_amc

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