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October 28, 2003
Coordinate US Corporate Social Responsibility Policy, Kenan Institute Study Group Says
    by William Baue

A study group convened by the Kenan Institute recommends synchronizing US public policy on CSR and asking the SEC to consider requiring triple bottom line reporting.


What is the appropriate role for the US government to play in promoting global corporate social responsibility (CSR), which takes into consideration companies’ social, environmental, and ethical practices? This is the question addressed by a study group convened in 2003 by the Washington, DC-based Kenan Institute of Private Enterprise, a unit of the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill. The study group’s answer? Coordinate existing CSR initiatives, which are currently so broad and various as to confuse corporations and nongovernmental organizations (NGOs) alike.

“The US government already has a wide range of public policies that promote global CSR--there are many competing standards, guidelines, and initiatives that clutter the international marketplace,” said James Reeves, the institute’s associate project director.

The study group enumerated examples. Securities and Exchange Commission (SEC) and Environmental Protection Agency (EPA) regulations address corporate disclosure of environmental liabilities. The Foreign Corrupt Practices Act, passed by Congress, legislates ethical corporate behavior overseas. The Department of State administers human rights policies globally, and also issues responsible procurement guidelines for the General Services Administration (GSA) and the Department of Defense. Even the tax codes applied by the Internal Revenue Services (IRS) determine whether or not corporations can move their headquarters overseas to reduce their tax burdens.

Far from being devoid of CSR policies, the landscape of corporate activity is littered with enough CSR obligations to government agencies and departments to boggle the mind.

“Despite its activities, it is still unclear whether the US government finds global CSR a priority,” said Mr. Reeves, as evidenced by the lack of synchronization within the government. “What the study group agreed on was that the appropriate role of the government is to clarify the ‘lay of the land’ and to stop sending confusing signals to global actors.”

“The central point of our project was to identify the areas that both activists and businesses could agree on the appropriate areas for governmental involvement,” Mr. Reeves told SocialFunds.com.

The study group consists of employees from corporations such as Hewlett-Packard (ticker: HPQ) and Starbucks (SBUX), as well as from nongovernmental organizations such as Amnesty International, Friends of the Earth, and Oxfam. The study group also includes organizations that promote socially responsible investing (SRI), such as the Interfaith Center for Corporate Responsibility (ICCR) and the Social Investment Forum (SIF). However, all of the study group members endorsed the recommendations as individuals, not as representatives of their companies or organizations

The group issued a series of 18 recommendations that fall under six broad categories:

- Promote transparency and disclosure practices;
- Encourage adherence to internationally accepted social and environmental standards;
- Offer resources to improve governance institutions worldwide;
- Strengthen U.S. government coordination and capacity to promote global CSR;
- Convene multi-stakeholder dialogues to encourage and strengthen global CSR practices; and
- Provide incentives and use government procurement policies as tools to promote global CSR.

The study group recommends that the General Accounting Office (GAO) prepare a report reviewing existing US policies and programs that promote or undermine global CSR.

“The GAO report is an obvious place to start,” said Mr. Reeves, who co-authored a report last year for the National Policy Association that surveyed global CSR policy, focusing particularly on US policy. “The public could use an updated and more in-depth look at the current agencies’ and departments’ activities.”

The study group also recommends that the SEC establish a blue ribbon commission to consider rulemaking to require triple bottom line reporting on social, environmental, and financial issues as part of their annual filings. The SEC currently requires companies to report material environmental liabilities, but has come under much criticism for failing to enforce this rule.

“The SEC is inadequately involved in enforcement, which has led to policy confusion by not defining materiality,” said Mr. Reeves. “The issue of what is material and immaterial in environmental reporting will undoubtedly be addressed if/when this blue ribbon commission is established.”

A bipartisan group of Congressmen will host a brown bag lunch briefing on the study group recommendations on Capitol Hill on Thursday, October 30. Speakers include study group members with Paul Magnusson of Business Week moderating.

 

 
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