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February 26, 2004
Report Favors International Regulation Over Voluntary Corporate Social Responsibility
    by William Baue

A recent report by Christian Aid argues against the voluntary aspect of CSR and for international regulation. Part one of this two-part article discusses support for the report; part two presents criticism of the report.

Late last month, Christian Aid issued a report critiquing corporate social responsibility (CSR), which the UK-based anti-poverty religious charity defines as an "entirely voluntary" initiative to promote self-regulation on social and environmental issues.

"The CSR movement has, we believe, become about the pursuit of voluntary action in order to build an argument that business does not need further regulation," said Andrew Pendleton, senior policy officer at Christian Aid and author of the report.

The report's characterization of CSR as a tool for ducking accountability has fueled CSR skeptics and frustrated the corporate community as well as CSR advocates, who find the report lacking in breadth and academic rigor. Part one of this two-part article considers the case of the former constituency, part two the latter.

"People are becoming increasingly disheartened with CSR initiatives," said Dr. Jem Bendell, who co-authored the 2003 Lifeworth Annual Review of Corporate Responsibility for the Anita Roddick-founded New Academy of Business. "[These initiatives are] often used to promote an ideological agenda that gets big business and government off the hook for the state of the world."

"Christian Aid's recent report shows that major NGOs [nongovernmental organizations] are turning against CSR," Dr. Bendell continued. "It's time for CSR to grow up and address the systemic problems with globalization, or fade away into irrelevance."

The Christian Aid report identifies CSR as a systematic attempt to keep control over social and environmental policies and practice in corporate hands and out of regulators' hands. The report, entitled Behind the mask: The real face of corporate social responsibility, makes its case against CSR in section one, and presents its recommendations for international regulation in section three.

Bookended between these two sections are case studies of Shell (ticker: RD) oil extraction in Nigeria, British American Tobacco (BATS.L) farming in Kenya, and Coca-Cola (KO) water usage in India, all intended to illustrate the shortcomings of CSR. Christian Aid chose these three corporations due to their reputations as CSR leaders that implement innovative social and environmental solutions.

"The leaders, it strikes me, will always innovate regardless of where the regulatory bar is set," Mr. Pendleton told "We do not deny that CSR has brought about change in some areas--we simply say [voluntary CSR] is wholly inadequate in order to guarantee basic standards -- and look at these three examples."

If CSR leaders cannot honor basic human rights and environmental stewardship, what does that say about the rest of the CSR pack, the report suggests.

"For instance, Coca-Cola has always maintained that in Kerala, India, where it stands accused of depleting groundwater, that it has complied with what the government has asked," explained Mr. Pendleton. "That may be true, and Christian Aid has not accused Coke of breaking the law, but if a company commits itself to high standards of 'corporate citizenship,' then it must live up to these standards regardless of where it works--especially in places where current government requirements are too low to protect their citizens."

Christian Aid is not alone in criticizing the voluntary approach. In June 2003, the Organisation for Economic Co-operation and Development (OECD) released a report on this very issue entitled Voluntary Approaches for Environmental Policy: Effectiveness, Efficiency and Usage in Policy Mixes.

"This report concludes that the environmental effectiveness of voluntary approaches is often questionable, and their economic efficiency is generally low," states the OECD, a consortium of 30 developed countries committed to free market democracy.

Section three of the Christian Aid report sets out "ten reasons to regulate," and then makes proposals on how to implement regulation on the national as well as the international level. While environmental and social regulations in multinational corporations' home countries are often robust, legislation and enforcement in developing countries where these companies increasingly operate are much weaker, according to the report.

"Companies and governments are very afraid when we talk about international regulation, but in fact we are talking only about extra-territorial jurisdiction for national regulation, underpinned by internationally agreed standards," said Mr.Pendleton.

"That said, regulation will not, overnight, make a difference," he added. "So work on compliance, which has in effect already begun, is absolutely key--this is essentially an extension of the voluntary [approach]."

Part two of this two-part article presents criticisms of of the Christian Aid report.


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