Tag: #Societal

Corporate social responsibility and societal governance

By Jeremy Moon

◦ 3 min read ◦

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  

About the Author

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Photo credit: TarikVision on iStock

Economics for Life

Time for a New Economics

By Sandra Waddock

Steen Valentin recently pointed out in a BOS blog that we – and particularly economists – need to look beyond Milton Friedman’s famous New York Times argument that ‘The social responsibility of business is to increase its profits’. Friedman’s argument underpins today’s dominant ideology and the economics that shapes it – neoliberalism.

Neoliberalism has a core and often repeated set of tenets or memes – the core building blocks of narratives and of culture (ideas, phrases, words, images, symbols). These well-rehearsed memes include that markets and trade are ‘free’, economic actors are self-interested profit maximizers, free markets will resolve societal problems, responsibility is individual, less government is invariably good, and continual economic growth through globalism is feasible and desirable.

Fundamentally, Friedman stated that the sole purpose of the firm is to maximize profits or shareholder wealth, despite that shareholders are, as Charles Handy long ago pointed out, hardly actual owners of the firm in any real sense.

This narrative completely overlooks both societal and ecological impacts of economic activity because nature is completely ignored, even assumed away.

As former UK Prime Minister once put it, ‘There is no such thing as society’. More to the point, Thatcher also stated, ‘There is no alternative’ to neoliberalism, a phrase that got shortened to TINA – still widely believed today.

There Really Are Alternatives!

Is there really no alternative? Particularly in the era of the Covid-19 pandemic, climate emergency, massive species extinction, and growth global inequality? In a recent paper ‘Reframing and Transforming Economics around Life’ I argued for just such an alternative, and also that economics that supports all of life needs to be the mainstream economic orthodoxy. It cannot be considered ‘heterodox’ or come with a modifier that sets it apart from the mainstream.

That means finding new memes as powerful and compelling as the neoliberal ones they need to replace.

Such thinking, while fundamentally based in economics, also needs to encompass core societal and ecological considerations to reframe how business is done and how economic activity in general is undertaken.

The paper synthesizes six new memes that frame an economics in support of all of life. It draws from a wide swath of economics and other literature (including now ‘heterodox economics’) and supports new approaches like Kate Raworth’s doughnut economics – with a few core memes. The six memes are briefly described below.

Six Core Memes for Economic Orthodoxy in Support of All of Life
  • The first new meme is stewardship of the whole, which means that all economic actors have a shared responsibility for the whole system (or nested set of subsystems) that their activities impact. This meme explicitly recognizes both the broader social – societal – system in which economic activity is embedded – and the natural environment in which societies are intimately, inextricably, and interdependently nested. The good of whole systems needs to be kept constantly in mind, whether that is the good of a whole company, a community, a nation, or the planet itself.
  • Another is Co-creating Collective Value. Here I draw from the pioneering work of Donaldson and Walsh, who stated the purpose of business as creating collective value absent dignity violations. The idea of co-creation invites collective participation in the production of value for the whole system – not just for one stakeholder but for the many that are affected by businesses and other economic actors. Multiple values and multiple stakeholders will inevitably mean new metrics by which to assess economic productivity and activity. Co-creating collective value brings back the original meaning of wealth, which has been corrupted to meaning only financial wealth, but which originally meant health, wellbeing, and prosperity.
  • A third relates to cosmopolitan-localist governance. The idea here is that though we live in a globalized world (and some things will remain globalized), many decisions – economic and other – need to be placed at the most local level feasible. That ensures access, voice, and participation by many more actors, and encourages sharing of ideas, knowledge, and other resources in contextually appropriate ways.
  • A fourth is that of regeneration, reciprocity, and circularity, which acknowledges the interconnectedness and interdependence of humans and nature, and that todays so-called take-make-waste production processes are no longer either truly efficient from a whole systems perspective. Regeneration means that production processes need to allow time for the Earth to regenerate resources that will be needed long into the future. Reciprocity means that trade and exchanges need to be mutually beneficial among other humans and with respect to nature. Circularity embodies the idea that ‘waste equals food’ as frequently expressed by the concept of circular economy.  
  • The precept of relationship and connectedness places human economic and social activity into the full complexity and ‘wickedness’ of its connected and relational socio-ecological context. It recognizes that people are social creatures by nature, who only exist in the context of community. It acknowledges, as the African saying Ubuntu goes, ‘I am because we are’.
  • Finally, equitable markets and trade recognizes that markets exist and are important to meeting real (not manufactured) human needs, and that they need to be fair to all participants throughout the supply chain. That means that products and services need to be fully-costed and priced accordingly – and that all so called ‘externalities’ or negative by-products of production need to be incorporated into prices.

Though far more detail is provided in the actual paper, this brief outline synthesizes some of the core aspects of a framing for economics that has the potential to support all of life, rather than as is the case with neoliberalism, ignoring life and our Earth itself as a living system. It is past time for such a shift in thinking – and core memes – to take place. These ideas are offered as a tentative framework for beginning to reshape economic thinking in the direction of what works for all of life – wealth in its original meaning!

Further Reading

Sandra Waddock, Reframing and Transforming Economics around Life, Sustainability, 2020, 12, 7553; doi: 10.2290/su1218755

About the Author

Sandra Waddock is the Galligan Chair of Strategy, Carroll School Scholar of Corporate Responsibility, and Professor of Management at the Carroll School of Management, Boston College, Chestnut Hill, MA USA. Her research interests include large system change; management education; cross sector collaboration; corporate responsibility; and social and organizational change.

Photo by Echo Grid on Unsplash

Normative foundations for stakeholder involvement in environmental and societal impact assessments

A complex issue of global relevance

By Karin Buhmann

This article is based on previously written piece for the Centre for Business and Development Studies. It focuses on the normative foundations, such as guidelines and legislation as well as some common features or practices for good stakeholder involvement in environmental and societal impact assessments. As a part of the blog-post series on Consultations, Public Participation and Meaningful Stakeholder Engagement, it considers various aspects of stakeholder involvement as an element in the planning and decision-making relating to renewable energy, mining, infrastructure etc.

These blog-posts disseminate preliminary results from project examining best practice in stakeholder engagement as part of impact assessment. The project partly builds on investigations and interviews in Greenland in August 2018 and Sápmi in June 2018. [Ref: NOS-HS project, ref. 2017-00061/NOS-HS, on Best practice for Impact Assessment of infrastructure projects in the Nordic Arctic: Popular participation and local needs, concerns and benefits, Principal Investigator: Karin Buhmann)].

Public requirements on consultations and corporate management of risk to society

Consultation of the public in the context of assessments of societal or environmental impacts is not only common but mandated by law in several countries. In many places mandatory environmental impact assessment goes back to the 1970s. Mandatory impact assessments of other issues, such as societal sustainability or human rights, is a more recent phenomenon that to an extent builds on experiences gained around environmental impact assessment.

Even when impact assessment is not mandatory, it may be wise for a company to reach out to the local community and other potentially or actually affected stakeholders in order to map societal risks. This may contribute to counteracting a loss of the corporate ‘social licence to operate’.

Recommendations on ’meaningful stakeholder engagement’ in societal impact assessments

It is a general expectation that companies conduct so-called ‘meaningful stakeholder engagement’ in order to identify potential or actual adverse impacts on, for example, the environment, labour conditions and human rights. This is a result of the OECD Guidelines for Multinational Enterprises – a detailed set of recommendations from OECD member states as well as several countries in Africa and Latin-America.

The recommendations target companies operating in or out of the relevant countries. Likewise, all companies (regardless of form and countries of registration or operation) engage meaningfully with affected stakeholders whose human rights are or may be harmed by a business activity, in order to understand and map the impact from the perspective of these affected.

The United Nations (UN) Guiding Principles for Business and Human Rights, which were a source for the 2011 update of the OECD Guidelines, refer to meaningful stakeholder engagement in this context. The objective is that the impact assessment will be conducted in a manner that takes account of the affected stakeholders’ perception of risks or actual harm caused, that is, adopting a bottom-up perspective.

The company is expected to prevent risks and actual harm that it causes or contributes to. It can only do so if it understands the problems from the perspective of those who experience or fear the problems.

OECD has developed a detailed Guidance on Meaningful Stakeholder Engagement for the Extractive Industries. The guidance includes an annex particularly on engagement of indigenous people. A translation into the Sami language was introduced at a seminar taking place back-to-back with the assembly of the Sami Parliament in Northern Norway in June 2019.

Even so, at a meeting on mining and sustainability, which took place in Northern Sweden later in June 2019, we observed very limited awareness of the guidance and relevant global guidelines among local NGOs and other civil society organisations. In fact, awareness is higher with some companies. Lack of knowledge of the normative standards that apply to companies make it difficult for civil society to require that companies observe the norms.

The OECD Guidelines and the UN Guiding Principles are not binding but mark a tendency towards recognition of individual access to influence through making one’s views and concerns known, even if this may not take place through a formalized process.

Overall, the past 40 years have witnessed a development in international environmental and human rights law towards direct access for the individual to partake in decision-making on business activities affecting one’s life [Pring and Noé, 2002]. Rights of indigenous and tribal peoples to be involved in decision-making on mining and other forms of natural resource extraction are often highlighted in this context [Triggs, 2002]. Consultations can form one element among others in ensuring such participation.

Mandatory requirements

The Nordic countries, which include Arctic areas, have long mandated planning of specific types of activities to include assessments of the environment so that the information can form part of the authorities informed decision-making. In some Nordic countries environmental impact assessments include broader societal aspects, such as impacts on health, employment, traditions and business operations [Nenasheva et al. 2015].

Specific requirements of separate assessments of societal impacts are less common in a Nordic context. However, Greenland’s self-government has introduced explicit requirements in the Act on Raw Materials mandating social sustainability assessments of activities that are may have significant societal impacts. Greenland has also introduced rules enabling authorities to make permits conditional on the company contribution to society, for example through vocational capacity building, employment of local labor, or locally based processing of explored raw materials.

Our project has shown that there are diverse opinions of such ’Impact Benefit Agreements’ (IBAs) that are tailored to each specific project and local context. While IBAs offers opportunities to agree on specific local measures, limited transparency on the contents reduce opportunities to develop solutions across projects.

Authorities can introduce specific requirements on the consultation process through general or special legislation. While such demands vary between countries, involvement of local communities and other affected stakeholders is a general element [Vanclay and Esteves, 2012].

Common demands on a good consultation process

As regulations and levels of detail vary between countries and types of impact assessments, specific demands on the process will not be described here. However, general indications are given by the so-called Aarhus Convention [UN 1998], which fleshes out the implications of the political decisions from the 1992 Rio Summit concerning public participation in decision-making concerning projects with environmental impacts.

The convention also covers human health and safety, locations of cultural significance etc., provided the impacts have a connection to the environment.

The Aarhus Convention establishes that:

  • the public must be informed about an activity in the early stages of a decision-making process;
  • the information must, among other things, include the character of the activity; what permit is applied for; the responsible authorities, timeline, place and procedure for public consultations on the activity; and available information on the activity’s impacts on environment, health etc.;
  • the information must be free and provided as soon as it is available;
  • reasonable time should be set aside between different phases of the process, and therefore both to inform citizens and for citizens to prepare and actively participate in the decision-making process;
  • the applicant for a permit is encouraged to actively engage in dialogue and to contribute information on the project;
  • authorities are responsible for making relevant information accessible, for example on the location for the activity, impacts on the environment in a the above sense (inclusive of health and safety), what measures will be taken to prevent adverse impacts, and alternatives to the proposed plan;
  • a summary of the information must be provided in a non-technical form that can be understood without technical prerequisites;
  • the consultation process must provide citizens with opportunities to express comments, information, knowledge and views that they find relevant. Citizens or NGOs who perceived their rights to be infringed upon are to have access to remedy provided by a court of law or another independent institution.

The Aarhus Convention has been signed by most European countries, including the Nordic states, and a few Central-Asian states.

Obviously, participation in a consultation process should not require participants to be familiar with the law, nor should the quality in principle depend on participant’s awareness of the informing normative foundations. It is possible, especially in countries with well-functioning public institutions, to ask the relevant authority to explain the rules and requirements and their implications. Elsewhere, civil society organisations are often able to provide advice and guidance.

Consultations aim to create dialogue, not conflict

Even if participation in a consultation is not a claim to having one’s view win out, a consultation is ideally a dialogue between citizens and the authorities or companies that conduct the consultation.

Consultations build on an aim of exchanging knowledge, views, concerns and needs and thereby to provide the best possible informed foundation for decisions and for projects to be adapted and regulated in response to the concerns and needs that have been voiced or identified through the consultation.

Both process and outcome depend on the involved understanding and respecting that the process builds on a conversation which is not about identifying a winner and a loser, but rather a dialogue towards an adapted result which may be a compromise between the original project idea and the thoughts, concerns and views expressed during the consultation process.

References

Esteves AM, Franks D, Vanclay F (2012) Social Impact Assessment: the state of the art, Impact Assessment And Project Appraisal 30(1) 43-42.

Nenasheva M, Bickford SH, Lesser P, Koivurola T & Kankaanpää P (2015). Legal tools of public participation in the Environmental Impact Assessment process and their application in the countries of the Barents Euro-Arctic Region, Barents Studies: Peoples, Economies and Politics 1(3) 13-35.

Pring, George (Rock) and Susan Y. Noé (2002). The Emerging International Law of Public Participation Affecting Global Mining, Energy, and Resources Development, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0002.

Triggs, Gillian (2002). The Rights of Indigenous Peoples to Participate in Resource Development: An International Legal Perspective, in Zillman, Donald M., Alastair Lucas and George (Rock) Pring (eds) Human Rights in Natural Resource Development: Public participation in the Sustainable Development of Mining and Energy Resources, Oxford Scholarship Online, DOI: 10.1093/acprof:oso/9780199253784.003.0004.

UN (1998). Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (Aarhus Convention).

About the Author

Karin Buhmann is Professor at Copenhagen Business School, where she is charged with the emergent field of Business and Human Rights. Her research interests include what makes stakeholder engagement meaningful from the perspective of so-called affected stakeholders, such as communities, and the implications for companies and public organisations carrying out impact assessments.

Photo by Clay Banks on Unsplash