Corporate responsibility: what's in a name?

27 June 2011

Over the past two decades, corporate social responsibility (CSR) — where businesses adopt a range of voluntary initiatives to improve social, environmental and human rights performance — has become a popular tool for marrying business with development.

At the latest provocation from IIED and Hivos, held in Brussels last week (22 June), a group of around 60 policymakers, academics and development practitioners gathered to discuss, among other things, the role of CSR in achieving development goals such as poverty reduction and the empowerment of small-scale farmers.
 

Richard Howitt, MEP and European Parliament spokesperson on CSR, opened the seminar by saying the past two years have seen a change in businesses’ mindset when it comes to accepting social responsibility. “We live in an exciting time if you are a CSR and accountability nut,” said Howitt.

Today, he said, there is a much more constructive attitude—particularly within the European Union—towards CSR as an effective tool to support development. How has the change come about? Howitt, who hosted the provocation in association with Vredeseilanden and the UN Research Institute for Social Development (UNRISD), attributed it to several initiatives.

At a global level, three in particular have helped place CSR centre stage as a development issue. First are the latest OECD Guidelines for Multinational Enterprises, agreed last month. “In my view, these are the most authoritative international standard on corporate responsibility,” said Howitt. True, they are voluntarily signed up to by governments. But Howitt claimed they are also extremely relevant to — and can genuinely improve — business practices in developing countries.

Second, within the past two weeks, John Ruggie’s framework for business and human rights was passed. “I cannot tell you how that has changed the weather on CSR,” said Howitt. According to the MEP, businesses have, for a long time, only accepted to be responsible for themselves, drawing a very tight line around how that is defined. Now, said Howitt, thanks to both Ruggie’s work and the OECD guidelines, “we’ve nailed that argument… You have to measure the full human rights impact… and that is clearly not in the lift on the way to the managing director’s office.”

Third, a series of global roundtables, organised by the International Integrated Reporting Committee (IIRC), has promoted the idea of ‘integrated reporting’, where businesses incorporate social and environmental aspects into their regular financial accounting. Howitt hopes that the IIRC’s proposal for doing this in practice will be endorsed at the G20 meeting in October this year.

Consumers’ values matter

Off the global stage, within the European Union, there is also growing support for CSR. Howitt explained why: “the citizens of Europe are worried about sweatshops and export processing chains where standards are routinely ignored. They’re worried about mining and extractive industries. They’re worried about palm oil plantations, where companies are often involved in projects they say improve prosperity in developing countries but which in reality impact in a negative way. And they’re worried about human rights abuses.”

This growing awareness of CSR issues among EU citizens, to whom Howitt as a MEP is accountable, has given him the room he needs to push CSR further up the political agenda in his own work — although he was quick to emphasise that he is not interested in an EU-only solution: “we want global solutions that the EU can participate in.”

Christophe Landuyt, from the Netherlands Centre for Promotion of Imports from Developing Countries, agreed that the values of European consumers can positively impact businesses’ behaviour, particularly within the agricultural sector. “If we succeed in creating stable employment with larger-scale companies in developing countries, we are one step further… because within these large farms, management is aware of the values we have in Europe,” he said.

What’s the catch?

But not everyone shared Howitt’s enthusiasm on CSR in general, or the EU’s efforts in particular. Dwight Justice, from the International Labour Organization, criticized the EU’s definition of CSR, which calls it the concept by which companies integrate social and environmental concerns into business.

“The problem is that that is not the way that the word ‘responsibility’ is used in any European language or country. The public understands responsibility to be accountable for the consequences of your actions,” said Justice. He claimed that the focus on CSR has shifted public policy debate away from the impacts of activities or businesses, towards positive news and avoidance of the real issues. “Time is running out on this poor discredited definition of responsibility.”

Other participants reminded us that implementing CSR on the ground in the developing world is far from easy.

Sanjeev Asthana, from the National Skills Foundation for India, questioned the ‘seriousness’ and intent of CSR. Is it one department that works alone? How can you mainstream it? And how can you make it more sustainable?

When it comes to CSR as a route to improving rural livelihoods and empowering smallholders, Asthana claimed that despite all good intentions, big companies have not really been able to break into long-term relationships with small-scale producers. Speaking about business’ efforts to work with smallholders in India he said: “It’s extremely expensive…and creating a viable ‘negotiating unit’ is difficult — how do you deal with a producer who comes and sells you US$5 of produce every day? [Big companies] have not found a viable business model to reach out to smallholders.”

It is definitely good news that enthusiasm for CSR is growing. But harnessing that enthusiasm to deliver genuine development benefits for small-scale farmers remains a challenge.