EU-LDC Network conference 2002
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Improving Global Governance for Development: Issues
and Instruments - 7-10 December, Chiang Mai
Session 2.5 - Corporate Social Responsibility
- Summary
Concerns about the role and responsibility of business in developing
countries are not new. These concerns go beyond the conformity to
legal standards, and include social and environmental dimensions
of business practice. The speaker focused on the concept of CSR,
on the relation between CSR and development and on ways of implementing
CSR. Regarding the concept of CSR, a distinction needs to be made
between shareholder accountability and stakeholders accountability.
On the one hand, managers of companies need to maximise earnings
for the shareholders. On the other hand, companies are faced with
other stakeholders, like employees, consumers and environmental
organisations. The needs of shareholders and stakeholders do not
always have to clash, however. Some people claim that sustainable
development should prevail over profits for shareholders, and that
companies benefit from this by creating good will. Others see CSR
as a “misguided virtue” however, that will decrease welfare in the
long run.
On the relation between CSR and development, CSR might be needed
to maximise of benefits and to minimise of negative impacts. In
general, regulating powers and checks and balances in developing
countries are relatively weak, and the power of MNEs compared to
governments is relatively large, which may lead to bad corporate
governance. The rationale for companies to engage in CSR cannot
be generalised, and will also differ between developed and developing
countries. In general, in developed countries arguments relating
to human resource detention, brand recognition and reputation are
important, while in developing countries arguments relating to cost-saving
and better access to international markets will be more important.
Other arguments for companies may include the need for a good relation
with local communities in order to secure a “social license to operate”.
Then the question is how CSR can be promoted? The speaker distinguished
three “vehicles” for this: firms, governments, and international
standards. Firms can deliver CSR in three ways: through their normal
operations (e.g. employment), through social welfare and risk management,
and through re-alignment of core business with development priorities
(public-private partnerships). There are many positive examples
of this, but the main question is how you can scale it up. Governments
can play a role by setting minimum standards and provide incentives
for firms to go beyond compliance. Finally, CSR can be promoted
through the use of international standards. This may be done through
reporting, through certification of standards by the financial sector,
or through “aspirational”/ non-binding principles, like the OECD
guidelines for multinational enterprises.
There are still a lot of unanswered questions in the debate around
CSR. For example, is CSR only a luxury good that is only affordable
in times of steady economic growth? Is there a bias to the opinion
and consumers in developed countries as opposed to those of local
communities?
The first discussant noted that CSR mainly focused on visible impacts
of business practices, while there is relatively little attention
for less visible effects, such as the long-term impact on health
of employees. Governments mainly focus on creating a favourable
investment climate for attracting foreign investment, there seems
to be much less attention for the kind of investment and the effects
of these investments. Governance is needed both at corporate and
local level. It may be necessary to establish a committee for this.
Capacity building for public-private partnerships is needed. This
committee can influence standards and compliance; and may in this
way facilitate CSR.
The second discussant stressed that when talking about CSR, it
is necessary to link the company, local and global level; and it
also needs to be linked to the constitution. CSR often starts within
a company, but then relates to the other levels. He discussed three
cases that highlight the different levels of CSR. In the case of
Burma, the question for foreign investors is whether they should
develop business activities through which they can also promote
CSR, or if they should stay out. It may be difficult in this kind
of countries to implement CSR, even if it is working within companies
because it is not the right environment. In two other cases, namely
pollution in the Rhine River and the blast of rapids in the Mekong
River, the local and international aspects were shown.
In the discussion, participants expressed their doubts about the
effectiveness of CSR, because it cannot be enforced and companies
will only apply CSR if it is useful for them. The fact that CSR
is more likely to happen in a company that is owned by one person
than in a multi-shareholder company was also stressed. One person
noted that providing incentives for companies to apply CSR through
media attention may not always work, because in some countries the
private sector controls the media. On the other hand, a number of
positive CSR examples in developing countries, notably through private-public
partnerships, were mentioned.
Session 2.5 - Speakers
Chair: Luis Rappoport
Speaker: Henri-Bernard Solignac Lecomte (OECD Development
Centre)
Discussants: Voravid Charoenloet (Chulalongkorn
University/ Thai Labour Campaign), Tun Myint (Chiang Mai University)
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