11

Chapter 15The social responsibility of the global firm

22

33

44

What is corporate social responsibility (CSR)?

• It concerns how business enterprises relate to and impact upon society’s needs and goals

• It is also concerned with the firm’s operational behavior and its impact on surrounding society

• It goes beyond philanthropy and compliance with the law

Source : Unctad, The Social Responsibility of Tansnatioonal Corporations, WIR, 1999

55

Are global corporations bad global citizens?

• Destruction of the Ozone Layer • 50% of the emission of greenhouse gases• Persistent organic pollutants• Pollution-intensive mining, refining and

smelting of metals • Unsustainable agriculture • Deforestation

• Over-fishing • Human rights• Non-respect of normal labor

practices• Corruption• Political backing of

repressive regimes• Dual standards

66

Bribe Payers Index (BPI)(From 0 = high level of bribery to 10 = negligible)

Low propensityto bribe

High propensityto bribe

8.1United States9

8.1Singapore9

8.1France9

8.5Australia8

8.6Japan5

8.6United Kingdom5

8.6Germany5

8.7Switzerland3

8.7Netherlands3

8.8Canada 1

8.8Belgium1

5.9Russia 22

6.5China 21

6.6Mexico20

6.8India19

7.4Brazil17

7.4Italy17

7.5Taiwan14

7.5South Korea14

7.5South Africa14

77

Corruption Perception Index (CPI)(From 0= high level of corruption to 10 = highly clean)

Low corruption High corruption

1 Denmark 1 New Zealand 1 Singapore 4 Finland 4 Sweden 6 Canada 7 Netherland 8 Australia 9 Switzerland

10 Norway

9.3 9.3 9.3 9.2 9.2 8.9 8.8 8.7 8.7 8.6

168 Angola 168 Equatorial Guinea 170 Burundi 171 Chad 172 Sudan 172 Turkmenistan 172 Uzbekistan 175 Iraq 176 Afghanistan 176 Myanmar 178 Somalia

1.9

1.9

1.8

1.7

1.6

1.6

1.6

1.5

1.4

1.4

1.1

88

Corruption and development

99

Causes of corruption

• Administrative resource allocation

• Lack of institutional checks and balances and information

• Insufficient funding of public services

• Social and cultural factors

• Abundant natural resources

1010

Effects of corruption

Direct effects• Discourages domestic and foreign indirect investment • Skews public capital expenditure • Reduces the productivity of public investments and reduces the collection of

taxes

Indirect effects

• Reduction in work productivity as a result of demotivation• Dislocation of social fabric• Loss of integrity inside the bribe-giving companies• Corruption money is often linked to criminal and terrorist activities

1111

Anti-corruption measures for the public sector

Issue and implement anti-corruption legislation

Adopt human resource policies based on transparency of recruitment, fair remuneration and adequate education

Establish an enforceable code of conduct for public employees

Set up transparent, open and fair public procurement procedures

Simplify regulations and procedures and limit or suppress administrative authorisations in the hands of single officials

Set up a system of transparent reporting and control

Do not allow tax reductions for non-transparent monetary transfers

1212

Public endorsement of anti-corruption measures Clearly articulated written policy prohibiting any paying of or receiving bribes

and ‘kickbacks’ Implement the policy with due care and take appropriate disciplinary measures Provide training for employees to carry out the policy Record all transactions fully and fairly and conduct internal audits to assure

that all payments made are proper Report annually on the firm’s bribery and corruption policy Have the annual report in line with the above audited

Anti-corruption measures for the private sector

1313

• Require all agents of the firm to affirm that they have neither made nor will make any improper payments

• Require all suppliers of the firm to affirm that they have neither made nor will make any improper payments

• Establish a monitoring and auditing system to detect any improper payments

• Report publicly any solicitations for payments

• Establish a system to allow any employee or agent to report any improper payment without fear

Anti-corruption measures for the private sector cont.

1414

Economic pressures on biodiversitySector Direct pressures Indirect pressures

Positive Negative Positive Negative

Agriculture and plantation forests

• Creation of diverse ecosystems• Support for biological functions

• Ecosystem conversion to agriculture or forest• Fragmenting habitats• Introduction of non-native species

• Maintenance of ecosystem services, enrichment of biological diversity in some cases

• Pollution of ecosystems through farm chemical run-off• Genetic homogenization through monoculture use• Erosion, siltation, etc.

Fisheries • Destruction of habitats through damaging fishing practices• Potential over-fishing of target species or by-catch species• Introduction of non-native species

• Pollution of marine and freshwater ecosystems through effluent discharge, excessive nutrient and chemical loading (aquaculture), noise, etc.

Source: OECD (2001), OECD Environmental Outlook, Paris

1515

Sector Direct pressures Indirect pressures

Positive Negative Positive Negative

Natural forests • Habitat loss or fragmentation through forest clearing and infrastructure construction

• Pollution of forest ecosystems through effluents and noise• Erosion and associated effects• Colonization of natural areas facilitated through infrastructure and access provision

Oil production • Pollution of ecosystems through spills• Destruction of ecosystems through infrastructure construction

• Decrease dependency on renewable natural resources (e.g. wood, fuel)• Reduced resource extraction through recycling

• Pollution of ecosystems through extraction (e.g. effluents, noise, etc.)

Economic pressures on biodiversity cont.

1616

Sector Direct pressures Indirect pressures

• Pollution of ecosystems• Loss of habitat through

infrastructure developmentIndustry

• Water conservation, measures beneficial to ecosystems

• Creation of special habitats

Water and sanitation

• Pollution associated with transport use, including greenhouse gas and air pollution emissions

• Bringing people to conservation sites, increasing awareness

• Facilitating access to fragile ecosystems, fragmenting habitats, pollution

• Use of land for transport infrastructure

• Water pollution and over-use destroying habitats and ecosystems

Transport and related infrastructure

• Pollution of ecosystems linked to use of inputs in extraction (e.g. effluents, noise, etc.)

• Pollution through leaching etc.• Habitat destruction through

infrastructure constructionMining

NegativePositiveNegativePositive

Economic pressures on biodiversity cont.

1717 Source: OECD (2001), OECD Environmental Outlook, Paris

1818 Source: OECD (2001), OECD Environmental Outlook, Paris

1919 Source: OECD (2001), OECD Environmental Outlook, Paris

2020

Some answers• In Rome…

• What is legal can be done

• Competitive forces

• Unproven evidence

• Corporations are economic agents and it is not their duty to substitute governments

• PR campaigns

• Lobbying

We do not acknowledge the notion of socialresponsibility as defined by some NGOs.….We comply with the laws of countries.

Brian FlanneryScience Strategy and Programs Manager

Exxon Mobil, Nov 2000

2121

Actions

Collective Corporate

Fight

Proactive

LobbyFinance researchAdvertise

DenyAdvertiseThreaten?

ReportAuditPlanTarget

Participate inclubs, roundtables

Codes of conduct

Governments

BlockPassive

Legislate(Anti-Corruption Acts)Initiate internationalagreementsFund internationalorganisations

2222

Reduce material intensity

Reduce energy intensity

Reduce waste dispersion

Enhance recyclability

Make maximum use of renewables

Extend product durability

Increase service intensity

Eco-efficiency actions

Source Lehni: Eco-efficiency: creating More Value with Less Impact, World Business Council for Sustainable Development, Geneva, 2000

2323

Business value from sustainable development

High

Low

Low High

As trust diminishes, the demand for transparencyin the form of assurance mechanisms increases

“Trust me”

Trus

t

Transparency

Trend

“Tell me”

“Show me”

The move to the “Show me” world

2424

2525

Research conducted in 2001 on a sample of the 996 largest global corporationsshowed that:

• 1 out of 3 publish environmental and social information• 4 out of 10 enforce worldwide minimum environmental standards• 1 out of 10 conduct a systematic financial analysis of their

environmental policies and measures (e.g. “full cost pricing”)• 1 out 3 monitor environmental performances for most of their

operations• 6 out of 10 have implemented environmental and social policies• 1 out of 2 have at least partially adopted an EMS (Environmental

Management System) including objective setting, measurement, reporting and performance evaluation for environmental performances

• 1 out of 2 have a code of conduct valid for all employees

Practices

2626

Annualized return

Dow Jones Global World Index (DJGI)US$

Dow Jones Global Sustainable Index (DJSI) US$

1 year -7.17% -2.77%

3 year 18.59% 19.01%

5 years -1.47% -1.66%

10 years 7.6% 4.45%

Socially responsible investing: doing well by doing good?