CSR- Myth or Reality

8/17/2019 CSR- Myth or Reality

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Corporate social responsibility:Myth or reality?

Labour Education 2003/1No. 130


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Editorial V

Corporate social responsibility: Challenges and opportunities for trade unionists, by Dwight W. Justice 1

Sustainable bargaining: Labour agreements go global, by Ian Graham 15

The social responsibilities of business and workers’ rights, by Guy Ryder 21

OECD Guidelines – one tool for corporate social accountability, by John Evans 25

Corporate social responsibility – new morals for business?, by Philip Jennings 31

Corporate social responsibility in Europe: A chance for social dialogue?, by Anne Renaut 35

Strengths and weaknesses of Belgium’s social label,

by Bruno Melckmans 41Social auditing, freedom of association and the rightto collective bargaining, by Philip Hunter and Michael Urminsky 47

Corporate public reporting on labour and employment issues, by Michael Urminsky 55

The ILO Conventions: A “major reference”, by Nicole Notat 63

Workers’ capital and corporate social responsibility, by Jon Robinson 67

The social responsibility of business, by Reg Green 75

Contents


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These days, corporate social responsibility (CSR) is common currency but a “currency” that is rather devalued. The phrase is so over- andpoorly used that it begins to lose any meaning. Any proper definition ofCSR would require a categorical standard of values. This is lacking. In factCSR now means many different things to many people.

It has often become a convenient vehicle for companies to boast of their“social achievements”, distributing awards to countless business heroes,trumpeting their contributions to charities and lauding their own “struggles”for noble causes ranging from the elimination of child hunger to the preser-vation of endangered species – and even to the welfare of their employees.

The financial scandals in a number of major companies have led to de-mands for “accountability”. In fact, various corporations have used CSRfor damage limitation and in order to avoid regulation, often throughpublic relations operations aimed at restoring their tarnished image. Ac-cording to a recent survey in the United States, only 18 per cent of Ameri-cans still have confidence in their top executives. This is the biggest lossof consumer and investor confidence since the Great Depression of 1929.Corporate social responsibility is often about image. Yet it could be aboutmore than that. But for CSR to get beyond the stage of fine words andgood intentions, not to mention parts of marketing strategies, more willhave to be demanded of companies.

First, it must be clear that, despite all the talk about the voluntary na-ture of CSR, companies do actually have binding responsibilities vis-à-vissociety, the countries in which they operate and the workers they employ.International labour standards and labour legislation must be respected

by all companies, and governments have a duty to ensure their full im-plementation, including respect for the rights of workers.

Freedom of association and the right to collective bargaining, enshrinedin two of the fundamental Conventions of the ILO, are not mere options.They are international obligations. Indeed, the ILO Declaration on Fun-damental Principles and Rights at Work, unanimously adopted in 1998,

makes clear that all ILO member States have an obligation, by the solevirtue of their membership of the Organization, “to respect, to promoteand to realize” workers’ fundamental rights, defined as: freedom of asso-ciation and the effective recognition of the right to collective bargaining;the elimination of all forms of forced or compulsory labour; the effective

Editorial


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abolition of child labour; and the elimination of discrimination in respectof employment and occupation. And this whether or not they have rati-fied the relevant Conventions.

Yet the latest annual survey published by the International Confed-eration of Free Trade Unions (ICFTU) clearly shows the great deficit inthe implementation of the principles of freedom of association. It details

abuses in 134 countries. More than 200 trade unionists were killed in thecourse of one year and thousands were sacked for legitimate trade unionactivities. There can be no legitimate claim that corporate social responsi-

bility will ever take the place of governments’ securing full observance ofworkers’ fundamental rights, through legislation and law enforcement.

And CSR must be more than mere adherence to law. It should ideallymake a real input to social progress and overall development. Accordingto many of its proponents, CSR is about the impact of companies on so-ciety’s needs and goals. The point is well taken. But this is not at all thesame thing as trying to redefine society’s expectations in line with CSR.

Respect for democratic institutions and processes should therefore be cen-tral to the concept. Independent trade unions are democratic institutionsand the only legitimate voice for workers. Hence, CSR might be useful ifit opens up the possibility for workers to define and defend their own in-terests. As ICFTU General Secretary Guy Ryder points out in his contri-

bution to this issue of Labour Education, “Corporate social responsibilityis useful if it provides the space for workers to protect their own interests– and damaging if it tries to fill that space.” In other words, it is not themission of companies unilaterally to decide what is good for people whomthey can make no claim to represent. Workers’ solidarity and collectiverepresentation should be recognized and taken as an important means ofconsultation and decision-making. Workers need legitimate power, notthe human resources management concept of “empowerment” and sub-ordination.

Similarly, where fundamental workers’ rights are fully respected, sus-tainable development – often referred to as an objective by CSR promo-ters, and a key concern for trade unions – is also much more likely to beachieved. Organized workers are able to speak and act freely in both theworkplace and the community. Participation by workers and their un-ions in addressing issues related to the environment is a powerful forcefor progress in terms of both the quality of development and its more

quantitative aspects.Democracy remains the best guarantor that social and environmen-

tal issues will be addressed in a progressive manner. And besides legis-lation, the voluntary initiatives most likely to succeed are those that relyon the strengths of democracy by engaging other stakeholders, includingthrough tripartite initiatives, use of non-binding instruments and variousforms of partnership and agreements.

Indeed, one of the few solid indicators of the impact, if any, of CSRwould be the corporate practice of constructive industrial relations andthe negotiation of agreements with trade unions. This is actually difficult

to assess and puts clear limitations on the claims of the emerging socialaudit industry (see article by Philip Hunter and Michael Urminsky onpage 47). In the absence of free trade unions and a collective agreement,there is no way to guarantee or verify that freedom of association exists.As one of our contributors stresses, “the group that is best capable of moni-


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toring practices at the workplace is the one that labour standards seek toprotect: workers and their trade unions”.

Certainly, one of the merits of corporate social responsibility is to havemade it plain that in the era of globalization, national or local social dia-logue is no longer sufficient. Improvement in the quality of life and inworking conditions requires global social dialogue in addition to efforts

at national and regional levels. Talking to oneself, as many companieshave done through the adoption of unilateral codes of conduct intendedto revamp their image, is not dialogue. Hiring consultants or “social au-ditors” ostensibly to verify (or rather justify) one’s behaviour is not dia-logue. Social dialogue requires talking with – and listening to – legitimateinterlocutors.

Global framework agreements between multinational corporations andglobal union federations (GUFs), a visible sign of global social dialogue,are gradually becoming more common. This is a welcome trend whichcould take corporate social responsibility one step further towards the so-

cial responsibility of business. Framework agreements are voluntary inthe same sense that collective bargaining is, but they are legitimate andcommit the parties to common principles. Good global industrial relationsalso provide a sensible way to solve problems, based on the recognitionthat conflict exists between workers and employers. In the interest of bothparties, progress depends on dealing with conflict in a satisfactory man-ner rather than trying to suppress or ignore it.

The future of corporate social responsibility is not in replacing govern-ment responsibility. In fact, CSR will fully realize its potential only when itoperates on internationally recognized standards. Global rules do not needto be invented. ILO core labour Conventions providing for full respect offreedom of association, the right to collective bargaining, non-discrimina-tion in pay and employment, and the prohibition of forced labour and ofchild labour, are universally recognized as benchmarks. CSR begins withacceptance of all of them, spreading them throughout the companies andtheir suppliers, having a positive attitude towards trade unions and en-gaging in an active social dialogue.

The ILO Tripartite Declaration of Principles concerning MultinationalEnterprises and Social Policy is a particularly relevant instrument for pro-moting the social responsibility of business. It was adopted by govern-ments, employers and trade unions working jointly in the ILO. It seeks to

maximize the positive contributions that investment by multinational en-terprises can make to economic and social progress and help resolve diffi-culties to which such investment may give rise. The OECD (Organisationfor Economic Co-Operation and Development) Guidelines for Multina-tional Enterprises are government expectations for good corporate prac-tice, primarily addressed to enterprises based in the countries that adhereto them.1 But the Guidelines apply to worldwide operations of companies

based in adhering countries. And more countries are now in the processof adhering to them. The Guidelines are comprehensive, with chapterscovering general policies, disclosure of information, employment and in-

dustrial relations, environment, combating bribery, consumer interests,science and technology, competition and taxation. The ILO Declarationon multinationals and the OECD Guidelines are the only instruments inthe area of corporate social responsibility that are based on universal prin-ciples and standards.


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These are the yardsticks against which the contribution of corporatesocial responsibility initiatives towards social justice and their meaning-ful impact on the world of work and on improving the quality of life ofworkers, if any, will be measured.

And hence their relevance, or not, to trade unions.

Michael Sebastian Acting Director

ILO Bureau for Workers’ Activities

Note

1 Adhering to the Guidelines are the 30 OECD countries – Australia, Austria, Belgium,Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland,Ireland, Italy, Japan, Republic of Korea, Luxembourg, Mexico, Netherlands, New Zealand,Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, United Kingdomand United States – plus Argentina, Brazil, Chile, Estonia, Israel, Lithuania and Slovenia.


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Corporate social responsibility (CSR)has emerged as a significant subjectof public policy, in many countries as wellas internationally. Considered by some to

be “the business issue for the twenty-firstcentury”, CSR is assuming an increasingpart of the larger debates over both glo-

balization and sustainable development.There is no universally agreed definitionof CSR. Differing perceptions of CSR haveresulted in many misunderstandings andhave created obstacles for trade unions inaddressing the opportunities and chal-lenges of CSR.

The meaning of corporate socialresponsibility

Some trade unionists look upon CSR asa desirable goal, while others in the un-ions see in it a dangerous attempt to cre-ate a substitute for the traditional rolesof both governments and trade unions.And, of course, many trade unionists re-gard CSR as just “PR” (public relations).

This article will consider various aspectsof CSR and their implications for workersand their trade unions. It does not makerecommendations about specific initia-tives or organizations, but it does identify

some of the underlying issues that tradeunionists should take into account. It is

based on conclusions reached by a specialGlobal Unions meeting (Stockholm, April2003) held to consider the implications ofCSR for trade unions.

CSR has a tangible dimension that can-not be ignored by trade unionists. It hasspawned a new industry of consultantsand enterprises offering CSR services to

business. It has changed the industry ofinvestment managers who organize fundsand other investment vehicles as well asthose enterprises that offer company in-formation to investors. CSR is manifest inthe newly created CSR departments found

in numerous corporations, in “multi-stake-holder” initiatives involving non-govern-mental organizations (NGOs) (and some-times trade union organizations), and inpublic-private partnerships linking busi-ness and governments. Governments,intergovernmental organizations and re-gional institutions such as the EuropeanUnion have developed work plans andhave created special units to promote CSR.

Business schools and universities havealso created CSR departments and units.CSR is the subject of numerous books, ar-ticles, web sites and entire journals. Thou-sands of businesses have adopted codes of

Corporate social responsibility:Challenges and opportunities for trade unionists

The not ion t hat companies are respon sible not only t o t heir sto ckho ld- ers (ow ners), but also t o a b roader set o f st akeholders and t o society

at large, is one of th e essential ideas behind w hat is now referred t oas cor po rat e social respo nsibil it y (CSR). Yet t here are di f f erin g percep- t ions of CSR. They brin g w ith th em chal lenges and oppor tu nit ies fo rt rade un ion s – and f or t he ILO. The challeng e fo r labour is t o p reventCSR f rom becom ing a substi t ut e for t he proper role of go vernmentsand t rade union s. This w il l require a nuanced app roach.

Dwight W. JusticeMultina tiona l Ent erprises Depa rtmen t

Int ern a t ion a l Co nf ed era t ion o f Free Tra d e Unio ns (ICFTU)


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conduct, ethical principles and guidelinesin the name of CSR.

CSR is also the proliferation of increas-ingly elaborate reports by corporations ontheir social responsibility or their “sustain-ability performance”. Part of this phenom-

enon is explained by an accounting indus-try that is positioning itself to sell assur-ance1 for non-financial reporting in theanticipation that companies will eventu-ally be forced to provide such reports andto have them verified.

Trade unionists cannot ignore the con-cept behind this phenomenon. As a con-cept, CSR has been used to counter orcomplement trade union objectives and is

the subject of a debate over the relation-ship of business to society. The outcomeof that debate will affect workers and theirtrade unions.

The term “corporate social responsibil-ity” is not new, at least in academic litera-ture, but the concept has evolved. Considerthe following five definitions:

“Corporate responsibility involves acommitment by a company to man-

age its role in society – as producer,employer, marketer, customer and citi-zen – in a responsible and sustainablemanner. That commitment can includea set of voluntary principles – over andabove applicable legal requirements –that seek to ensure that the companyhas a positive impact on societies inwhich it operates.”2

“Corporate social responsibility are ac-

tions which are above and beyond thatrequired by law.”3

“It is not about ‘doing good’, it is noteven about being seen to be doing good,it is about recognizing a company’s re-sponsibility to all its stakeholder groupsand acting in their best interests.”4

“Corporate social responsibility is theoverall relationship of the corporation

with all of its stakeholders. These in-clude customers, employees, commu-nities, owners/investors, government,suppliers and competitors. Througheffective CSR practices, organizations

will: achieve a balance between eco-nomic, environmental and social im-peratives; address stakeholders’ ex-pectations, demands, and influences;sustain shareholder value.”5

CSR is a “concept whereby companies

integrate social and environmental con-cerns in their business operations andin their interaction with their stake-holders on a voluntary basis”.6

Among the most frequently recurringelements in the various definitions of CSRare its voluntary nature and its emphasison management initiatives and on manag-ing social impact, as well as the idea that

companies have stakeholders whose inter-ests must be taken into account.Sometimes questions about the mean-

ing of “CSR” lead to discussion of whetherit is, in fact, the right term to use. Someprefer “CR” (corporate responsibility) be-cause they believe that the word “social”does not include “environmental”. Othersprefer “OR” (organizational responsibility)or “SR” (social responsibility) because theydo not believe that business enterprisesshould be singled out or treated differ-ently from other organizations or evengovernments. Still others prefer the term“corporate citizenship”, with its implica-tion that a company should be regarded asan individual, having both rights and re-sponsibilities. In any event, the term “cor-porate social responsibility” is used moreoften than the other terms.

The sources of the current concept

The current form of CSR emerged in the1990s and represents a convergence ofideas and developments. The most signifi-cant source for the current CSR conceptcomes from concern over the environment.It is related to the idea of sustainable de-velopment, developed by the Brundtland

Commission in the late 1980s and accepted by the Rio Earth Summit in 1992. Trade un-ionists played a major role in linking theenvironmental with the social during thisperiod. They also succeeded in obtaining


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recognition that there was a social dimen-sion to sustainability. This became an inte-gral part of the sustainable developmentconcept.

One of the most important drivers ofCSR is the idea that there is a “business

case” for social responsibility. Behind thisidea lies the widely accepted belief thatmeasures that are good for the environ-ment can also be good for the financialperformance of a company.

Another aspect of the environmentalinfluence on the concept of CSR was thatthe non-financial performance of an en-terprise could be objectively measured,reported, audited and certified in ways

similar to those that are used to measure,report, audit and certify the financial per-formance of a company. This thinking lay

behind rapid and widespread acceptanceof the term “triple bottom line” whichlinks the financial, environmental and so-cial performance of companies.

Yet another aspect of the environmentalinfluence was the ecological approach tosocial issues represented in the concept of“stakeholders”. Stakeholders are consid-ered to be any person or group affected

by the activities of an enterprise. Corpor-ations are expected to approach social is-sues by identifying the “impact” of theiractivities, just as environmentalists de-mand that corporations identify the im-pact (the “footprint”) of their activities onthe environment.

A second important source of the cur-rent concept of CSR can be traced to the

consequences of liberalization, deregula-tion and privatization policies in the last20 years. Embraced by governments seek-ing “low-cost, low-maintenance policy”,CSR fits in well with the growth of public-private partnerships and the increasinguse of NGOs as service providers for newforms of philanthropy. A widely held viewwas that, as business assumed more of thetasks that society had previously expected

governments to perform, the expectationsof business with respect to its social re-sponsibilities would increase.

A third source of the current conceptof CSR relates to the codes of conduct

adopted by companies and meant to beapplied to the labour practices of theirsuppliers and subcontractors. These “sup-plier codes” were a response to negativepublicity related to exploitation and abu-sive labour practices in the production of

famous brand-name goods. These codesraised questions as to how the companiesthat were adopting them could implementthem – and how they could prove to thepublic that these codes were actually beingrespected. The search for answers to thesequestions motivated a lot of private stand-ard-setting in the social area and led to thecreation of an industry of private labourinspectors, or social auditors, as well as re-

lated multi-stakeholder initiatives whichcame to have a profound impact on theCSR phenomenon.

The supplier codes were important tothe evolution of the CSR concept becausethey addressed questions of business re-sponsibility raised by two significant andlong-term developments. The first was theimpact of the new forms of business organ-ization and relationships, brought about inlarge part by outsourcing and subcontract-ing. Increasingly elaborate internationalchains of production (value chains) weremaking it easier for business to avoid itsresponsibilities at the same time that vari-ous pressures were making it difficult formany governments, especially in devel-oping countries, to fulfil their responsi-

bilities.A second and related development was

the increasing importance of intangibles,

including brand names and reputation, indetermining the worth of an enterprise.The supplier codes became a means of“risk management” for brand reputation.Codes and management systems address-ing other reputation risks, such as possible

bribery and corruption scandals, were alsodeveloped. Risk management became oneof the strongest components of the busi-ness case for CSR and codes of conduct

became a central feature of CSR.Another source for the present conceptof CSR is the incorporation of ideas drawnfrom human resource development (HRD)concerning the retention or training of the


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workforce. Existing thinking and practicesin this area fit well with the CSR concept.Companies came to describe their HRDpolicies as an aspect of their social respon-sibility towards their employee “stake-holders”, and as evidence that they were

taking the “high road” to being competi-tive. Industrial relations and collective bar-gaining are hardly ever mentioned, evenwhere the subject is the company’s rela-tions with its employees. Of course, theimpact of successful employee retentionon society is less significant for companiesthat outsource most of their work. More-over, these kinds of HRD policy cannothave much of a role in low-skill, labour-

intensive industries operating in environ-ments where basic human rights are notrespected.

The nature of CSR

The most controversial issue in the defi-nition of CSR centres on the idea that it isabout the voluntary activities of companies“above and beyond legal requirements”.The question is not whether companiesshould respect the law – some defend thevoluntary nature of CSR by saying that itassumes compliance with law (“takes com-pliance as a starting point”). Although itis increasingly accepted that CSR is aboutvoluntary activities, this has not ended thecontroversy over the voluntary nature ofCSR. Two unresolved questions keep thecontroversy alive. The first concerns the

adequacy and role of business regulationand the second is whether business shoulddetermine its social responsibilities wheresociety has not incorporated its expecta-tions of business into legally binding re-quirements. Some see CSR as an alterna-tive to regulation, and some promoters ofCSR want acceptance of its voluntary na-ture to translate into acceptance that vol-untary initiatives are the sufficient and

preferred means of addressing the socialconsequences of business activity.If CSR is to be a voluntary concept, then

it is important that it be distinguished fromother concepts concerning the relationship

between business and society. The term“corporate accountability” (at least in theEnglish language) is now being used bysome to refer to the obligations imposedon corporations by governments, and tothe corporate governance framework es-

tablished to hold management account-able. Thus, corporations are said to be “ac-countable” in a binding sense both to theirshareholders and to the governments underwhose laws they are created and must op-erate. There is little difference in English

between the meanings of the words “ac-countability” and “responsibility” (a simi-larity that does not exist in some other lan-guages). There is, however, a need for terms

that can be used to distinguish between theregulatory and corporate governance ideain this use of the term “corporate account-ability” on the one hand, and the voluntaryactivities idea most often meant by the term“corporate social responsibility” on theother. It is widely accepted that regulatoryand corporate governance frameworks canshape corporate behaviour more than CSRprinciples or initiatives. There is also grow-ing recognition that these regulatory frame-works are inadequate.

Distinguishing the voluntary from the binding is not the only important distinc-tion. The voluntary nature of CSR is ofteninterpreted by business to mean that, sinceCSR activities are not binding, they are al-ways optional and therefore can be deter-mined solely by business. Through the useof voluntary codes and other forms of pri-vate standard-setting, companies decide

what they consider to be their responsibilities to society. Implicit (and sometimesexplicit) in these self-definitions is thatthere must always be a “business case” –that is, a positive financial result from theresponsible behaviour. Often, this privatestandard-setting has resulted in a redefin-ing or reinterpreting downward by busi-ness of already-established norms. Normsneed not be binding to be applicable and

the expectations of society with respect tothe behaviour of business are manifest innon-binding instruments at the nationaland international level as well as in otherforms of “soft law” and practices which


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may vary among cultures and societies.If CSR is only a voluntary concept, thenthere must be another concept that could

be called “the social responsibilities of business”. This would enable us to dis-tinguish the CSR activities, which are op-

tional, from the legitimate expectations ofsociety which are always applicable, evenwhere they are not binding.

It is in the nature of CSR to be a man-agement concept – it really does not distin-guish the company from its managementand is, in the end, only about managementdecisions and systems that managementshould put in place to make and imple-ment decisions. Understanding the social

impact of a company involves understand-ing that the management of a company, onthe one hand, and the company as a whole,on the other, are not the same thing. As UNSecretary-General Kofi Annan observed in

July 2000 when describing the participantsin the Global Compact, “Labour unionscan mobilize the workforce – for after all,companies are not composed only of theirexecutives.”

CSR is international in nature. Al-though it can take different forms in dif-ferent countries, it is more often than notabout the internationally applicable be-haviour of multinational companies. CSRhas a relationship to globalization, is thesubject of an international debate and hasattracted the attention of intergovernmen-tal organizations.

An environment and not an option

Trade unions did not create CSR. How-ever, neither the concept nor the phenom-enon will disappear should trade unionistschoose to ignore either.

CSR should not be viewed as an end initself. Nor should it be regarded as a tool to

be used as needed and returned to the tool- box. Rather, CSR is a convergence of ideas

and real developments that is changing theenvironment in which trade unions relateto employers, business organizations,NGOs, governments and internationaland intergovernmental organizations. This

new environment is not an option. Tradeunionists can, however, help to shape it.But they must first recognize both the chal-lenges and the opportunities that the envi-ronment holds for workers and their tradeunions. Rising to the challenges and taking

advantage of the opportunities will requirea nuanced approach.

CSR has provided tools to obtain lev-erage over companies. The new environ-ment has resulted in codes of conduct, ingreater support for trade union-drivenshareholder actions and in improved fol-low-up procedures to the OECD Guide-lines for Multinational Enterprises. Whilethese opportunities should not be over-

looked, the challenges for trade unionsmust not be ignored.

Challenges and opportunities

The following considers some of the chal-lenges and opportunities for workers andtheir trade unions in seven aspects of theCSR concept and phenomenon:

The chal lenges and op po rt unit ies of a volunt ary concept

The experience of workers and their tradeunions is that, in the end, their rights andinterests are advanced or protected onlythrough the proper application of goodlaws and regulations or through theirown self-organization for such purposes

as collective bargaining. Trade unionistsknow that paternalism is no substitutefor the proper role of government. Theirexperience is that regulatory frameworksare needed to ensure that business activi-ties are socially responsible.

The challenge for trade unionists is toprevent CSR from becoming a substitutefor the proper role of governments andtrade unions. The opportunity for trade

unionists is to use CSR as a way of pro-moting a culture of legal compliance andrespect for standards as well as to promotegood industrial relations and respect forthe role of trade unions. This suggests


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that trade unions should take a nuancedapproach to CSR issues, similar to the ap-proach that many trade unionists now takewith respect to the codes of conduct thatare unilaterally adopted by companies andintended to be applied to their suppliers.

The beneficial effects of these codes areconsidered to be indirect and depend onwhether they create space for governmentsand trade unions to function properly.

Of course, the use of CSR by businessto avoid regulation or to promote privati-zation of the proper functions of govern-ment should be opposed. The greater prob-lem, however, may lie with the use of CSR

by governments at the international level.

Governments seek to balance, on the onehand, their own binding obligations withrespect to property rights in trade and in-vestment agreements with, on the otherhand, urging voluntary actions by busi-ness to respect human rights.

There is growing recognition in manycountries, as well as internationally, thatcertain frameworks meant to hold busi-ness accountable are inadequate. Some ofthe most important of these frameworkshave received international attention andare the subject of international standards.They include corporate governance, ac-counting and reporting as well as briberyand corruption.

The chal lenges and op por tu nit ies of th e stakeholder idea

The idea that companies are responsiblenot only to their stockholders (owners),

but also to a broader set of stakeholders,is one of the essential elements of the CSRconcept. Much of CSR is about how man-agement should identify and “engage”stakeholders and how managers shoulddetermine, measure and report the im-pact of company activities on stakehold-ers. Of course, identifying and engaging all

stakeholders is impossible and the practiceis most often to identify and engage NGOsas surrogates for the real stakeholders.

In the CSR world, NGOs are consideredto be synonymous with civil society – but

there is a difference, and not all NGOs arepart of civil society. Indeed, many of themost important civil society organizationsare often not considered to be NGOs. De-pending on the situation and how theyfunction, organized religion and political

parties are key civil society organizations.As a concept, civil society is more thanthe relationship between the individualand the state and is more about the rela-tionship of individual members of societyto each other. The growth of some kindsof NGO results from attempts to substi-tute for the failure of civil society and ex-plains why the visibility and importanceof NGOs is increasing, even in situations

where genuine civil society institutions areweaker than ever.There are some conceptual difficulties

with the stakeholder idea. One is that notall stakeholders are equal. Another is thatnot all stakeholders have a legitimate claimon the behaviour of the company arisingout of the interests of society. Indeed,there are some stakeholders whose exist-ence does not add to the responsibilities ofthe company and may even reduce them.Consider situations where a company hasoutsourced work to other enterprises, evenwhere this is in order to avoid responsibil-ities. In such cases the number of “stake-holders” has increased but the responsi-

bilities of the company have not changedor may have decreased.

Some misuses of this overused termreflect conceptual difficulties. The term“stakeholder” is supposed to contrast

with the term “shareholder” and concernsrelationships with a company. “Stakehold-ers” is an inappropriate term to describethe relationships of governments withconstituents. Citizens in democracies aremore analogous to shareholders.

Trade unions have welcomed accept-ance of the stakeholder idea and haveused it in their efforts to push for cor-porate governance frameworks that take

the interests of society into account. Theyhave supported the stakeholder idea upto a certain point – not, however, when itsubstitutes for social partners. The mosteffective and proven means of increasing


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the beneficial impact of business activitiesupon society has been through industrialrelations and especially collective bar-gaining in the framework of effectiveprotection of rights and regulations bygovernments. Collective bargaining, of

course, requires partners and recogni-tion that companies are more than theirmanagement. Indeed, other than govern-ments, the only real counterbalance orcheck on corporate power has been tradeunions. As mass representative organi-zations, trade unions are almost alwaysamong the largest civil society organiza-tions. But as representatives of employeesand as vehicles for collective bargaining,

trade unions are also private economic ac-tors that are important organizations intheir respective industries or economicsectors.

This dual nature of trade unions under-lies the idea that industry has two sides.The existence of two sides in turn is the

basis for social partnership and social dia-logue. These concepts are reflected in thetripartite structure of the ILO, through theconsultative arrangements at the OECDand in the many and various social dia-logue structures that have been estab-lished in many countries. Some privateCSR “multi-stakeholder” organizations,including the UK-based Ethical TradingInitiative and the Global Reporting Initia-tive, recognize this dual nature of trade un-ions and distinguish between trade unionsand NGOs in their structures.

Often, company CSR departments do

not distinguish between NGOs and tradeunions and many do not consider tradeunions at all. This can be true even forcompanies whose employees belong totrade unions. One reason for this is that,within the company, CSR activities tend to

be located in a separate place from humanresource/personnel functions. Where CSRdepartments fail to understand the dualnature of trade unions as industrial or-

ganizations that are also civil society organ-izations, they also fail to appreciate howa company can develop genuine roots ina community through the trade unions ofits employees.

The chal lenges and op por t unit ies of st andards and stand ard-sett ing

Trade unionists seek labour standardsand their application. The CSR phenom-enon and especially the codes of conduct

for suppliers have provided an opportu-nity to promote greater recognition and ap-preciation of ILO standards than ever be-fore. Indeed, it was the international tradeunion movement that introduced the useof ILO international labour standards intothe debate over codes of conduct coveringlabour practices.

Trade unionists face, however, a numberof serious challenges with respect to stand-

ards. Business is using codes of conductand other forms of private standard-settingin the social area to redefine or reinterpretstandards so as to make their responsibil-ity seem less than it really is. For instance,many companies promise to respect free-dom of association only where it is lawfuland accept no responsibility in this regardfor operating in environments where this

basic human right is not permitted. Al-though the right to collective bargaining isnow recognized as one of the fundamentalrights at work, it is rarely included by busi-ness even where respecting workers’ free-dom of association has been accepted.

Many businesses will claim that ILOConventions do not apply to companies.This is to ignore the fact that the ILO Tri-partite Declaration of Principles concern-ing Multinational Enterprises and SocialPolicy constituted recognition, by employ-

ers as well as governments and workers,that the underlying principles of many ILOConventions could and should be appliedto the behaviour of business. The fact thatILO Conventions establish definitionsand are accompanied by jurisprudence toclarify their meanings in specific circum-stances has not discouraged business andits CSR consultants from redefining moreconveniently terms such as “child labour”

or from promoting employer-dominatedmechanisms to substitute for freedom ofassociation.

One way that companies use privatestandards to lower expectations of their


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behaviour is by not distinguishing the dif-ferent purposes of codes. Codes that areappropriate for one enterprise to applyto the labour practices of its suppliers orsubcontractors will not be appropriateto apply to activities that the enterprise

directly owns or controls. The best sup-plier codes rightly stress observing min-imum internationally recognized humanrights standards such as those identified

by the ILO as being fundamental rights atwork. But existing expectations concern-ing the responsible behaviour of businessgo well beyond respecting basic humanrights. There is, for instance, a big differ-ence between respecting freedom of asso-

ciation, on the one hand, and having goodindustrial relations, on the other. Businessshould not avoid the broader range of ex-pectations of society, especially when setforth in legitimate and always applicableinstruments such as the OECD Guidelinesfor Multinational Enterprises.

Business is used to participating intechnical standard-setting processes wherethe purpose is to create or promote mar-kets. An example of this can be develop-ing standards so that products can be in-terchangeable. In recent years, there has

been an increase in private standard-set-ting activities in the social area, which aremodelled on the processes involved inestablishing market-promoting technicalstandards. This kind of social standard-setting lacks both the genuinely repre-sentative structures and the competencenecessary to give it legitimacy. Trade un-

ionists must work to make sure that pri-vate standard-setting and self-regulationdo not negatively impact on the legitimatestandard-setting functions of the ILO or ofgovernments.

Private standard-setting can take manyforms. Programmes and organizations thatseek to collect and disseminate “best prac-tice” in this area can even be consideredto be engaging in a form of social stand-

ard-setting.

The chal lenges and op por t unit ies of report ing and v er i f icat ion

Trade unionists seek corporate transpar-ency. A “true and fair” view of the perform-ance of the employer is considered indis-

pensable in collective bargaining. Tradeunions were among the first to demandthat companies account for their socialimpact and to support the idea that com-panies must report on their social responsi-

bilities. “Social reporting” has become oneof the most important CSR activities – andan opportunity for trade unionists.

Agreeing on what a company shouldreport to the public about the social im-

pact of its activities or its contributions tosociety can be one of the most importantforms of standard-setting. For this reason,the Global Unions decided to participatein the Global Reporting Initiative, an in-ternational multi-stakeholder initiative de-signed to develop guidelines for companyreports. Sometimes referred to as “sustain-ability reporting” and “triple bottom linereporting”, this non-financial reporting isheavily influenced both by financial re-porting practices and by experience fromreporting on environmental impacts. Theemphasis is on quantifiable informationthat is also considered objective (unbiasedor neutral), comparable and auditable.

Among other things, reporting stand-ards involve identifying aspects of CSRand deciding on “performance indica-tors” that relate to these aspects. One ofthe many challenges is choosing indicators

that really indicate the aspect to be meas-ured. For instance, consider the number ofstrikes or of days lost due to strikes. Thesefigures would be poor indicators for as-pects such as the quality of industrial re-lations or for respect of freedom of associ-ation. The same figures could be present insituations where there were good indus-trial relations, bad industrial relations orno industrial relations as well as in situ-

ations where freedom of association wasrespected or where it was repressed. An-other challenge is deciding the appropri-ate boundary of the reporting company.The human resource policies applied to


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the core headquarters employees will saylittle about the impact on labour of compa-nies who outsource most of their work.

One of the major influences on deter-mining reporting content is a nascent in-dustry of consultancies offering assistance

to companies in preparing reports, as wellas other enterprises, often linked to theaccounting industry, offering services de-signed to enhance the “credibility” of thesereports by providing “verification” or “as-surance”. The more important drivers for“assurance” will not be campaigning or-ganizations seeking to make companiesprove their CSR claims, but the companiesthemselves who want to reduce liability

for their public claims – and investors de-manding reliable reporting of non-financialperformance that has a bearing on the fi-nancial performance of the company.

The influence of this reporting and as-surance industry on reporting standards is

becoming a significant challenge to tradeunionists. Many of the practices and prin-ciples that underlie financial and environ-mental reporting may not be appropriateto the social dimension, where a high levelof intangibles must be taken into account.Albert Einstein said, “Not everything thatcan be counted counts, and not everythingthat counts can be counted.”

Trade unionists need to be careful aboutverification. Consider the behaviour of“social auditors” engaged by companiesto “independently monitor” workplacesin their supply chain. These enterprisesregularly report compliance with respect

for freedom of association, including inplaces where there is no trade union orwhere the government does not permitthe exercise of the human right to union-ize. These “social auditors” rarely under-stand the link between the suppression oftrade union rights and the exploitation thattheir activities are ultimately intended toprevent. For various reasons, such “socialauditors” are disposed to show that work-

ers can have a “voice” without the genuinerepresentation that comes from trade un-ions or to demonstrate that it is possible tosource from countries with repressive re-gimes without using exploited labour.

Many of the ways in which workerscan be intimidated, discouraged or pre-vented from joining or forming trade un-ions are difficult to detect. Because of this,the only real test that workers’ freedom ofassociation is respected is the presence of

an independent or free trade union whichis actually permitted to function. Similarly,the only good test for respect of the rightto bargain collectively is a collective agree-ment that is respected. The CSR industryhas handled the subject of trade unionrights poorly for various reasons, includ-ing the confusion of management interestswith those of the company and the failureto recognize that governments, and not

management alone, must function prop-erly if human rights are to be respected.Trade unions were among the first to

demand that companies, applying codesof labour practice to their suppliers, havethese suppliers “independently moni-tored”. Later, it became clear that whatwas being demanded was unrealistic –the word “monitoring” implies a continu-ous presence or a frequently repeated ac-tivity of the kind that companies and the“social auditors” that they engage cannotperform. The only real system of “inde-pendent monitoring” of workplaces is

by the workers themselves through theirtrade unions. Workers are able to speak upabout workplace conditions through theirtrade unions or directly because of theprotection afforded by their trade unions.This is not to say that there is no role forprivate workplace inspection or verifica-

tion of supplier code compliance. The chal-lenge for trade unionists is to ensure thatstandards for “social auditors” and privateworkplace inspection are developed thatare compatible with the best practices ofthe labour inspectorate, promote a cultureof compliance with law and are consistentwith the role of industrial relations. In theview of many, this is a job for the ILO.


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The chal lenges and op por tu nit ies of socially responsible investment

The interest in socially responsible invest-ment (SRI) is part of the CSR phenome-non. It has led to the growth and popular-

ity of investment funds claiming to investin companies that are socially respon-sible, and to the growth in the numberof enterprises that provide informationto investors about the social or environ-mental performance of companies. Thishas increased opportunities for trade un-ionists to obtain leverage over corporate

behaviour through means such as intro-ducing shareholder resolutions at annual

company meetings. Such use of workers’capital has helped to shape the CSR en-vironment. These tactics have been ap-plied mainly in countries where there isan “equity culture” and where workers’ orother institutions, such as religious groups,with an interest in the social responsibil-ity of business, have an influence on theinvestment decisions or the proxy votingof pension funds.

The interest in SRI may also be of usefor trade unionists in the debate over cor-porate governance. It offers opportunitiesfor trade unionists in some countries topromote a long-term perspective on sharevalue performance in capital markets thatserves the interests of worker beneficiariesof funds by encouraging responsible cor-porate behaviour.

There are different ways that SRI can be used to influence corporate behaviour.

One is by choosing investments throughscreening. In applying a screening strategy,investors either do not invest in companies(or divest themselves from companies)that fail to meet agreed criteria concern-ing various aspects of CSR, or else investin “ethical” or “responsible” companiesthat meet certain criteria. The screen canoperate on either positive or negative crite-ria. While there is logic to a CSR screening

system perfectly constructed and univer-sally applied, the actual situation poses ob-stacles to creating any such system whichmay not be possible to surmount. These in-clude getting the right criteria (the choice

of standards) as well as obtaining the rightinformation about company compliance.One risk of screening is to eliminate fromshare ownership the very institutions thatwould be likely to engage corporate boardsand management over reform. Screening is

a different, but not necessarily competing,approach to active share ownership.

SRI challenges trade unionists. The jus-tification for insisting that companies besocially responsible requires a “businesscase”, usually based on risk managementand liability and associated with protect-ing intangible assets such as brand valueor company reputation. The danger is thatinvestors or enterprises supplying CSR in-

formation about companies will reinter-pret or redefine the social responsibilitiesof business to conform to this need. Theproblem is that the “sustainability” of anenterprise is not always the same as the“sustainability” of society, as expressed inthe concept of sustainable development. Inother words, there is not always a businesscase for socially responsible behaviour.This is one of the reasons why checks oncorporate power through regulation andindustrial relations are needed.

SRI is about the role of shareholders inmaking companies more socially respon-sible through their investment decisions,through the exercise of their voting rightsacquired through share ownership orthrough participation in a dialogue of com-pany owners and company management.There are, however, important limits to thisapproach. Even in situations where work-

ers are important shareholders, effortsto strengthen the rights of shareholdersin the corporate governance frameworkwill not necessarily advance workers’ in-terests. Workers have both common andcompeting interests with their employer.Although workers’ capital can be a posi-tive influence and its power should be de-veloped, it can never be a substitute fortrade unions.


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The chal lenges and op por t unit ies ofsocial rat ing , aw ards and social labels

CSR has spawned various means of judg-ing companies. For trade unionists, themost useful have been those that can be

used to embarrass companies into chang-ing their behaviour or that otherwise inhibittheir behaviour. Sometimes, judgementscan be comparative, as in the social ratingsof companies that enterprises provide toinvestors. Some of these enterprises wanttrade unions to provide information aboutcompanies. Under certain circumstances,providing this kind of information couldraise practical and ethical problems. Ethical

questions could, for instance, arise in situa-tions where a rating agency offered to com-pensate a trade union for information thatthe agency would make proprietary.

Comparing companies could poseproblems for trade unions choosing to doso. Rating companies comparatively couldinterfere with the central trade union pur-pose of engaging management and de-fending the interests of union members.Ratings can be affected by where a com-pany does business or by its home coun-try. The trade union experience with mul-tinational enterprises (MNEs) is that thehost country environment is a more reli-able predictor of company attitudes and

behaviour than the home country environ-ment of the MNE. National trade unionsmay not be appropriate organizations to

judge the overall behaviour of an MNE.Not surprisingly, business enterprises

prefer positive judgements to “naming andshaming”, and the CSR phenomenon fea-tures positive incentives such as awardsand labels. These can concern labour is-sues, and they range from human resourcepractice awards at home to labels relatedto supply chain codes abroad.

Awards that purport to promote “bestpractice” can be seen as a form of standard-setting. The implicit message of awards

seems to be that companies do not requireregulation or collective bargaining to be“good employers”. These kinds of awardare usually based on management reportsand employee surveys conducted by man-

agement. Trade unions are often bypassed,and “experts” engaged to judge the reportsmay not be familiar with industrial rela-tions. The source of good working condi-tions is always presented as the generosityof management, even where these condi-

tions were collectively negotiated. Not sur-prisingly, companies with poor industrialrelations records or anti-trade union poli-cies are just as likely, or more likely, to winawards. Awards for human resource man-agement or conditions of work may well bethe most paternalistic aspect of CSR.

There is little difference between giv-ing a company an award and authorizing acompany to use a label. Labels for products

that, in effect, certify the labour practicesinvolved in the manufacture of the prod-uct pose special problems. Unlike productcontent or safety labels, the claim cannot

be verified by testing the product itself. Alabel covering labour practices could only

be credible if there were constant polic-ing of the workplace – a condition thatexists only where secure and independ-ent trade unions are permitted to performtheir proper functions and even then, onlywhere they are supported by enforceableand enforced labour regulation in an openand democratic society.

Social labels for products are unlikelyto be credible. There is reason for moralconcern where industry associations orgovernments authorize the use of labelsintended to create a commercial advan-tage without also creating a liability forthe abuse of the label. Although social la-

bels have the potential to provide leverageover a company where problems are dis-covered, the label itself may not promotedialogue within the company.

The chal lenges and op po rt unit ies of engaging employers

The CSR concept can be contradictory. It

stresses the importance of identifying andengaging stakeholders but, at the sametime, stresses unilateral management ac-tion. The experience is that CSR is moreabout management systems and check-


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lists than genuine dialogue. Not surpris-ingly, management prefers to choose its“stakeholders” for dialogue. Too often,companies engage NGOs over workplaceissues and avoid trade unions. Althoughthe “empowerment” of workers is a recur-

ring CSR theme, this term almost never re-fers to the genuine power that workers ac-quire through their trade unions.

Co-operation between trade unionsand NGOs has worked best in this areawhen it has been based on a full under-standing of their respective and comple-mentary roles. This issue is not about com-petition between NGOs and trade unions.It is, however, about the meaning of repre-

sentation and the responsibility of businesswith respect to trade unions and industrialrelations. Although both trade unions andNGOs can be advocacy organizations, onlytrade unions are representative organiza-tions of workers. This is true even in in-dustries or countries where trade unionmembership is low (where, for instance,employers resist recognizing trade unionsor governments set low standards or failto enforce standards). In many countries,national industrial trade unions should

be considered the representative organi-zations for workers in an industry, evenif not all workers are members or not allcompanies in the industry are parties tocollective agreements. Similarly, at the in-ternational level, the various Global UnionFederations (GUFs) are the representativeorganizations of workers in their respec-tive industries or economic sectors. GUFs

are the international trade union organiza-tions representing workers by sector.

Industrial relations and social dialoguerequire representative structures. There is,of course, a big difference between the CSRapproach to workers and the industrial re-lations approach. Industrial relations are

based on the understanding that, in therelationship between labour and manage-ment, not everything can be “win-win”.

In this relationship, there will always beconflict and competing interests. Collec-tive agreements anticipate problems andare about an orderly means of resolvingthem. CSR seems to be more about dealing

with problems if found or asserting the ab-sence of problems through the applicationof management systems. The challenge fortrade unionists is to identify ways to en-gage employers in the CSR environmentso that it involves genuine social dialogue

and promotes good industrial relations.This requires representative structures thatare also democratic and legitimate.

In recent years, a number of “frame-work agreements” have come into effect

between multinational companies andthe GUFs. Some consider frameworkagreements to be negotiated codes of con-duct with complaints systems and there-fore superior to “unilaterally adopted”

company codes of conduct. This is, how-ever, not a useful way of looking at theseagreements, which are qualitatively differ-ent from codes of conduct. The importanceof these agreements does not stem fromany complaints procedures or even theircontent. The agreements are important be-cause they constitute a formal recognitionof social partnership at the global level. Al-though they are closer to collective agree-ments than to codes of conduct, frame-work agreements are intended to com-plement but not substitute agreements atthe national or local level. Because GUFsare the representative organizations ofworkers in an industry at the global level,framework agreements do not pose theserious problems that can arise where na-tional trade unions “negotiate” with com-panies’ codes of conduct or similar CSR in-struments that are meant to be applied glo-

bally. National or local agreements shouldnot be negotiated at the world level, andglobal agreements should not be negoti-ated at the local or national level. The chal-lenge for trade unionists is to make surethat what is on the negotiating table de-termines who is around the table.

Conclusion

CSR is neither an objective nor an option but an environment offering challengesand opportunities that can also be shaped.The trade union response to CSR will re-


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quire nuanced approaches. Trade unionistshave much experience in such approaches.They recognize both common and compet-ing interests with their employer. It should

be no surprise that, while trade unionistsrecognize an interest in the sustainability

of their employers, they also understandthat this kind of sustainability is not thesame as is meant by “sustainable devel-opment” in terms of society and the envir-onment. Trade unionists encourage busi-ness to take the “high road” with respectto their competitive behaviour. However,they also understand that the business casefor social responsibility is, more often thannot, insufficient to guarantee socially re-

sponsible behaviour and that countervail-ing power, in the form of regulations andtrade unions, is needed.

A nuanced approach is incompatiblewith an approach that encourages activi-ties uncritically by letting “1,000 flowers

bloom”. Trade unionists should resist theargument that, even where initiatives andactivities do little good, they are better thannothing. It is now clear that many CSR ac-tivities are having a substitute effect for therole of government and are also substitut-ing for genuine dialogue.

Trade unionists can do much to informthe CSR debate. They can recall their expe-rience with paternalism. They can remindgovernments and business that collective

bargaining and social dialogue are the pri-vate mechanisms that have been the mostimportant and effective means for societyto maximize the positive and minimize the

negative social consequences of businessactivities.

Because CSR is based on voluntary ac-tivities, it is of critical importance that adifferent term such as “the social responsi-

bilities of business” be used to refer to thelegitimate expectations of society with re-spect to the behaviour of business, whetheror not these expectations are binding. CSRmust not be a means for business to rede-

fine or reinterpret its existing responsibili-ties. CSR must not become a substitute for

the proper functions of government. Busi-ness does not possess the political legiti-macy to define its responsibilities or sub-stitute for government. Many of the prob-lems brought about by globalization aregovernance problems that business is in

no position to resolve.Because private business activities are

not the whole problem, they cannot be thewhole solution.

CSR has an international dimensionthat requires an international response.This response can include engaging busi-ness internationally and through variousinternational initiatives where this is ap-propriate. The ILO has much to contribute

to the debate over the social responsibili-ties of business and to the CSR phenom-enon. The most important contributionsthat the ILO could make concern stand-ards and standard-setting, as well as so-cial dialogue and tripartite consultation.The challenges for the ILO will be to re-sist adopting a management system ap-proach to CSR and to protect its leadingand central role as a standard-setting or-ganization for the world of work.

Notes

1 In the context of CSR, “assurance” usuallymeans “verification” – Ed.

2 United States Council on International Bu-siness, Advancing Corporate Responsibility – A state-ment by the USCIB Corporate Responsibility Committee,November 2002.

3 Cited as “McWilliams and Siegel 2001” and

found at the web site of Response Consulting, http://www.response-website.com4 Response Consulting, http://www.response-

website.com/What-is-corporate-social-responsibi-lity

5 George Khoury et al.: Corporate social responsibility: Turning words into action, The Con-ference Board of Canada, Ottawa, 1999. http://www.conferenceboard.ca

6 Commission of the European Communities:Communication from the Commission concerning cor-

porate social responsibility: “A business contribution to

sustainable development”, July 2002, COM (2002) 347Final, p. 5.


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Most of the world’s biggest employ-ers are now global. And most of theworld’s unions are affiliated to the sec-tor-by-sector Global Union Federations(GUFs). Companies and unions are be-ginning to take the obvious step. They aresigning global agreements.

The first of these dates back to 1988.Since the turn of the millennium, the trendhas been gathering pace. By March 2003,there were 21 global agreements.

Often called “framework agreements”,these packages cover issues ranging fromtrade union rights and collective bargain-ing rights to information and consultation,equal opportunities, safety and health,minimum wage standards and the ban-ning of child labour and forced labour.

The companies signed up so far areAccor, AngloGold, Ballast Nedam, Carre-four, Chiquita, DaimlerChrysler, Danone,Endesa, ENI, Faber-Castell, Fonterra, Freu-denberg, Hochtief, IKEA, Merloni Elettro-

domestici, Norske Skog, OTE, Skanska,Statoil, Telefonica and Volkswagen.1

On the union side, each agreement has been reached with the appropriate GUF– namely, the ICEM (organizing work-ers mainly in chemicals, energy, miningand process industries), the building andwoodworkers’ IFBWW, the metalworkers’IMF, the food, agriculture, hotel and alliedworkers’ IUF or the skills and services in-

ternational UNI.But most multinationals already havetheir own codes of conduct, and theseusually cover labour relations. So what isthe difference between framework agree-

ments and codes of conduct? At the globallevel, there is a crucial difference between

a unilateral company code of conduct anda union-management agreement. It is like,at the national level, the difference betweena unilateral company declaration of policy,perhaps contained in a “mission state-ment” or, in more detail, in an employeehandbook, on the one hand, and a collec-tive bargaining agreement on the other. Aninternal code has generally been written bythe company itself for its own purposes. Itscode applies, if at all, through processes con-trolled by the company. Framework agree-ments give the signatory GUFs the right toraise any alleged breaches of the agreedprovisions with corporate headquartersmanagement. Often, the agreements spec-ify regular meetings for that purpose, buteven without such meetings, channels existfor communication when needed, includ-ing on urgent matters. In other words, thepurpose of unilateral company measures

is often to certify or try to prove in oneway or another, that a company respects acertain number of standards. Frameworkagreements assume that there will inevita-

bly be problems inside companies – theydo not assume that companies are perfectand they in no way guarantee companyconduct. Rather, they provide practical, ef-fective and timely means to resolve prob-lems in the areas addressed by the agree-

ments. In effect, framework agreementsare part of a global social dialogue proc-ess that is the mirror image of unilateralcodes. The agreements promise little, butcan deliver a lot.

Sustainable bargaining:Labour agreements go global

Global framew ork agreements betw een mult inat ional corporat io nsand glob al union federat ion s are becom ing m ore commo n. What can

t hey achieve, and how do t hey relate to ILO st andards?

Ian GrahamJournalist


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Supplementing regulation

However, while some firms might see vol-untary initiatives as a substitute for tighterregulation, that view would not be shared

by most unions, particularly with reference

to framework agreements. They would beseen as industrial relations that can deepenand improve regulation of the workplace,

but not as a replacement for binding legalframeworks.

The agreement between constructionmultinational Ballast Nedam and theIFBWW “provides an added value forBallast Nedam”, said IFBWW GeneralSecretary Anita Normark at the signing in

March 2002.

2

“The verification of the ef-forts of the company to live up to interna-tional standards can be facilitated throughthe use of a global union network whichIFBWW can provide with 289 affiliates in125 countries!” But, she added, “It is alsoimportant for governments to provide alegal framework for the implementation ofglobal ILO and OECD standards.”

“The starting point is the need for mini-mum and agreed global labour and envir-onmental standards”, said IUF GeneralSecretary Ron Oswald.3 These should be“established internationally through bod-ies such as the ILO and put effectivelyin place and enforced at national level”.There is, he insists, “no substitute forgood national legislation and nationallyenforced social and environmental pro-tection. Nothing that we do with corpora-tions or that corporations themselves do

should be seen as substituting for this.”Not coincidentally, the agreements con-

centrate on many of the issues covered byILO Conventions, particularly core Con-ventions. The texts make prominent men-tion of those standards, often referencingthem by number and name. Most cited arethe two Conventions best known to tradeunionists – No. 87 on Freedom of Associa-tion and Protection of the Right to Organ-

ise, and No. 98 on the Right to Organiseand Collective Bargaining. The effectiveexercise of these rights enables workersto protect their rights and interests in anumber of other areas. However, several

of the agreements cite specific ILO Con-ventions as the most important examples ofthose to be applied. In these cases, there isan implicit commitment to ILO standardsin general. It is important to note that theselection of Conventions is related to the

scope of agreements. It may not be consid-ered necessary, for example, for an agree-ment that is restricted to direct employeesof a major multinational to cover child andforced labour.

In fact, the relationship between ILOstandards and the GUFs now parallelsthe interaction between national indus-trial legislation and national industrialunions. From the nineteenth century on-

wards, it was clear that even the best labour legislation needed to be backed bya strong union presence in the workplace.Conversely, that presence could be assisted

by good industrial law. And the more far-sighted employers realized that good lawand good agreements with the workers’representatives were in their own best in-terests. Today, those same lessons are beinglearned at the global level.

“Give Freudenberg Group credit fordemonstrating a social conscience”, urgedthe industry journal Rubber and PlasticsNews.4 But, it continued, “Give Freuden-

berg even more credit for being smart.” Thecompany had just signed a global agree-ment with the ICEM. “While confirmingpolicies it probably already pursues, Freu-denberg has taken a big step toward keep-ing labor relations on an even keel”, Rubberand Plastics News reported. “That gives it

an edge over competitors that take a morecombative approach to labor.”

ILO touchstones

Fifteen global framework agreements areanalysed in some detail in the ILO’s newGuide to the Tripartite Declaration of Prin-ciples concerning Multinational Enterprises

and Social Policy.5

It finds that nearly all theagreements incorporate the Declaration’sfundamental principles on the eliminationof child and forced labour, discriminationin employment, and respect for freedom


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of association and collective bargaining.On the other hand, some issues coveredin the ILO Multinationals Declaration fea-ture less often in the agreements. For ex-ample, less than one global agreement infive includes ILO standards on vocational

guidance and training.This may well change as the number

of global framework agreements increasesand as existing agreements are renegotiated.As the Guide says, “The ongoing process ofachieving decent work involves the build-ing of sound relations within the work-place and community of operation, basedon closer commitments among business,unions and government to work together.

Because of its global scope, the Declarationis well suited for use, directly or indirectly,in providing baseline content for frame-work agreements.” In addition, the OECDGuidelines for Multinational Enterpriseshave provided definition in some agree-ments to respect for freedom of associationand may, in the future, be even more closelylinked with framework agreements.

Meanwhile, the sectoral coverage of theframework agreements is continuing togrow. The automotive industry is one of thelatest sectors to join the trend. In June 2002,Volkswagen (VW) signed its Declaration ofSocial Rights and Industrial Relations withthe International Metalworkers’ Federation(IMF) and the VW Global Works Council. Afew weeks later, DaimlerChrysler adopteda similar document, Social ResponsibilityPrinciples, in an agreement with its WorldEmployee Committee, signed in conjunc-

tion once again with the IMF.The pioneers of framework agree-

ments were the food and allied workers’international IUF and the French-basedmultinational Danone. Negotiations fortheir first agreement began in 1985. Sincethen, they have signed additional agree-ments on trade union rights, on skillstraining and on the measures to be taken“in the event that new techniques [or] or-

ganizational processes are implemented,or in the case of substantial changes in pro-duction volume, transferral of substantialpart of production, partial or full closingsof facilities and, in general, in all situations

whereby working conditions or the natureof employment contracts are significantlyaffected.”

Of these texts, “the most crucial forthe IUF is the agreement covering respectfor trade union and collective bargaining

rights”, said IUF General Secretary RonOswald.6 “It refers to ILO Conventions,specifically Nos. 87, 98 and 135 since we

believe it is crucial that ILO Conventions be encased in such an agreement.”

But “The most challenging and inno-vative of these internationally applicableagreements is the one that relates to hand-ling the impact of changes in companystrategy on employment”, he said. “The

agreement specifically addresses proce-dures for negotiation when restructuringexercises are proposed.”

Put to the test

Due to that provision, the Danone pack-age underwent the toughest real-life test sofar faced by any of the framework agree-ments.

“In 1998, a proposed plant closure inFrance was subject to lengthy consultationsaccording to French labour law”, Oswaldexplained. “Local unions subsequently in-voked the international agreement, admit-tedly later in the process than we wouldhave liked. Invoking the Danone/IUFagreement led to an additional review ofthe closure proposal and an alternative

buyer appeared with a significant number

of jobs guaranteed as a result.“For many reasons, this example un-

derstandably strained and tested the rela-tionship we have with Danone. However,we had always known that experience was

bound to have an impact on the implemen-tation of such a complex agreement andwe subsequently proceeded to jointly ana-lyse what took place in this case. Follow-ing a frank and healthy process of analysis

by both parties, we have now agreed thateven closer attention to this agreement inthe early stages of proposed restructuringrepresents the best way to find mutual ben-efit in it in the future.”


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Two million workers and counting…

The recent VW and DaimlerChrysleragreements each cover more than 300,000employees. In all, some 2 million workersworldwide are employed by the 21 com-

panies that have signed framework agree-ments. Generally, companies headquar-tered in Western Europe have taken thelead, but there are also examples fromNew Zealand (Fonterra) and South Africa(AngloGold).

When one or more companies in a sec-tor sign up, there will be some pressure forothers to follow suit. That pressure mayalso be felt by the unions. A company that

has signed a framework agreement mayfeel exposed if its competitors fail to dolikewise after a certain time – exposed, thatis, to criticism both from the competitorsand from the company’s own sharehold-ers. So the GUFs will feel a particular needto keep up the momentum.

Here, another factor comes into play.In the nature of things, the first companiesto sign the agreements have tended to bethose that already have a good workingrelationship with the unions even thoughthere may have been major problems in thepast. The toughest corporate nuts have yetto be cracked. When a major multinationaland a GUF move straight from conflict tothe signing of a framework agreement,a further important step will have beentaken in global industrial relations.

Meanwhile, one way forward could beto reach sectoral-level global agreements

on specific issues. One of the reasons thatthis has not yet happened is that, for themost part, there is an asymmetry in themandates of the negotiating partners.While most industrial manufacturers arein sector-wide bodies at the global level,the relationship between these councilsand their member companies is not thesame as that between the GUFs and theiraffiliated unions. In the only existing glo-

bal collective bargaining agreement (asopposed to a framework agreement) inthe maritime industry, a new employers’federation, IMEC, had to be created as acounterpart to the ITF.

The potential difficulties with industryassociations are well illustrated by a chem-ical industry initiative that had its originsin an ILO sectoral conference. In February1999, governments and chemical indus-try employers and unions met under ILO

auspices. They agreed that negotiationsshould begin for trade union participa-tion in the chemical industry’s existingResponsible Care programme. This aims toensure universally high health and safetyand environmental standards whereverthe industry operates.

Detailed negotiations were indeedlaunched between the ICEM and the com-panies’ International Council of Chemical

Associations (ICCA), and by the begin-ning of 2001, everything seemed set for aworldwide sectoral agreement. However,the deal was scuppered at the last minute,apparently at the behest of two big anti-union US companies. Nonetheless, theICEM still hopes to reach agreement, pos-sibly at the regional level. So this innovativeILO-backed approach may yet bear fruit.

If global framework agreements be-come as commonplace as the GUFs hope,another problem could arise. The globalunion federations have fairly small sec-retariats. They can cope with the presenthandful of agreements, but if hundreds orthousands of such deals are signed, it will

be difficult for the GUFs to service themcentrally.

For this reason, the rise of frameworkagreements has gone hand in hand withanother important development – global

union networks within major multination-als. In future, the likelihood is that frame-work agreements will be serviced pri-marily by unions organizing within thecompany concerned or through facilitiesnegotiated with employers.

The idea of framework agreements isspreading, but it could still do with somemore promotion. Here too, the ILO may beable to help by stimulating and supporting

global social dialogue. After all, the pre-condition for any such deal is to get theunions and the companies together at theglobal level. Where better to do that thanat the tripartite ILO?


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The basis for this role has been laid bythe ILO Tripartite Declaration on Multi-national Enterprises and Social Policy. AsDirector-General Juan Somavia points out,this text is a universal basic reference pointfor social responsibility in the world of

work. Its principles, he says, “foster mutualunderstanding, participation, transparencyand social responsibility – all prerequisitesto sustainable partnerships among globaland local actors and markets”.

In a global marketplace, no task is moreurgent.

Notes

1 An online list of current global frameworkagreements, with onward hyperlinks, is maintained

by the International Confederation of Free Trade Un-ions at http://www.icftu.org/displaydocument.asp?Index=991216332&Language=EN

2 IFBWW press release, 19 March 2002. Availableonline at http://www.zulu.worldcom.ch/ifbww/cgi-bin/enpolicies.cfm?Id=257

3 Ron Oswald. IUF Agreements. 2001. Available on-line at http://www.icftu.org/displaydocument.asp?Index=991215155&Language=EN

4 Rubber and Plastics News, “Freudenberg’s global labor pact makes sense”, 2000. Available onlineat http://www.icem.org/agreements/freudenberg/freurp.html

5 Available online at http://www.ilo.org/public/english/employment/multi/download/guide.pdf Print copies can be ordered [email protected]. Subtitled Knowing and Using Univer-sal Guidelines for Social Responsibility, this guide is avaluable tool for anyone wanting to use the Multi-nationals Declaration. It gives practical informationon corporate social responsibility in general, draw-ing on worldwide experience of tackling issues suchas health and safety and child labour. It also stressesthe value of informed social partnership arrange-ments at local level, with multinationals sharing

information with governments and workers’ rep-resentatives. As it points out, keeping negotiationsfree of threats of transfer of operations or transfersof workers is critical to building confidence acrossthe table.

6 Oswald, op. cit.


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The social responsibilities of businesscannot be treated in isolation. They arepart of a larger picture in terms of the econ-omy and governance. They also relate tocertain fundamental principles about thekind of societies that we all seek to build,

based on human rights, social justice anddemocracy.

Democracy comes from the involve-ment of the people, not the good inten-tions of the elite. Democracy is based onrights, the ability of people to defend theirown interests. Alternatives to democracy,including “enlightened dictatorship”, donot produce a climate in which workers’rights and interests can be fully protected.Democracy, political and industrial, is theonly way to transform society positively ina fundamental and sustainable way.

The central mission of the internationaltrade union movement is to use its influ-ence and the tools available to it in orderto provide the space for workers to repre-sent their own interests by organizing intotrade unions and engaging in free collec-tive bargaining. It is to ensure that solidar-ity can weigh in and improve their oddsagainst powerful forces, governmental orprivate, that seek to exploit or dominate

working people.

Tipping the balance

It is to tip the balance towards fairness andrights that we use the ILO supervisory ma-chinery to put pressure on governments torespect workers’ rights. It is also a majorreason why we seek to move the inter-national financial institutions away fromprotecting the powerful and towards en-couraging the respect of the rights of thepowerless. It also explains, in part, our ef-forts to get the World Trade Organization(WTO) to recognize that there must be ef-fective support for workers’ rights and notonly for property rights.

And it is in order to weigh in on theside of working people that we join withour international trade union partners,the Global Union Federations and the

Trade Union Advisory Committee to theOECD, to get enterprises to respect work-ers’ rights. All of these activities have astheir object, in one way or another, to allowworkers to fight for a better deal and tochange the balance of power in the work-place and in society.

No substitute for unions

Organizing is critical to workers’ abilityto protect their rights. It is also centralto development and to the fight to elimi-nate poverty. The combination of effective

The social responsibilities of businessand workers’ rights

Corp orat e social responsibi l i ty is usef ul i f i t pro vid es t he space f orw orkers to prot ect t heir ow n int erests – and damaging i f i t t r ies to f i l l

t hat space. Respect f or b asic rig ht s, un ion recog nit ion , coll ect ive bar- gainin g and social dialogu e, including at t he int ernat io nal level, arekey in gredient s of ind ustr ial democracy and social respo nsibi l i t y.

Guy RyderGene ral Secret a ry

Int ern a t ion a l Co nf ed era t ion o f Free Tra d e Unio ns (ICFTU)


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governance and strong and free trade un-ions can bring those on the fringes of soci-ety into the mainstream. Both are the natu-ral enemies of exclusion. The best way forworking people to pull themselves up bytheir bootstraps has always been through

forming unions. That provides the powerto fuel democracy, dignity and prosperity.

Corporate social responsibility is usefulto the extent that it provides the space forworkers to protect their own interests andit is damaging to the extent that it tries tofill that space.

A corporation that thinks that it is mean-ingfully engaging workers by indulgingin dialogue with itself, even if this is dis-

guised by bringing “hired guns” into theprocess, is either fooling itself, seeking tofool others, or both. Neither the use of pro-fessional CSR enterprises nor a process ofcreating rather than recognizing interlocu-tors is a viable alternative to engagementwith workers and their organizations. So-cial dialogue and industrial democracy re-quire the respect of rights, in particular theright of workers to form their own organ-izations. The only real “voice” of workerscomes from trade unions that they control.There is no substitute. “Empowerment” inthe form of human relations, transmission

belt management, cannot replace represen-tation and real power.

Nor should there be expectations thatCSR can replace the obligations and func-tions of the State. Corporations, large andsmall, have no political legitimacy. Theycannot compensate for a lack of democ-

racy or for a lack of governance. They can-not replace either the will of the people orthe central role of public service in makingsocieties function. The need for companiesto behave responsibly is not a new discov-ery for trade unions. And we have neverseen it as a privatization of the duties ofgovernments.

Current CSR processes entail a dangerthat there will be, in effect, private set-

ting of labour standards or a redefinitionof them. Key rights, such as trade unionrights, will be missing or will be definedor interpreted out of existence. That is al-ready often the case. In addition, for un-

derstandable technical reasons, the focusof activity may well be on those stand-ards that are most easily measured. Bothof these problems can occur even if ILOstandards are used.

Regulation and voluntary action

Another danger is the notion, which iscreeping into the concept of corporatesocial responsibility, that it must be only“voluntary”. This c

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CSR- Myth or Reality