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Responsible Entrepreneurship
NGO
Perspectives on
Responsible Entrepreneurship
December 16, 1997
- Introduction
- 1.0 What is Responsible
Entrepreneurship?
- 2.0 Voluntary
Agreements
- 2.1 "Closed"
agreements: internal to business and industry
- 2.2 "Open" agreements:
negotiating with stakeholders
- 2.3 Concerns and criticisms
- 2.4 Recommended criteria
for effective voluntary agreements
- 3.0 Regulatory
Frameworks
- 3.1 Industry perspectives
on regulation
- 3.2 NGO perspectives
on regulation
- 3.3 The need for an
international regulatory framework
- 3.4 Mixing regulations
and market incentives
- 3.5 NGO concerns: neglecting
the precautionary principle
- 3.6 NGO concerns: double
stand
- 4.0 Reporting
- 4.1 Questions
about corporate reporting
- 4.2 Making information
available: Community Right to Know
- 4.3 Achieving credibility:
monitoring and independent verification
- 4.4 Social and environmental
audits and screens: making them meaningful
- 4.5 The need to protect
whistleblowers
- 5.0 Partnerships
- 5.1 What kind of partnerships
are possible?
- 5.2 Partnerships to promote
responsibility
- 6.0 NGO Recommended
Outcomes for CSD6 Industry Session
- Contributors/NGO
Working Group on Responsible Entrepreneurship
Introduction
In June 1997, the UN General Assembly emphasized
the importance of strengthening "interaction with representatives
of major groups including through greater and better use of focused dialogue
sessions and round tables," with "input from...business and
industry groups in the elaboration, promotion and sharing of sustainable
development practices and their promotion of corporate responsibility
and accountability." The upcoming 1998 CSD Dialogue on Industry provides
an important opportunity to examine how corporate responsibility and accountability
fit within the larger framework of sustainable development.
This Dialogue seeks to achieve some common
understandings of a number of concepts critical to achieving sustainable
development. The concept of responsible entrepreneurship, linked
to Agenda 21’s call for stewardship of natural resources,
elicits a range of interpretations and opinions. In turn, the meaning
of corporate responsibility and accountability garners a
wide diversity of opinion among NGOs, business and industry, trade unions,
governments and the United Nations. In this Dialogue we hope to establish
enough of a common language to take us beyond the concepts and to the
task of changing the way we do business.
While this paper cannot adequately address
the diversity of issues surrounding this topic, we hope to at least focus
sufficient attention on some of the critical points NGOs have raised in
this process. All the NGOs who have contributed ideas and recommendations
to this paper may not agree with all the points raised. However, this
paper is intended to stimulate a dialogue, not to say the final word.
1.0
What is Responsible Entrepreneurship?"
An entrepreneur, following Webster’s
definition, is "one who organizes, manages, and assumes the risks
of a business or enterprise." Ironically, environmentalists and human
rights advocates tend to criticize corporations precisely for externalizing
their risks and costs, passing these on to the environment and society.
Several NGOs find the concept of
responsible entrepreneurship problematic. Six years after Rio,
many NGOs agree with our colleague from Eco News Africa who finds that
"such responsibility is not reflected in the behaviour of huge corporations,
and if anything things are only getting worse."
For the Northern Alliance for Sustainability
(ANPED), responsible entrepreneurship "could be considered a contradiction
in terms when related to sustainable development," in that for most
entrepreneurs their primary responsibility is to their own financial bottom
line. ANPED offers its definition of a "responsible" entrepreneur
as someone who
"actively supports sustainable
development, does not harm the environment, public health or the social
fabric of society and reveals to the public all the possible social and
environmental impacts of their practices."
Many if not most NGOs agree
that the widespread adherence by industry to responsible business principles
and practice depends on the degree to which they are also accountable
to society. In other words, corporate responsibility requires accountability.
One NGO describes the notion of corporate responsibility without accountability
as like trying to run a bank on the honor system, with no security guards.
In spite of all the best practices of honest customers and staff, bank
managers fully understand that it takes only a single dishonest exception
to take away everyone’s common savings. The same is true for sustainable
development.
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2.0
Voluntary Agreements
Voluntary agreements differ dramatically
according to scale of application, the parties involved, their motivations
and incentives, and how compliance is assured and verified, in addition
to the issues (e.g., labor, health, environment) at the heart of the agreement.
Agreements can be distinguished
according to their scale or level of application. They may be
- Company specific (e.g., Levi
Strauss & Company; The Gap; Liz Claiborne; Reebok; Phillips-Van
Heusen; L.L. Bean; the Petrobras Ideas Network);
- Product or industry specific
(e.g., the CMA’s Responsible Care initiative; the White House Apparel
Industry Partnership);
- Location or community specific
(e.g., Clean Clothes campaign in Bangor, Maine; the PADE Programme for
waste management in Rufisque);
- Global or national (e.g., Sullivan
Principles; ICC Business Charter; OECD Guidelines for Multinational
Corporations; CERES Principles; ICCR’s Principles of Global Corporate
Responsibility).
There is a big difference
between "closed" agreements, among companies within an industry,
and more "open" agreements, involving a broader range of employees,
communities and populations directly affected by company operations, consumers,
concerned stockholders – sometimes clustered together under the term
"stakeholders."
2.1
"Closed" agreements: internal to business and industry
Agenda 21 encourages
business and industry to "increase self-regulation, guided by appropriate
codes, charters and initiatives integrated into all elements of business
planning and decision-making and fostering openness and dialogue with
employees and the public." It does NOT say that business and industry
does not need to be regulated, but that they should voluntarily operate
in a socially and environmentally responsible manner. From a business
perspective, voluntary compliance with corporate responsibility codes
can help companies anticipate the impacts of investment decisions on the
environment, health and human rights – and thus avoid costly litigation,
public protest, and disgruntled shareholders.
From the perspective of NGOs,
the value of corporate self-regulation depends on whether or not any significant
progress is made in adopting responsible practices and developing more
sustainable products or services. NGOs are fully aware of the inevitable
choice between responsibility and profitability. This conflict highlight
the weakness of closed voluntary efforts, which often result in noncompliance,
double standards, inadequate targets or standards, and greenwashing. These
flaws obviously damage the public credibility of the agreements.
"No matter how great
the goodwill or sense of responsibility of a business or industry, it
cannot escape the reality that it has to remain competitive and financially
viable," the South Africa New Economics Network (SANE) points out.
For a company to operate responsibly, it has to be assured that its competitors,
who do not behave likewise, do not gain an advantage in behaving irresponsibly.
In other words, the "rules
of the game" must be the same for all; there is no room for "free
riders." When the company must choose between the competitive bottom
line and compliance with non-binding guidelines, management will be forced
to choose the bottom line. Therefore, industry-based voluntary codes must
be strengthened with appropriate government regulations and enforcement
as well as public access to information and community participation in
relevant company decisions.
As Friends of the Earth concluded
in their report on the issue, this is not an argument "against voluntary
initiatives by groups of firms or trade associations that aim to improve
environmental performance beyond compliance with regulations. However...such
schemes do not, and cannot, represent an alternative to regulation."
2.2
"Open" agreements: negotiating with stakeholders
In contrast to the closed
agreements within business and industry are those more "open"
or negotiated agreements and codes involving a wider range of parties.
NGOs and the public are more likely to be skeptical of closed voluntary
codes and agreements -- especially with no independent monitoring and
verification of compliance. NGOs are more likely to support open agreements
reached through negotiations with stakeholders.
One example of a stakeholder
negotiated agreement is the Ethical Trading Initiative, currently chaired
by the New Economics Foundation (NEF). According to NEF, this initiative
"is funded by the UK government and incorporates 18 companies (mainly
food and clothing retailers) and 16 UK NGOs. It has been established to
develop common codes of conduct and approaches to business in poorer countries,
in an effort to positively impact on the well-being of employees and their
communities. Through the process of experimentation, dialogue and negotiation
the ETI will aim to widely endorse a set of standards and an approach
to monitoring and verifying these codes of conduct."
In some cases, community-groups,
consumer organizations, or NGOs may themselves initiate a corporate code
or agreement, and then lobby companies to sign on as partners. For example,
the "Maquiladora Standards of Conduct" was developed in 1990
by the Coalition for Justice in the Maquiladoras (CJM), an international
coalition of environmental, religious, community, labor, women's, and
Latino organizations. This agreement provides guidelines to alleviate
acute problems created by the maquila industry along the U.S.-Mexico border.
Unfortunately, the Maquiladoras have yet to voluntarily adopt and implement
these standards, which nevertheless help raise public awareness and support
the workers and community organizers in Mexican border towns.
The Interhemispheric Resource
Center (IRC) describes the emergence of stakeholder-initiated codes "as
a response to the globalization of the marketplace." According to
IRC, "consumer groups and labor organizations see codes as a way
to regulate the practices of corporations that have operations across
the globe, while the companies themselves have adopted codes to improve
their corporate image and head-off damaging boycotts and bad publicity."
On the other hand, some NGOs warn against open agreements whereby corporations
specify the rules and control the moves in the process, using the term
"stakeholder" to redefine and reduce communities, workers, and
citizens to corporate constituencies in the global economy.
"A prerequisite for
such participative forums to work is a degree of trust between the parties,"
states World Wildlife Fund-UK, a trust which "has been undermined
in the past by the secrecy with which most companies have shrouded their
environmental performance. Responsible companies should have a presumption
of transparency about their operations, and work to release as much data
as possible. This openness should be supplemented by having regular independent
environmental and social audits, drawing on input from employees and the
surrounding community."
Moving in the opposite direction
from transparency is a trend toward what might be called the "corporate
right to secrecy," in which "environmental audit privilege"
laws are enacted allowing companies to conceal information contained in
environmental self-evaluations from national and local enforcement and
environmental agencies, the courts, and citizens. Another component of
these corporate secrecy laws is the "privilege" given to regulated
facilities of "outright immunity from prosecution for companies who
disclose and self-correct violations as a result of auditing," which
will "allow some lawbreakers to retain the financial fruits of their
previous disregard for the law."
2.3
Concerns and criticisms
NGOs express concerns about
both types of voluntary corporate agreements because of their potential
for greenwashing and public manipulation, wasting time, undermining needed
legislation and regulatory efforts, weakening of monitoring and enforcement
mechanisms, creating divisions among NGOs, and for masking the increasing
power and influence of corporations over civic and governmental bodies.
Since the 1992 Earth Summit,
the concept of "voluntary agreements" or "self-regulation"
remains a red flag for many NGOs, as this was given to justify removing
the Code of Conduct for Transnational Corporations from the Agenda 21
negotiations. This 17-year body of work, despite its non-binding nature,
was dismissed at Rio with the promise of a new era of responsible business.
"The most glaring weakness at Rio was the failure to include the
regulation of business, financial institutions, and transnational corporations
in Agenda 21 and other decisions," stressed Martin Khor of Third
World Network in a speech at CSD5. "If nothing else," laments
Joshua Karliner of TRAC, "the Earth Summit clarified the fact that
global corporations have the power and capacity to seriously influence
the focus and trajectory of international agreements on environment and
development."
Greenwashing is one obvious
reason for NGO mistrust of corporations and their concerns about voluntary
agreements. In their book on greenwash, Greer and Bruno of Greenpeace
stress the need to look at the reality hidden beneath the green image
fostered by TNCs, that "TNCs are not saviors of the environment or
of the world’s poor, but remain the primary creators and peddlers
of dirty, dangerous, and unsustainable technologies. The claims of these
companies must be scrutinized carefully and their activities and products
regulated for the good of the planet and its people."
According to ANPED, voluntary
agreements "have not worked, do not reach all entrepreneurs, and
are not participatory...which means that they are ineffective." As
they put it, "the road to environmental and social hell has already
been paved by such ‘codes of conduct’ and alleged good intentions.
In a legalistic society, victims of environmental crimes can find little
comfort in ‘non-binding agreements,’ whether they be broken
or fulfilled in some vague way. The solution lies in international legally
binding regulations to ensure that responsible entrepreneurship will be
the only way in which corporations world-wide operate."
Friends of the Earth International
(FoEI) also identify fundamental problems with the voluntary approach:
- Ineffective, "because
the potential motivations for compliance are neither strong enough nor
sufficiently widespread;"
- stifle innovation, "not
only to fail to stimulate innovation but also to tend to lock firms
into existing, often short-term solutions;"
- undemocratic, focusing
on industry’s interests and definitions of the problems while leading
"to the Government effectively abdicating responsibility for whole
sections of environmental policy,"
- lack public credibility,
raising "the fear that it will serve the narrow interests of the
firms concerned rather than those of the public," and that even
"industry groups themselves have serious doubts about the voluntary
approach which centre on the lack of motivation for compliance and,
in particular, the problems of free-riders."
"Lack of compliance
with international commitments made in Rio formed the key to the failure
of UNGASS," says Netherlands Committee for IUCN, "This underscores
the need for compliance mechanisms in sustainable development agreements,
particularly when they target the main actor in environmental and social
degradation -- industry." NC-IUCN criticizes voluntary agreements
for not including compliance mechanisms, although they consider labeling
initiatives like the "Max Havelaar" case in the Netherlands
and certain labeling efforts for organic agriculture as "a compliance
mechanism within the context of a voluntary agreement." However,
NC-IUCN raises the need to ensure that such cases also "fulfill the
criteria for inclusiveness and accountability."
Noting the wide gap between
business and industry’s promotion of voluntary codes and NGOs’
criticisms, Eco News Africa suggests that "this would be a good place
to look into how far corporations have respected codes" as well as
cases of corporate misconduct and gloss over "previous disasters
that they have helped create and despite the existence of voluntary codes."
Research is needed to clarify the record, to identify the successes and
failures, and to assess both the problems and the potentials of the different
types of voluntary agreements. "Such an evaluation should include
the views of the civil society at large," stresses this Kenyan NGO;
"NGOs and Community-Based Organizations...could work on an effective
strategy on how this could be best achieved."
2.4
Recommended criteria for effective voluntary agreements
Many NGOs believe voluntary codes
and guidelines can be effective contributions to sustainable development
only if they fulfill the following requirements:
- substance: appropriate
content and language (i.e.,undiluted, unambiguous and watertight);
- inclusiveness: active
participation of appropriate stakeholders, including opportunities and
resources for participation of the wide range of affected persons and
organizations;
- motivation: sufficient
incentives to encourage voluntary compliance;
- integration: incorporation
of social and environmental values into not only the policies and operations
of companies, but also in the way they define and measure success and
progress;
- transparency: independent
monitoring of implementation;
- credibility: independent
verification of compliance, involving participation and endorsement
by the NGO sector in the choice and methods of verification; and
- accountability: regulatory
and civic mechanisms enforcing responsible behavior, including penalizing
companies that consistently behave irresponsibly.
"If global guidelines
and codes lead to building partnerships among those who have a stake in
the health and well-being of communities in which they operate,"
says Interfaith Center on Corporate Responsibility (ICCR), "then
they can prove to be useful tools for sustainable economic and human development."
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3.0
Regulatory Frameworks
Both industry and
public advocates complain, for different reasons, about the inadequacy
of regulatory frameworks for motivating responsible business practices.
Industry often describes regulations as interfering with their ability
to establish responsible practices. Advocates of regulation claim that
threats of litigation and fines impel companies towards responsible behavior,
that regulation inspires voluntary responsibility. Other critics
point out that current regulations are not always enforced, or that the
substance is watered down by industry lobbyists.
3.1
Industry perspectives on regulation
Industry has consistently
complained that "entrepreneurial solutions to environmental problems"
are blocked by "complex and cumbersome regulations." In their
eyes,
responsible innovations are hampered
by "punitive regulations, costly and time-consuming enforcement and
licensing methods," which have not kept up with the "increased
awareness of the complex interrelationships between man [sic] and nature."
Speaking for industry’s promotion of the voluntary approach, the
International Chamber of Commerce helped launch the Business Charter
– their preferred alternative to the UN Code of Conduct for TNCs.
Outside CSD, certain elements
in industry and government have been secretly advancing a different, heavy-handed
strategy for dealing with frustrating regulations. Through the proposed
internationally binding Multilateral Agreement on Investment (MAI), companies
will have the power to legally override local and national regulations
and laws if they are determined to be obstacles to foreign investment.
As NGOs gradually learn of this "stealth agreement" they tend
to be scandalized and outraged at such an undemocratic and manipulative
attack on hard-won laws to protect the environment, health, and human
rights. Thus, five years after Rio, industry’s quest to escape accountability
reaches new heights. In turn, NGOs continue to struggle for appropriate
and effective safeguards, regulations, and access by citizens to information
and to the courts to pursue compensation for damages caused by industrial
activities.
3.2
NGO perspectives on regulation
NGOs have no desire to burden
industry with regulations, instead tending to agree with Friends of the
Earth International (FoEI) that "traditional forms of regulation
have been too prescriptive and consequently the opportunity for exploiting
the ability of business to produce novel and timely solutions is constrained,"
that "industry is granted no discretion in how to achieve an environmental
goal." Most NGOs readily agree that regulations are only one of many
different instruments for influencing corporate and public behavior.
As part of the input to this
paper, NGOs recommend a number of social and market-based instruments,
such as redirecting or phasing out damaging and unsustainable subsidies
by the year 2010,, shifting taxes from labor to resource consumption
and pollution, introducing an international CO2 tax, taxing airplane fuel,
implementing the Tobin tax on currency speculation, committing to time-bound
targets, mounting public education campaigns.
Acknowledging that "governments
have often over-stretched regulation, and barely tapped the potential
of market approaches," David Roodman of Worldwatch also points to
a mix of market instruments and regulations, noting that "laws –
not market forces alone – are what will protect endangered species,
manage nuclear waste, and ban pollutants that may be deemed unacceptable
in any amount, such as DDT or dioxins." In contrast to industry arguments,
Worldwatch observes "there is remarkably little evidence that regulations
have seriously depressed the fortunes of industry, or that they have chased
businesses into ‘pollution havens’ – countries with lax
environmental rules." Furthermore, says FoEI, "there is strong
evidence that regulation remains the primary motivation for firms to improve
environmental performance."
3.3
The need for an international regulatory framework
Many NGOs agree with Friends of
the Earth on the "need for an international regulatory framework
in respect of the monitoring and guidance of TNC activity," that
since the closure of the UN Center on Transnational Corporations, "there
has been no official debate on how TNCs should be monitored and regulated."
For ANPED, "nationally enforced regulatory frameworks provide the
only tool to hold corporations accountable and liable, ensuring that responsible
entrepreneurship includes all business." Furthermore, regulations
level the playing field, eliminating the free rider problem by making
the rules of the game the same for all. "This way of giving direction
to business and industry," explains South African New Economics Network,
"largely removes the complex issues which they need to face if these
are left entirely up to the criteria of moral judgment and response to
social pressure."
3.4
Mixing regulations and market incentives
In
general, NGOs tend to call for defending and improving national and international
regulations as well as market instruments. For example, the Taskforce
on Business and Industry (ToBI) calls for governments to "send the
right message" to business -- stressing a mix of ecological tax and
subsidy reforms in combination with strengthening citizens’ Right
to Know and litigation rights to challenge irresponsible practices.
The Women in Environment
and Development Organization (WEDO) encourages CSD6 to promote the language
agreed in the Habitat Agenda, in which governments commit themselves to
"strengthening regulatory and legal frameworks to enable markets
to work, overcome market failure and facilitate independent initiative
and creativity, as well as to promote socially and environmentally responsible
corporate investment and reinvestment in, and in partnership with, local
communities and to encourage a wide range of other partnerships to finance
shelter and human settlements development."
To guide this mix of regulations
and market incentives, minimum standards to define responsible practices
are needed. To succeed, WWF-UK says, these standards must be "locked
into place with binding international regulation." To implement environmental
and social accounting practices across the board, international regulations
and binding standards are required. "A lot of ‘complex and cumbersome’
regulations are caused by the lack of political courage of governments
to introduce at once the tough standards that are necessary from a sustainability
perspective," explains the Netherlands Committee for IUCN, "
Instead, they tend to take a step-by-step approach in which standards
are tightened every few years, thus causing a lot of uncertainty for industry."
Rather, a more direct implementation of standards would allow industry
to immediately invest in the proper technologies, in contrast to "technologies
which will be outdated before the investment is gained back." Furthermore,
adds WWF-UK, such regulations and standards should be promoted by company
environmental officers and industry representatives such as the International
Chamber of Commerce and World Business Council.
3.5
NGO concerns: neglecting the precautionary principle
In
their reaffirmation of the Business Charter, the International
Chamber of Commerce explained that "business looks to government
to provide the necessary regulatory framework based on sound science,
the understanding of risk assessment and economics." This emphasis
on so-called "sound science" and risk assessment is a standard
excuse made by industry to sidestep regulatory safeguards to put controversial
new products, chemical additives, genetically modified organisms, or other
questionable items on the market or engage in hazardous production practices
-- unless science has undeniably proven significant harm or damage.
Thus, for new chemicals or biotechnology products, the burden of proof
and risk is passed onto consumers and communities – not on the company
to demonstrate to the public that their intended actions are truly safe.
Groups like ANPED, ToBI and others continue to urge incorporating the
precautionary principle as part of clean production standards and regulations.
3.6
NGO concerns: double standards
This is the problem whereby companies
comply with certain environmental, health and labor standards in countries
where this is legally required, but fall far short of such standards in
other countries where they have subsidiaries, suppliers, or where they
relocate. "Companies rarely relocate to take advantage of lower environmental
standards, but when operating abroad often behave in ways which they know
would be totally unacceptable in their home countries," says WWF-UK.
However, "a truly responsible company should not act in this inconsistent
manner, but aim to operate to worldwide standards." In this regard,
"companies should undertake regular independent environmental audits
of subsidiaries and major overseas suppliers," and "any variation
in environmental performance for similar processes must be explained inside
the context of a company’s global responsibilities."
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4.0
Reporting
In last year’s UNGASS
report, governments agreed to encourage the "voluntary publication"
by business "of environmental and social assessments of their own
activities." The intent is to encourage greater transparency by business
and industry in providing valid and timely information – especially
about those practices having an impact on the health and well-being of
communities and environment.
In some countries, certain
types of company reports – on campaign contributions and lobbying
expenditures, environmental impact assessments for proposed projects or
developments, and registers of toxic releases – may be legally required.
Beyond these requirements, it is up to the companies as to what additional
information they will divulge. Indeed, for the sake of improving their
relationship and image with consumers, shareholders, government, and partners,
many companies voluntarily provide an assortment of reports about their
various practices. In turn, NGOs pose various questions about their reporting.
4.1
Questions about corporate reporting
As with voluntary agreements,
many NGOs are skeptical of voluntary company self-assessments, suspicious
that such self-audits and environmental reports "effectively serve
to preempt pressure on companies to open their facilities and books to
independent inspectors who could more objectively assess the environmental
impacts of their operations." In general, NGOs raise a number of
questions about corporate reporting, whether voluntary or required:
- Is timely and relevant
information about company practices available to the public?
- Is the information a company
provides credible?
- Is it comprehensible
and comparable?
- Does the public have access
to the courts or other bodies to act on this information?
4.2
Making information available: Community Right to Know
In response to NGO skepticism,
the chemical industry with their Responsible Care program says "don’t
trust us, track us." Although companies in the program are supposed
to conduct annual self-evaluations, "the evaluations are not available
to the public," says Greenpeace. "Without access to information
– even that generated by the company itself," they continue,
"the public does NOT have the opportunity to track the corporation
any more than it did before Responsible Care." In order to effectively
track companies and determine whether they are conducting themselves in
a responsible manner, the public needs relevant information. If companies
will not provide this information voluntarily, then government needs to
take the necessary steps to ensure public access.
One example of information
that companies are required to report to government and which in turn
are to be made available to the public is the Toxic Release Inventory
and Community Right to Know laws (in the United States. "Citizens
armed with information," observes ANPED, "are able to monitor
their neighbourhood polluters and takes some of the regulatory burden
off resource-strapped authorities." Few other countries have the
toxic reporting requirements of the U.S., but governments are being encouraged
to introduce Pollutant Release and Transfer Registers (PRTRs). Simply
by making this information available to the public, claims the OECD, PRTRs
"have had a stronger impact than many regulatory programmes even
though a PRTR sets no improvement goals mandatorily." What is mandatory,
however, is the reporting.
Only a small handful of countries
have yet implemented and enforce Community Right to Know laws. Even in
these countries, the Right to Know has yet to be extended to include not
just a company’s emissions, but the toxic chemicals used in the production
process and in the products themselves. NGOs seek the extension of Right
to Know to cover pesticides used and residing in food (an issue of increasing
concern regarding the impact of endocrine disrupters), as well as on radioactive
materials and genetically engineered organisms.
Industry representatives
typically argue against this expansion of Right to Know, using many of
the original arguments they used against reporting their toxic releases.
Companies claim that public access to information needs to respect "certain
limits," that some data must be respected as proprietary and kept
secret. NGOs argue that "too often corporations hide behind the mask
of ‘commercial confidentiality’ claiming that disclosure will
reduce their ability to compete."
A colleague from Australia
suggests that to help soften the "policing nature" which businesses
may perceive of government reporting requirements, the reporting system
could be extended "to include recognition of outstanding practice
through rewards such as awards/preference given to government contracts,
etc."
4.3
Achieving credibility: monitoring and independent verification
For a company or industry
to establish its credibility with NGOs, it will need to do more than sophisticated
advertising and clever public relations. Methods and criteria need to
be developed to verify the claims of a company or industry about the safety
of their activities. Whether due to gaps in information, simple errors,
or overt greenwashing and deception, there are many reasons to question
the validity of company reports not verified by reliable, independent
methods.
Several NGOs clearly state
their distrust of voluntary programs like Responsible Care, described
as "vehicles that the transnationals use to define environmental
issues on their terms" and designed to "divert attention from
the fundamental environmental issue: products such as nuclear reactors
and toxic chemicals form the lifeblood of many TNCs." Even if these
companies make their self-assessments available to the public, what is
necessary for them to be credible?
Eco News Africa asks a critical
question: "Who [is to] establish such a means for independent verification?"
Some NGOs, such as Germanwatch, suggest that governments, business and
green NGOs should jointly select an institute to conduct corporate monitoring.
The Good Neighbor Project for Sustainable Industries suggest a "right
to inspect," an approach proven effective in numerous previously
negotiated agreements. "In this approach, community and workforce
representatives or NGOs have been entitled to their own experts, and to
accompany them to inspect problem plants and evaluate pollution prevention
opportunities." In many places, particularly in developing countries
in Africa and elsewhere, the technical capacity for such monitoring and
verification is not immediately available. Rather than commission outside
(Northern) consultants to do the job, NGOs suggest "building the
strength of primary stakeholders," particularly local community-groups
or others who understand the problems and are best positioned to observe
a company’s on-going behavior.
"Today, there is a struggle...over
the definition of independent monitoring and who can qualify as an independent
monitor," the Interfaith Center on Corporate Responsibility (ICCR)
points out. "The pressure created by NGOs for companies to adopt
independent monitoring has created a new industry. Accounting, auditing
and consulting firms... have moved into the monitoring field and developed
social audit instruments to measure compliance with company codes of conduct."
While the big accounting firms may appeal to companies as credible monitors
of their behavior, these firms are less qualified for daily monitoring
of potential labor, health and environmental violations to which local
NGOs and community groups would be more attuned. Furthermore, since such
NGOs are perceived as "not beholden to the company," they have
a credibility "which can carry weight with consumers, investors,
labor, human rights groups and the public."
One example of an NGO-business
partnership to develop such an independent monitoring and verification
system is among the Gap and ICCR, Businesses for Social Responsibility,
and the National Labor Committee Education Fund in Support of Worker and
Human Rights in Central America. In this case, the Gap responded to NGO
observations of a violation of the Gap’s Code of Vendor Conduct by
its maquiladora supplier in San Salvador. By February 1996, the Independent
Monitoring Group of El Salvador (IMGES) was formed, a result of consultations
and negotiations with factory workers and managers, local and international
NGOs, religious and business groups to develop appropriate independent
monitoring methods. In March 1996, a historic resolution was signed pledging
all parties to improving worker-management relations, rehiring former
union leaders and giving total access by NGOs to the plant to monitor
the factory’s operations. A year later, IMGES issued a public report
on its work, stating that all points in the resolution had been fulfilled.
While this example may not
be a model for all independent verification situations, it is one positive
example of a process in which a company gives up some of its control and
trusts in the integrity of an equal partnership with the community and
NGOs to reach a solution to a volatile human rights situation. Such an
example might be contrasted with the disastrous experience of Royal Dutch
Shell with the Ogoni in Nigeria.
4.4
Social and environmental audits and screens: making them meaningful
There is also the need of
mechanisms ensuring that company self-audits and reports by external auditors
are comprehensible, capable of being verified, comparable to some kind
of appropriate standard, and that the public has the capacity to respond
in a meaningful way.
A number of organizations,
such as the Council on Economic Priorities (CEP), the New Economics Foundation,
and others are working to develop appropriate auditing and screening mechanisms
to make coherent sense of company practices. For CEP and organizations
working to promote Socially Responsible Investment (SRI), the emphasis
is on developing and using environmental and social screens by which to
identify companies acting in an environmentally and socially responsible
manner. Such screens are useful to concerned investors who want to be
sure they are not investing in enterprises which are causing harm. Groups
such as the Institute of Social and Ethical AccountAbility promote "best
practices in social and ethical accounting and auditing" and are
working to "develop standards and accreditation procedures"
for professional social auditors.
Available and timely data
about company behavior is worthless if it is not easily accessible, understandable
and comparable to some kind of standard or criteria. Special training,
technical assistance and software may be needed to allow public interest
groups to access and apply this data to their work in monitoring the effects
of companies on their community.
The UNECE Convention on Access
to Environmental Information and Public Participation in Environmental
Decision-Making is now being negotiated, with NGOs trying "to strengthen
the role of the public as an environmental watchdog." Among European
NGOs’ concerns with the Convention include "excessively long
time limits...proposed for responding to information requests from the
public," and that "information should be provided in the form
requested, where available, and certain data placed on the Internet."
European ECO Forum members also stress the importance of making information
not only available, accessible, and credible, but that citizens have access
to justice to enforce noncompliance and seek compensation. The UNECE Convention
"needs to provide not only the right to complain about infringements
of the Convention, but also the right to sue both public and private bodies
for breach of environmental laws in general."
Right to Know and public
participation laws need to encompass all regions of the world. Efforts
to provide access to information, participation in decision making, and
access to justice should be gender sensitive and account for the needs
of women. Technologies and methodologies, including information and legal
systems, to establish public access to information and participation should
be considered part of the discussion about technology transfer to developing
countries. In some places, citizens do not even know they have a right
to information about the company practices that affect them.
4.5
The need to protect whistleblowers
One traditional type of non-statutory
monitoring and reporting which requires governmental protection and public
support is company "whistleblowing" – whereby employees
within a company "blow the whistle" on harmful, dangerous or
illegal company practices, which otherwise would remain unknown to the
public or government agencies. Generally, this type of employee watchdog
activity is penalized by demotion, dismissal or other punishment. Protection
for whistle-blowers must be provided in all countries.
Where national whistleblower
protection laws exist, workers may be pressured by other "marginally
legal" methods to discourage disclosure of embarrassing or costly
secrets. Furthermore, warns the Good Neighbor Project for Sustainable
Industries, efforts are being made to enact anti-whistleblower provisions
into environmental audit protection laws. In addition to having the capacity
to challenge such provisions in court and legislatures/parliaments, communities
and workers "need expanded rights and opportunities to ensure responsive
action on identified hazards."
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5.0
Partnerships
As UNIDO recently
observed, "relatively few companies have successfully integrated
sustainability requirements into their overall corporate strategy and
even fewer have made a commitment to follow through in the absence of
stringent regulations. Today’s challenge is to stimulate businesses
to take this step." As to partnerships between businesses and NGOs,
it comes as no surprise that there is much mutual suspicion as well as
differences in priorities and worldviews. Many NGOs are especially disturbed
by the behavior of industry lobbies to kill environmental legislation
or water down agreements. A prime example is the Kyoto climate change
summit, which offers "disturbing examples of this lack of responsibility
presented by the large oil companies and car manufacturers in the US as
they financed a multi-million dollar dis-information campaign to undermine
the climate change treaty negotiations."
5.1
What kind of partnerships are possible?
There are numerous examples
of partnerships among NGOs, businesses, government and trade unions, from
the neighborhood to the global level. We will undoubtedly hear about many
of these examples between now and the Dialogue in April. Some of these
will be inspiring models which we may wish to promote or attempt to emulate,
such as Clean Clothes Campaign in Bangor, Maine or the examples Malick
Gaye of ENDA Tiers-Monde gives of entrepreneurial citizens working to
build the local economy and community democracy by finding innovative,
grassroots solutions to provide local services. On the other
hand, there are numerous examples of a lack of cooperation, false promises,
and a competitive treatment of public interest groups and civil society
as if they are meant to be included in the concept "global competitiveness."
"The NGOs are being bamboozled
by the UN and the corporations," David Korten warns. "We are
given just enough opportunity to create the appearance of citizen input,
but the real action is elsewhere. I think its time to blow the whistle
in the realization that talking to ourselves in rooms provided by the
UN has little to do with citizen participation in a democratic global
governance process."
However, many NGOs continue to
believe that CSD is the place for NGOs committed to sustainability to
come together to engage our governments, the UN, business and industry
and other major groups to define our roles and responsibilities, our obligations
and our accountability to society. Particularly in light of the global
power being granted to corporations by the industry-oriented World Trade
Organization and the Multilateral Agreement on Investment, NGOs look to
the CSD as the primary international institution where the multiple voices
for sustainability have a chance to be heard.
On another level, perhaps
the term "responsible entrepreneur" should be thought of not
so much in terms of companies but rather in terms of specific responsible
individuals within companies and government. Such entrepreneurs would
be those people who have personally accepted the risks and responsibility
for improving things -- even if their colleagues, staff, Board members
or superiors are not convinced. In this case, informal, personal partnerships
and alliances among committed individuals may provide the vital levers
to move reluctant companies towards more responsible policies and practices.
Thus, even if a company continues to cling to irresponsible policies and
practices, there may be a set of potential partners within that company
who are struggling to change it and who deserve to be acknowledged and
supported.
5.2
Partnerships to promote responsibility
Many of the concerns and
hopes raised by NGOs in this paper depend on government to represent its
citizens and ensure that business behaves responsibly. Corporations are
not citizens and do not have the right to risk the health and well-being
of communities and the environment, despite their responsibility to shareholders
to seek higher revenues and financial returns. To possess legitimacy in
the eyes of civil society, businesses must be accountable to society.
To move forward, NGOs need
to make greater efforts to develop partnerships with businesses sincerely
trying to be responsible, governments to help define and implement accountability,
and with trade unions to help protect the rights, health and well-being
of workers in all countries and companies. Furthermore, NGOs need to take
advantage of the CSD’s efforts to include NGOs and major groups more
directly in dialogues and consultations with member governments, to help
build more productive relationships and mechanisms to achieve deeper understanding
and solutions to the global challenge of implementing sustainable development.
Finally, in the words of
Eco Africa News, "[the suggestions] need to be debated by all the
players who are willing to spend their time to build up good strategies
and who can do some work. Otherwise very often we all get together in
New York, have long discussions and go back home to the business as usual
scenario." Since our involvement in this Dialogue is to change business
as usual, it is up to us to make sure there are indeed practical outcomes.
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6.0
NGO Recommended Outcomes for CSD6 Industry Session
NGOs recommend for the CSD, business
and industry, trade unions, and other major groups over the coming months
and years to join with NGOs to engage in the following actions:
- For CSD to sponsor an inventory
and evaluation of the effectiveness of voluntary agreements. This evaluation
should include active participation by representatives from business,
NGOs, trade unions, and research institutions involved with these issues,
as well as an analysis of their differences. The goal would be to identify
the strengths and limitations of voluntary agreements and viable mechanisms
to assure and verify compliance. The results of this evaluation could
be reported at Earth Summit III in 2002, with yearly status reports
to the CSD up to that time.
- For CSD to establish
a Panel on Corporate Responsibility and Accountability. This Panel could
serve as a vehicle for governments and major groups to explore in greater
depth methods for promoting corporate responsibility and accountability,
as recommended in the UNGASS Programme for Further Implementation of
Agenda 21. This Panel could coordinate or sponsor dialogues among major
groups and different sectors of business and industry to better define
those areas where government regulation and oversight is appropriate
and necessary (accountability), and needs to be investment and reinvestment
in local communities. With this aim in mind, the Panel could implement
some of the following recommendations, such as the inventory and evaluation
of voluntary agreements, and provide a vehicle for partner dialogues
on the results. In turn, in 2002, the Panel could issue a joint position
on recommended measures to the General Assembly for ways to more effectively
promote corporate responsibility and accountability in sustainable development.
- For CSD to compile, define
and further explore NGO and other major group recommendations emerging
from this Dialogue. Such recommendations include:
- That companies commission
regular independent environmental audits of subsidiaries and major overseas
suppliers;
- that companies support
efforts to give affected host country citizens the automatic right to
primary redress in the company’s home country courts, without having
to fight for legal standing on a case by case basis;
- that companies support
efforts to institute binding international minimum standards on environmental
and labour practices to avoid others free-riding on their efforts;
- for governments to enact
or strengthen laws protecting whistleblowers from company reprisals;
- for each country present
a plan to redirect or phase out all unsustainable subsidies step by
step by the year 2010;
- to explore the need and
feasibility for a Convention on Corporate Responsibility and Accountability.
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Contributors/NGO
Working Group on Responsible Entrepreneurship
Jeffrey
Barber, Integrative Strategies Forum and ToBI (USA)
Marcio Bezerra, World
Ideas Network (BRAZIL)
Kenny Bruno, Greenpeace
(USA)
Wim A. de Bruyn (BELGIUM)
Susan Davis, Womens
Environment & Development Organization (USA)
Maya Forstater, New
Economics Foundation (UNITED KINGDOM)
Pieter van der Gaag,
ANPED and ToBI (NETHERLANDS)
Malick Gaye, ENDA
Tiers Monde (SENEGAL)
Germanwatch (GERMANY)
Mark Glazebrook, Deakin
University (AUSTRALIA)
Tony Juniper, Friends
of the Earth International (UNITED KINGDOM)
Joshua Karliner, Transnational
Resource & Action Center (USA)
Gail Karlsson, Citizens
Network for Sustainable Development and UN Association (USA)
Albin Keuc, European
ECO Forum (SLOVENIA)
David Korten, People
Centered Development Forum (USA)
Iza Kruszewska, ANPED
and ToBI (UNITED KINGDOM)
Dr. A. Roukens de
Lange, South African New Economics Network and ToBI (SOUTH AFRICA)
Sanford Lewis, Good
Neighbor Project for Sustainable Industries (USA)
Silvia Lorek, German
NGO Forum on Environment & Development (GERMANY)
Simone Lovera, Netherlands
Committee for IUCN and ToBI (PARAGUAY)
Nick Mabey, World
Wildlife Fund (UNITED KINGDOM)
Libby and John Morse,
Surfree Foundation (USA)
Betty Paschen, Green
Party and Sustainable Edmonton Society (CANADA)
Jagjit Kaur Plahe,
Eco News Africa (KENYA)
David Roodman, Worldwatch
Institute (USA)
Carol Skinner, National
Climate Centre (AUSTRALIA)
Jeffrey J. Smith,
The Geonomist Society (USA)
Philip Sutton, Green
Innovations, Inc. (AUSTRALIA)
Leonel Umana, CEDARENA
- Centro de Derecho Ambiental y de Recursos Naturales (COSTA RICA)
Monica Willard, NGO
Values Caucus (USA)
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