The Hindu Business Line : People, planet and profit — Three Ps of corporate social responsibility

DO YOU know how many hits you get if you search the Internet for "Corporate Social Responsibility"(CSR)? One million one hundred and sixty thousand. Obviously, you could argue all day about the method used, but one thing is for sure: There are a great many people involved in the subject — nations, trans-national corporations, entrepreneurs, students, policy-makers, and advisers.

Over ten years, people have increasingly begun to appreciate that the success of a business is inextricably tied to the welfare and stability of the community. "People" and "planet" also have a part to play alongside "profit". That view calls for a new corporate logic, in which caring for employees, communities and the environment is not only seen as morally correct, but also the best approach for continuity and profitability.

To understand how CSR benefits continuity and profitability, let us examine what it means in concrete terms. As Goethe, the German philosopher, so succinctly put it, you have to "put your policy where your principles are". But how can you convert social problems into business opportunities?

Corporations seem to be caught in what may be called the `Friedman Dilemma'. In an influential essay, "Social Responsibility of Business", first published in the New York Times Magazine in 1970, Nobel laureate Milton Friedman wrote that corporate executives could either strive for profits or go haring about chasing social causes. The two were inimical to each other as `social responsibility' was nothing less than unadulterated socialism. Of course, corporate philanthropy was allowed for, but only after profits were properly secured!

Last month, "Building Trust" was the theme at the OECD Roundtable on Corporate Responsibility for Multinational Enterprises and Developing Countries. The Roundtable was attended by delegates from the 32 OECD -member and 14 non-member countries, representatives of the business community, trade unions, NGOs and academia, who discussed the need to make better use of the OECD Guidelines on CSR.

The Guidelines contain recommendations to companies from 39 governments, and are unique as they are the only CSR instruments that have been negotiated in collaboration with representatives of trade unions, employer organisations and NGOs. This OECD Paris Roundtable was intended to give the Guidelines credibility and stability as a globally applicable instrument so that it may begin "building trust" among all countries and corporations. True, in the rather complex world of CSR, there are no readymade answers or recipes, but the participants set themselves the task trying. In this context, let us consider a recent EU poll which should make all business people sit-up and think. The poll covered "trust", and 61 per cent of people said they did not trust big companies — only political parties fared worse!

This should cause the corporate world much worry and compel it to reflect on the relentless pursuit of shareholder value as the key goal of publicly quoted companies.

One sees it all the time in Brussels, where company lobbyists argue strongly against any new regulation on business. European and other employers took up the cry of "no more red tape". Images of enterprise portrayed as Gulliver chained down by restrictions have been on prominent display. At the same time, the lobbyists seek to portray their corporate social responsibility efforts as the alternative to regulation, using it as a defensive tactic to block new regulatory steps.

Let us be clear on one thing: We are not advocating controls and regulations, but voluntary regulation in areas such as worker involvement, collective bargaining and sustainable development are a little suspicious. Instead of these, observance of OECD guidelines is needed.

In some respects, very little progress has been made during recent years, and we have to find ways to increase awareness and enhance implementation of the guidelines. To act on issues such as labour rights, anti-corruption and sustainable development is one of the most important challenges ahead of us.

Here is a reality check: In June 2002, a group of France's leading retailers, mostly multinationals, released the results of audits carried out in some 300 of their supplier establishments. The details made for grim reading. Children under 13 were found working at two plants in Bangladesh, and, of the 45 textile plants audited in Bangladesh, few were found to be paying the legal minimum wage of 12 euroa month. The minimum wage was last adjusted in 1994, when it was raised above 24 euro. Workweeks of 86 hours or more, even for youngsters, were common. Those who refused to work overtime were docked two days' wages. One factory had seven toilets for 600 workers.

For their Chinese suppliers, 12-hour workdays, seven days a week were the norm. Most workers did not have a single day off in a month. Legislation was virtually never respected, and wages paid in many of the audited plants were just over half the legal minimum. In Morocco, child labour and what was described as `forced labour' for women workers were easily uncovered, and health and safety conditions were horrific. Filthy or locked toilets. No fire or emergency exits. No protection against chemicals or dangerous work situations. All disasters waiting to happen.

Suppliers audited in Pakistan rarely respected the minimum wage regulations, and horrifically long hours of work and dangerous working conditions were commonplace. The majority of the production came from Export Processing Zones, where labour legislation do not apply anyway. In their presentation of the reports, these multinational retailers displayed amazing complacency, appearing largely to ignore ILO Conventions and the OECD Guidelines. They even dismissed the widely accepted Code of Conduct, SA8000, which is firmly anchored in the key Conventions of the ILO, as "too demanding" and only for "the rich".

None of their 46 suppliers audited three years ago could be certified under SA8000. Not surprising when almost all, were in breach of numerous pieces of national labour legislation. Though most of these retailers were from France, they were soon joined by other American and European companies. Many OECD retailers and merchandisers source from Sri Lanka where much of the production is carried out in export designated zones in which trade unions were banned until recently and efforts to unionise are met with harassment, intimidation and mass firings. Unfortunately, even as corporate social irresponsibility is rife among the world's leading retailers and merchandisers, it encourages such corporate criminality, which exploits workers and endangers their lives.

Business misconduct in the supply chain is causing enormous problems for workers. Constant efforts to secure goods at the lowest possible price and as quick as possible are impoverishing workers, communities and nations. Their problems are compounded by the absence of worker representation, collective bargaining, and the failure of governments to enact and enforce legislation protecting human and worker rights. Many governments do not act because of incompetence or corruption, but also because there appears to be no incentive to do so in the absence of international mechanisms to enforce minimum human and workers' rights standards.

How do we go about fixing all of this?

A combination of regulation, along with global, national and voluntary effort is needed. Globally, there is urgent need for mechanisms to ensure that laggards and offenders are brought to heel. Trade agreements should contain a social clause making participation in global markets dependent on respect for global labour standards. National governments have a key responsibility in advancing the well being of all their citizens, including workers. This necessitates enacting and implementing legislation protecting workers' rights, health, safety, job security, etc.

Finally, the corporate world must, even in the absence of regulation or its implementation, respect international norms. All the old excuses don't wash any more.

CSR is not about applying the same standards in other countries. Rules and wages have to be adapted to local conditions. But, this does not mean that lowering labour standards is an acceptable tool to attract foreign trade and investment. Rather, the right to organise, freedom of speech and the abolition of the worst forms of child labour have nothing to do with the level of development. They are universal rights that must be universally respected by all businesses.

(The author is former Europe Director, CII, and lives in Cologne, Germany. Feedback may be sent to mohan.murti@t-online.de)

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