Corporate Social Responsibility: A Fledgling Movement Faces a Crucial Test
Senser, Robert A.
IN HIS BEST-SELLING book Capitalism and Freedom, first published in 1962, future Nobel Laureate and world-renowned economist Milton Friedman laid down this basic principle for corporate...
...I hope other brands come on board so that I am not always seen as the bad guy with factory management...
...The usual argument in favor of globalization— that it will make most workers better off, with only a few low-skilled ones losing out— has not so far been borne out by the facts," the Economist wrote in its September 16, 2006, survey of the world economy...
...Today, Nike has nearly 150 employees engaged in full time or significant part-time CSR activities under the slogan of "Do the Right Thing...
...There is much to be said for leaving social and economic policy to governments...
...And it wound up with this wisdom: "The proper guardians of the public interest are governments...
...That is illustrated by the experience of a Reebok human rights monitor recounted in "Our Commitment to Human Rights," Reebok's 2005 CSR report (the last one it made before Germany's giant athletic goods marketer, Adidas, bought it...
...Most troubling of all, from the Friedman/Economist perspective, is how widely CSR has infiltrated the executive suite itself...
...Resetting the direction of that policy to make it worker-friendly is a crucial national challenge...
...The plan "is to influence markets, not just [its own] projects and clients," the IFC said...
...Five years ago, amid a prolonged period of anti-globalization demonstrations, Boeing, Caterpillar, and other big U.S...
...It should not come as a surprise, therefore, that businesses, in a "rational" pursuit of their interests, take full advantage of a global economy that leaves them free of any "social responsibility other than to make as much money for their stockholders as possible...
...government, unequaled in potential influence to translate those rights into practice, has chosen not to do so, under both Democratic and Republican administrations...
...The Canada-based International Institute for Sustainable Development has developed a comprehensive case for changing that imbalance while still promoting investment...
...But the new U.S...
...corporation—Levi Strauss & Co.—has come out unequivocally in support of such a linkage...
...IN HIS BEST-SELLING book Capitalism and Freedom, first published in 1962, future Nobel Laureate and world-renowned economist Milton Friedman laid down this basic principle for corporate executives: their sole social responsibility is to maximize the income and wealth of stockholders...
...government zealously promotes throughout the global trade and investment system...
...He advocated making "[anti-] censorship a central element of our bilateral and multilateral [trade] agendas...
...For the duration of its five-year term, that legislation accelerates the passage of the president's trade bills—and related domestic legislation—through Congress without amendment, without the usual congressional hearings, and with very limited floor debate in the House and Senate (hence the popular name "fast track...
...Using the multinational's own voluminous data on internal audits of eight hundred Nike suppliers in fifty-one countries, a Sloan Management School research team conducted a study titled "Does Monitoring Improve Labor Standards...
...Governments have long resisted adding a DISSENT / Winter 2007 • 79 CORPORATE SOCIAL RESPONSIBILITY human rights (or CSR-like) dimension to the global trading regime, as embodied in the world, regional, subregional, and bilateral trade agreements that span the globe...
...Otherwise, the standard set will be that of the company trying the hardest to please the Chinese government...
...Will it expose CSR as merely cosmetic...
...Even in the business world, "the movement for corporate social responsibility has won the battle of ideas," according to the Economist, the English-language media's foremost defender of capitalism...
...The ISO is now developing an international standard with guidelines on "social responsibility," including the right to unionize...
...Objectively carried out, that reassessment could generate reforms filling a major gap that was built into the global trading regime from its very start at the end of the Second World War...
...These protections should include effective measures and processes to ensure compliance— including recourse under the World Trade Organization dispute settlement proceedings if necessary—to enforce them...
...They, at least, are accountable to voters," it editorialized (ignoring the governments of China and Vietnam...
...Its Web posting (which has since disappeared) explained that "advocacy by governments who believe that these rights should be upheld globally is a tremendously powerful tool [to] press intransigent peers to recognize these rights through international forums and other forms of diplomatic pressure...
...After all, a multinational devoted to CSR is at a disadvantage in competing with multinationals that are not, given a global marketplace with rules that grant them awesome rights without any corresponding responsibilities or accountability...
...Alternatively, the Economist may have been on to something in another judgment it reached in the same article: that "the proper guardians of the public interest are governments...
...They specifically urged that the WTO zero in on the world's export-processing zones (now estimated to employ sixty-seven million workers, most of them women), and transform the zones into "globalization at its best...
...We are resolute in our commitment that future trade agreements must include strong language on labor protection at their core...
...The U.S...
...laws recommended in Human Rights Watch's report on the problem, "Race to the Bottom: Corporate Complicity in Chinese Internet Censorship," did not include any change in trade policies...
...But the statement stopped short of recognizing that trade rules are a powerful tool...
...At a June 2006 Bangkok meeting on monitoring and correcting abuses in the global supply chain, Govindasamy Rajasekaran, secretary general of the Malaysian Trades Union ConCORPORATE SOCIAL RESPONSIBILITY gress, reported that only a very small minority of companies in Asia have implemented CSR policies for the millions of workers employed by their contractors and subcontractors...
...Ideally, the International Labor Organization, founded just after World War I, could have been modernized after World War II, but leading government and employer representatives— both active under the ILO's unique "tripartite" structure—kept the ILO frozen in its 1918 mode, radically unfit to promote and defend worker interests in the global economy...
...The UN Global Compact, a "corporate citizenship" project first proposed by UN Secretary General Kofi Annan in 1999, has gained the participation of more than 2,300 business firms in 87 countries...
...Here are the key paragraphs of Levi Strauss's policy statement on "progressive trade liberalization": DISSENT / Winter 2007 n 81 CORPORATE SOCIAL RESPONSIBILITY We firmly believe that labor provisions—including key workplace standards and worker rights provisions, with effective enforcement measures— should be an integral part of all bilateral, regional, or multilateral trade negotiations to protect worker rights in an environment of increasing globalization...
...The system is working as designed...
...The short answer: No...
...It stuck to remedies confined to the domestic scene, such as better education for tomorrow's jobs and "more flexible labor markets...
...In two issues last year, Forbes listed a record number of people worth at least one billion dollars-793 in the whole world, and in the United States alone, all four hundred among the four hundred richest Americans...
...Another UN-born proposal, a set of proposed global norms on human rights for multinational corporations and their related business enterprises, is being debated in the new Human Rights Council...
...That is the global network of treaties and agreements protecting foreign investment and investors...
...In a January 22, 2005, editorial and eighteenpage article, both titled "The Good Company," the Economist formally joined the battle on Friedman's side (without invoking his name) and exhorted corporate leaders to reject the notion of corporate social responsibility (CSR...
...Some business leaders have gone so far as to become active in nongovernmental organizations that promote CSR principles and practice...
...We are a leader in publicly and effectively advocating this position and have been doing so since 2000...
...Business for Social Responsibility, founded by San Francisco corporate executives, attracted more than seven hundred business people to Chicago for its conference in November 2005 (when a New York Times ten-page advertising supplement on social responsibility featured full-page ads from AstraZeneca, ExxonMobil, Pfizer, and Starbucks...
...Of late, more and more top corporate officials, despite their own large stock holdings, have also done so...
...The human face that CSR applies to capitalism goes on each morning, gets increasingly smeared by day, and washes off at night...
...The need for organizations in both public and private sectors to behave in a socially responsible way," 78 n DISSENT / Winter 2007 the ISO explains, "is becoming a generalized requirement of society" In a far-reaching kind of CSR initiative, representatives from the business, academic, legal, labor, government, and investor communities are working together in a long-term project called Corporation 2020...
...Does it make any difference in the daily operations of the world's 70,000 multinational firms, their roughly 700,000 foreign affiliates, and their millions of suppliers and distributors in China and elsewhere...
...THE UNITED STATES, as a government and as a people, will have to confront that need directly because of the expiration in mid-2007 of the controversial 304-page "trade promotion authority" legislation that Congress enacted by a paper-thin 215-212 margin at three o'clock one morning in July 2002...
...Thereby, the Bush administration has had a lot of leeway to put its own corporatefriendly imprint on the country's own trade policy and on the policy that the U.S...
...CSR is little more than a cosmetic treatment...
...A corporation can be a "good company" without the cosmetics of CSR...
...And yet the movement keeps moving, both inside and outside the business world...
...Brad Adams, Asia director of Human Rights Watch, commented, "Laws are needed to end this race to the bottom and establish a level playing field so that the Chinese government can't pick off companies one by one...
...Toward that end, it announced in August that it is teaming up with the UN International Labor Organization to promote better labor standards in the global garment, footwear, electronic equipment, and other light manufacturing industries...
...Uncharacteristically, the seventeen-page survey suggested that "the traditional trade model needs modification," but it suppressed that notion in listing its recommendations for countering the political backlash against globalization...
...The Economist fired both barrels at this core idea...
...THERE MAY BE a good deal of truth in the cynical judgment that the Economist expressed in its "The Good Company" article: "For most companies...
...In their 2003 book Can Labor Standards Improve Under Globalization...
...The company that works within the law, and doesn't cheat, "is doing good works" just by making a profit, the Economist insisted...
...A CSR-diligent company can certainly use external help in applying its principles...
...Foreign Service, is editor/publisher of Human Rights for Workers (www.senser.com ). 82 n DISSENT / Winter 2007...
...Freeman of Harvard argued that the World Trade Organization should outlaw trade-related violations of core labor standards, just as it has outlawed trade-related violations of intellectual property rights...
...Though praising Nike for its effort to improve working conditions among its suppliers, the study concluded that monitoring "is not producing the significant and sustained improvement in workplace conditions that many had hoped...
...The proper business of business is business...
...This is a fundamentally subversive doctrine...
...It has already has its own ID—ISO 26000— with 2008 as its publication date...
...After intensively studying foreign investment issues facing developing countries, the Institute prepared a draft "Model International Agreement for Sustainable Development...
...BACK IN 1998, when it was taking constant heat for its sweatshops, Nike said that it needed government help to get supplier factories to follow its code of conduct on freedom of association and the right to collective bargaining...
...But profit-maximizing competition on the international level is incompatible with proCSR solidarity...
...Another challenge comes in the primaries for the 2008 presidential and congressional elections, when voters will have the opportunity to choose candidates committed to supporting a socially responsible trade policy and to implementing it in a worker-friendly way...
...The one-sided licenses thus granted to mining and energy multinationals, for example, go far to demystify the "resource curse" so puzzling to some economists...
...CORPORATE SOCIAL RESPONSIBILITY True, employer and government representatives, worried by increasing pressures to get the sanctions-equipped WTO involved in also protecting the rights of workers, joined forces to gain unanimous approval in 1998 for the "ILO Declaration on Fundamental Principles and Rights at Work and Its Follow-Up...
...Kimberly Ann Elliott of the Institute for International Economics and Richard 13...
...It is one thing for Amnesty International and the Evangelical Lutheran Church to embrace CSR...
...Occasionally a worried corporate executive, with nowhere else to turn calls on government for help...
...trade policy...
...Like any fledgling movement, CSR has many different manifestations...
...Though a tiny minority, they are pioneers in venturing outside the business path dedicated solely to maximizing the financial well-being of shareholders...
...In one way or another, however, its common thread is the goal of integrating the public interest into the corporation's mission...
...Elliott Schrage, a Google vice president, testified that the U.S...
...The same benighted bipartisanship has kept the United States from adopting the ILO conventions on freedom of association and the right of collective bargaining...
...As Allen L. White, cofounder of Corporation 2000, puts it: "The sheer weight of the corporate role in wealth creation and the footprint associated with this creative process makes responsibility inevitable...
...The WTO remained unmoved, partly because of the objections of governments in third world countries, even though the unions in some of them support the proposal...
...But what effect does it have out in the real world...
...In one area of international law, third world governments clearly have a stake in reform...
...economy going to workers in wages and benefits declined by 2.5 percentage points from 2000 to 2005, reaching a low of 56.5 percent of the gross domestic product, while the decline was even greater in Germany (3.1 percentage points) and Japan (3 percentage points) during roughly the same period...
...On May 1, the International Finance Corporation (IFC), the World Bank's private lending arm, put into effect comprehensive labor and environmental standards covering the five billion dollars it invests annually in the private sector across the globe...
...Lessons from Nike...
...departments of state and commerce and the Office of the U.S...
...As they now stand, these special (and little publicized) types of international agreements grant a wide range of rights and privileges to foreign investors without any corresponding responsibilities or accountability, while also imposing a wide range of obligations on host governments without corresponding rights...
...It is an impressive document on core worker rights, except that the prescribed follow-up, already weak in substance, has been even weaker in implementation...
...The key testing ground for the CSR movement is the global network of production and supply chains that serve multinational corporations with products from factories they do not own, made by many millions of workers they do not employ, in countries whose culture they do not share...
...Some companies do collaborate with each other to advance CSR goals...
...GATT addressed the rights and interests of one important group— the multinational business firms, banks, law offices, and allied firms headquartered in the United States, Western Europe, and Japan— but ignored a group essential to global production: the men, women, and children in the international labor market...
...But the need to reform international trade internationally cannot be sloughed off that easily...
...Quoting the idealized self-interest of Adam Smith's butcher, brewer, and baker, the lengthy article dismissed CSR as "based on a faulty— and dangerously faulty—analysis of the capitalist system," and hence a tool for wrongful interference in corporate decision making...
...For example, as the magazine pointed out, in their annual reports most large multinationals now justify their existence in terms of "service to the community," rather than solely in profit terms...
...No apology required...
...IT IS NEVER A good thing to have rights without obligations...
...Yes, there are a few strands of progress—for example, Nike is now disclosing the names and locations of overseas factories making its sneakers—but no advocate can claim that more than a decade of CSR has delivered on the promise inherent in its ideas...
...For example, eleven multinationals have joined a "Business Leaders' Initiative on Human Rights" and are doing test runs in applying the draft UN multinational human rights norms to their own firms...
...So it is no wonder that multinational corporations prosper under rules and regulations that bestow on them global rights, privileges, and powers without any corresponding global responsibilities or accountability...
...Launched in Boston two years ago, it addresses this question: in a just society, how should the future corporation be constituted to ensure that it serves the long-term common good, rather than short-term shareholder interests...
...If more brands collaborated on this, we could really make a difference in the lives of workers...
...Few trends," he wrote, "could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible...
...Could it be that, to attain its goals in the global economy, CSR needs help from governments...
...ROBERT A. SENSER, a former labor attaché in the U.S...
...It is another for a multinational corporation like Sprint Nextel to appoint a vice president in charge of corporate social responsibility...
...DISSENT / Winter 2007 • 77 CORPORATE SOCIAL RESPONSIBILITY Perhaps even more significant is the growing acceptance of CSR principles by intergovernmental organizations...
...In its mix of binding and voluntary responsibilities, the model urges the host state to have laws and policies consistent with the ILO's 1998 declaration on core worker rights and re8o n DISSENT / Winter 2007 quires investors to follow those laws and policies...
...Trade Representative "should treat censorship as a barrier to trade...
...Ideas can have consequences, at least eventually, but so far there is no evidence that CSR ideas have mattered much in this network, which is the breeding ground of sweatshops...
...Union leaders, student activists, environmentalists, and advocates of various other types have long accepted that subversive doctrine...
...That yardstick should be utilized in reassessing the whole range of present and future trade agreements, from the multilateral" ones of the WTO to the regional and the many bilateral ones of the United States and other countries...
...Sherry Yan, a human rights monitor directly responsible for inspecting 40 of the 160 or more factories in Reebok's China supply chain, wrote, "I love my job, but it can be very frustrating, especially when there is nothing I can do [to make changes that last...
...A recent CSR breakthrough on the intergovernmental level came in two steps last year...
...To date, only one U.S...
...Even the muscular corporate lobby the Business Roundtable seemed interested, but the Bush administration and House GOP leaders were not...
...Isn't it about time for Nike, if it takes CSR seriously, to do the right thing by publicly endorsing the need for a worker rights dimension in trade agreements...
...Howard Mann, a co-author of the model, explains, "One can argue about many of the details, but we believe that the fundamental principle is unassailable: it is never a good thing to have rights without obligations...
...For example, even when I have helped reduce [excessive] working hours in a factory once, the problem occurs again because of the pressure of the industry...
...Another sign of the way the wind seems to be blowing is a new development at the International Standards Organization (ISO), a quasiofficial network of the standards institutes of 157 countries, which has formalized more than 16,000 global standards, each with its own ISO number...
...A senior official of Google did so in February 2006 when he was on the hot seat at a congressional hearing investigating why U.S.based Internet companies are actively cooperating with China's strict censorship policies...
...Yes, most trade agreements now do give verbal recognition to labor rights, but in meaningless ways, without the protections that international agreements and agencies routinely guarantee to capital...
...In 1947, by adopting the General Agreement on Tariffs and Trade (GA1'1), the WTO's forerunner, they filled an institutional and legal gap in the international marketplace—but they did so very partially, in two senses of the word: partial as in incomplete and partial as in favoring one group over others...
...By that time, it had become obvious to top leaders of the United States and other Western nations that the laws and agencies of individual countries were grossly inadequate for the postwar growth in cross-border commerce...
...OTE THAT ALL this diverse CSR activity focuses almost entirely on the level of ideas...
...exporters began reconsidering what Business Week called "their implacable opposition" to linking labor rights and world trade rules...
...GA1T's incompleteness, its partiality, established a worker-unfriendly template for the whole system of multilateral, regional, subregional, bilateral, and plurilateral (don't ask) trade and investment agreements that followed...
...As its preamble states, the model agreement seeks to create "an overall balance of rights and obligations in international investment between investors, host countries, and home countries...
...In his interim report as the UN secretary general's special representative for business and human rights, John G. Ruggie of Harvard wrote, "At the level of the world political economy as a whole, policymakers and pundits of varying persuasions are coming to appreciate a lesson that history taught us long ago: severe imbalances between the scope of markets and business organizations on the one hand, and the capacity of societies to protect and promote core values of social community on the other, are not sustainable...
...Naturally, workers are getting a smaller slice of the economic pie: the portion of the U.S...
...If more companies did so, it would transform the upcoming debate on U.S...
...The upcoming debate on whether to change that policy will show where the corporate social responsibility movement really stands...
...The core question facing companies is how to harness the full potential of business to serve the public interest while preserving and enhancing core assets—creativity, innovation, and competitive drive...
...Based on extensive experience in monitoring factories in Latin America and Asia, Garrett Brown, an occupational health and safety professional, wrote in the September 2005 issue of Industrial Safety and Hygiene News, "The experience over the last decade with 'operationalizing' corporate social responsibility beyond glossy annual reports indicates very little tangible progress has been made...
Vol. 54 • January 2007 • No. 1
