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The Evolution of CSR
Just as the corporation’s history of social and environmental damage dates back to the East India Company, equally the concept of corporate responsibility is not new.
While some corporations have taken every opportunity to make profit regardless of the impacts on society, benefiting from the slave trade, colonialism and war, there is equally a history of a small minority of companies taking a more philanthropic approach by (to some extent) considering the needs of employees or assisting the poor. The creation of cooperatives and mutuals as alternative forms to the corporation reflects the long- standing concerns around the impacts of corporations. There has never been a heyday when corporations acted for the benefit of society. But the unprecedented power of corporations in recent decades, together with an informed and educated general public, has created a real threat to the legitimacy of the corporation, which CSR seeks to counteract.
Evolution of the concept
The phrase Corporate Social Responsibility was coined in 1953 with the publication of Bowen’s ‘Social Responsibility of Businessmen’, which posed the question ‘what responsibilities to society can business people be reasonably expected to assume?’. Writing on the subject in the 1960s expanded the definition, suggesting that beyond legal obligations companies had certain responsibilities to society. In 1984, the celebrated management consultant Peter Drucker wrote about the imperative to turn social problems into economic opportunities. Throughout the 70s and 80s academic discussion of the concept of CSR grew, but the first company to actually publish a social report was Ben and Jerry’s in 1989, and the first major company was Shell in 1998 .
The first international code of conduct
In the late 70’s both the Organisation of Economic Co- operation and Development (OECD), and the United Nations Centre on Transnational Corporations (UNCTC) began developing codes of conduct in an attempt to control different aspects of corporate globalisation. In 1976, the OECD, a grouping of 30 powerful industrialised countries, recognising the complications associated with companies operating across borders, established a set of guidelines to ease the workings of globalisation; setting the ‘rules of the game’ for foreign direct investment, and creating an atmosphere of confidence and predictability in overseas corporations. The OECD ‘Guidelines for Multinational Enterprises’ covered areas such as accounting, tax payments, and operating in accordance with local laws. The guidelines are aimed at countries rather than companies, and compliance with them can be important for gaining listings in certain stock exchanges and export credits. The UNCTC code of conduct, however, aimed to regulate corporate abuse rather than to facilitate corporate access to new markets, and unsurprisingly was less successful. The code might have been a useful tool for controlling corporate excess, but the body was dismantled under pressure from corporations and instead merged into the UN Conference on Trade and Development – a body which promotes foreign investment.
The rise in anti-corporate activism over environmental and human rights issues made a shift in corporate attitudes towards social and environmental issues essential. The 70s and 80s saw major international boycotts of companies investing in South Africa, notably Barclays Bank, and the Nestlé boycott over the company’s aggressive milk formula marketing strategies in the global South. This period was typified by confrontational campaigning that forced change from companies by attacking the brand In the 1990s corporate lobbying effectively undermined attempts to regulate their activities at a global level. Instead it achieved an extension of corporate power both logistically, through improved transport and communications, and legally, through international agreements such as the General Agreement on Trade in Services (GATS), and the Trade Related Intellectual Property Rights (TRIPS), which extended and enshrined rights for corporations.
De-railing the Earth Summit
The 1992 Earth Summit in Rio was a key moment in the evolution of CSR as corporate involvement succeeded in impeding the Summit’s ambitious task to ‘find ways to halt the destruction of irreplaceable natural resources and pollution of the planet.’. During the build up, proposals put forward by Sweden and Norway for regulation of multinationals, based on the work of UNCTC, were crushed in favour of voluntary corporate environmentalism. The level of corporate involvement in the summit was unprecedented, with a coalition of 48 companies formed specifically to influence its outcomes. This new coalition, the Business Council for Sustainable Development (BCSD, later to become the World Business Council on Sustainable Development WBCSD) was established by Swedish millionaire Stephan Schmidheiny, at the invitation of Maurice Strong, the chair of the Summit. The BCSD and International Chamber of Commerce (ICC) took a tandem approach which effectively shifted the debate. From one side the ICC attacked any measures that moved towards corporate regulation, and the BCSD trumpeted the ‘changing course of industry’ towards voluntary self-regulation. This type of strategy has come to typify corporate lobbying against progressive regulation.
Shell’s PR disaster and the turning point for CSR
The anti-corporate backlash reached a climax in 1995, as the spotlight turned on Shell. That year the company stood accused of complicity in the execution of Ken Saro Wiwa and eight other activists in Nigeria, as well as being hounded by Greenpeace over the decision to sink the Brent Spar oil platform. Shell temporarily lost the confidence of investors and the public. Shell’s annus horribilis was a sign of things to come and woke up many in the business world to the importance of their public reputations and the ability of campaigners to damage them. With their license to operate on the line, a strategy to convince the public that corporations played an important and meaningful role in society was essential. Capitalism had to be given a human face. Step forward CSR. Shell spent £20 million on its PR offensive to rebuild its reputation, contracting PR company Fishburn Hedges to co- ordinate its strategy. Shell published a statement of business principles outlining its core values of ‘honesty, integrity and respect for people’. The company’s strategy focused on the ‘magic keys’ – ‘openness and dialogue’, pioneering the practice of producing CSR reports with its ‘Profit and Principles – Does there have to be a choice? The Shell Report’ in 1998. The report was produced by Associates in Advertising and endorsed by the environmental consultancy SustainAbility. The involvement of SustainAbility, who had previously been critical of Shell, was key to the re-brand. The production of the report was coupled with a global advertising campaign focusing on environmental issues and a new website encouraging stakeholders to ‘Tell Shell’, enabling the company to appear to involve the community in its decision-making whilst making no definite commitments. The strategy was successful in rebuilding the company’s reputation amongst key opinion formers and decision makers. So, CSR came as a direct response by corporations to anti-corporate activism and the reputational damage campaigns were able to cause. It represents a success for corporations in resurrecting their public image and colonising the issue space around the social and environmental impacts of business. Tom Delfgaauw, former vice president for sustainable development at Shell, described the company’s problems in the mid 90s as ‘the best thing that ever happened to us, first because we’ve come out of it much, much stronger as a company, and second because it accelerated a great many needed corporate developments.’ It is doubtful whether Ken Saro Wiwa would share the sentiment, particularly considering the continued environmental devastation, poverty and human rights abuse in the Niger Delta.
The rise of the CSR industry
The 1990s saw CSR become an established industry with major companies such as PricewaterhouseCoopers, KPMG and Burson Marsteller entering the CSR service provision market. New consultancies, such as SustainAbility (1989), Business for Social Responsibility (1992) and CSR Europe(1996), also sprang up over this period, all promising to protect industry from protest. Specialist university research centres and the CSR conferencing circuit also emerged in the late 90s. Similarly CSR evolved beyond simple codes of conduct and reporting to include more extensive dialogue with stakeholders, NGO engagement and ‘multistakeholder initiatives’ such as the Ethical Trading Initiative (1993) and the Forest Stewardship Council (1998), bringing together companies, NGOs and in some cases governments. Similarly trade unions began negotiating and signing global framework agreements.
The Global Compact and other corporate codes of conduct
The following years saw a plethora of voluntary initiatives and codes of conduct being developed, by individual companies as well as sectoral codes and international frameworks. Codes included the International Organisation for Standardization’s ISO14001 in 1996, the Global Reporting Initiative Sustainability Reporting Guidelines in 1997, Social Accountability International’s SA8000 in 1998, the Accountability AA1000 Assurance Standard in 1999, and the United Nation’s Global Compact in 1999. The most high profile of these is the UN’s Global Compact. The Global Compact was designed by the office of the Secretary General, Kofi Annan, with considerable input from the International Chamber of Commerce (which did its utmost to ensure a ‘business friendly’ approach). The Compact is a set of nine principles on human rights, environmental sustainability and labour rights (now expanded to 10 with the inclusion of a principle on corruption). Many NGOs have been highly critical of the Compact as it has no monitoring or enforcement mechanism and so allows companies to appropriate the name of the United Nations to reinforce their reputations without requiring them to change any aspect of their activities. Deborah Doane, of the Corporate Responsibiility (CORE) Coalition, argues in ‘Red Tape to Road Signs’ that ‘by promoting these instruments as substitutes for international governance institutions, the UN and OECD effectively undermine the ability of national governments to put forward a different approach.’
Enron and a failed move towards mandatory social and environmental reporting in the UK.
In 2001, the collapse of Enron, once a paragon of CSR, showed just how deeply a corporation’s claims of social responsibility can differ from the reality. As Joel Bakan argues in The Corporation, ‘Enron’s story… suggests, at a minimum, that scepticism about corporate social responsibility is well warranted.’ Enron’s collapse, and the mistrust of corporations that the whole saga galvanised in the public consciousness, led to some soul-searching within the CSR movement. However, much of the public discussion centred on protecting investors, and the main concrete change brought about by the episode was the introduction of the Sarbanes Oxley Act in the USA. This has tightened up accounting regulations and introduced new reporting standards which include some aspects of non-financial risk reporting, but no substantive change on the issue of companies’ wider social impacts. The UK government went down a similar line with the Operating
Financial Review (OFR), in which all stock market listed companies would be required by law to produce a yearly review of their business operations and future developments and risks. This was to include information on environmental matters, employees and social and community issues, though the content of that reporting would be entirely at the company’s discretion. However, in December 2005, Gordon Brown announced that the OFR would be abolished, a decision which is currently being challenged by Friends of the Earth in the High Court. Though the OFR was watered down to a point where it meant little more than mandating companies to produce more PR, it would have represented a tentative shift towards mandatory social and environmental reporting.
From CSR to corporate accountability?
The 2002 World Summit on Sustainable Development (WSSD) marked the crowning of CSR. Friends of the Earth led calls for a Convention on Corporate Accountability, instead the summit delivered much the same outcome as Rio, with over 280 ‘new’ partnerships between government and industry announced as ‘outcomes’ of the summit, the first time such initiatives have been endorsed in this way. Christian Aid has documented the way in which discussion of the issue of corporate regulation in the summit’s agenda, changed from working towards a ‘multilateral agreement’, to developing a ‘framework’, to simply ‘promoting best practice’. Amongst activists and NGOs, however, dissatisfaction with the CSR model was clear. While many NGOs continue to engage with business, the calls for corporate accountability are growing with campaigns such as International Right to Know Campaign in the USA, the CORE Coalition in the UK and other initiatives internationally pressing for more legally binding rather than voluntary regulation.