4.1Voluntary versus Mandatory Compliance goes to the heart of CSR because it largely dictates the degree to which a company is going to be accepted by society. Those companies that add value will be welcomed and those that are perceived to be detracting from the general well-being will be criticized, even rejected. How the notions of contributing or adding value and detracting are defined is constantly shifting; therefore, there is self-interest driving companies to determine in advance what will be expected of them:

Companies are more mindful that their reputation is a precious asset which today's media can destroy in hours. Hence their interest in responding to the demand for CSR.

There is a strong case for the strict regulation of a company's actions when they come into (potentially negative) contact with society. For example, left to its own devices, a company transporting nuclear waste might be tempted to avoid undertaking all the costly precautions necessary to ensure a completely safe journey. There is also, however, a strong case that a company has to be genuinely committed to implementing CSR in order for it to be effective and that no amount of regulation can dictate such commitment:

Mandatory disclosure requirements would not help-especially if they were highly prescriptive. If requirements were too rigid, the result would be a bureaucratic compliance culture, where disclosure would relate not to any real commitment to good behavior but to a desire to tick the right boxes.... If corporate social responsibility means anything, it must involve some voluntary recognition by companies that they cannot thrive in isolation or opposition to the society in which they are trying to do business."

Alan Greenspan, chairman of the Federal Reserve Board in the United States, has long been an advocate of self-regulation, or voluntary compliance, within the finance industry:

"It is in the self-interest of every business- man to have a reputation for honest dealings and a quality product," he wrote ... in 1963. Regulation, he said, undermines this "superlatively moral system" by replacing competition for reputation with force .... [Greenspan] still admires the laissez-faire capitalism of the mid-19th century. At that time, competition, not regulation, kept financial markets honest. Banks, for example, issued their own currency whose value fluctuated with the issuer's reputation."

Government regulatory interventions-such as producing a national currency and guaranteeing individual savings deposits-Greenspan argues, reduced the incentive for bankers and businessmen to act prudently ... [and made] depositors less concerned about the reputation of the bank to which they entrusted their money."

The European Multi Stakeholder Forum on Corporate Social Responsibility (CSR EMS Forum) indicates a growing awareness of the need to encourage voluntary change:

Participants agreed [on] a definition of corporate social responsibility. They reaffirmed that it is the voluntary integration of environmental and social considerations into core business operations over and above legal obligations, and is based on dialogue with stakeholders."

It is also true, however, that given half a chance, many companies would determine where to cut costs based on self-interest (i.e., the lowest cost) rather than on what they feel would be best for society in general, if money were no object. Hence the case for stricter legislation as a safeguard: Enron, for example, proudly presented its CSR credentials as a giant PR exercise while internally betraying them. Unless companies really own CSR it is only window-dressing, argue the voluntarists. The best instrument is to show business that behaving well is good business, so that it adopts CSR willingly and internalizes it.There is definitely a place for regulation in areas of greatest interest to the largest number of people: In France, since 2002 all public companies have been required to report social and environmental information as part of the annual report." Belgium has a national kite marking scheme so that consumers can identify companies that follow CSR principles." Too much regulation stifles entrepreneurship and encourages inefficiency. Yet business's best interests require an understanding that consumer definitions of what is and is not acceptable are shifting. If firms ignore consumer expectations, a potentially more damaging backlash of wide- spread regulation may stifle the business environment and make the whole situation worse. A pattern that is emerging in global business is that those corporations that have felt the brunt of the attention of CSR campaigners up until now are often those that are most proactive regarding CSR. These companies see the self-interest in reacting positively to their experiences and instigating CSR protection to try and avoid similar problems in the future: Shell's experience with Brent Spar and in Nigeria convinced it to take relations with its stakeholders more seriously, becoming an exemplar of best practice in its environmental and social reporting." It is always difficult to tell, of course, whether these incidents prompt a company genuinely to re-evaluate its operations and strategic perspective to incorporate the importance of CSR or whether the company merely recognizes a need to appear concerned about issues that can harm it. The debate continues.

Questions for Discussion and Review (25 marks )

1. Which argument do you favor-persuading a company to change to incorporate a CSR perspective voluntarily or forcing them to change using legislation? Why?

Answer –

For the question it is hard to take a stand because both the arguments have their own pros and cons such as being not mandatory some companies will follow CSR and some will not thus this can create disturbing standards and chaos in any industry. But from the fresh

and fair perspective I will stand by the perception of CSR as a voluntarily responsibility rather then being a forced legislation, simply because it is a proven fact that when we do something forcefully we certainly find our way out of it by any means it should be proactively done by business community.

CSR is deeply connected with values, not with laws. Values cannot be forced, they can be promoted, taught or awaken. However, if a company decides not to be socially responsible, it’s more likely that its stakeholders will end up punishing its behavior. It’s something that comes from inside the company, with a desire to change things and create value.

The problem is that CSR activities are still regarded as philanthropy and less as strategy to improve business activities. Indicative of this stance are missing CSR structures, external monitoring, lack of knowledge regarding CSR initiatives and unwillingness to publish CSR activities and ignorance about CSR initiatives. All we need to have is minimum standards, a certain framework that set the rules of the game. The government of nations should come up with better reward and recognition schemes for the companies who comply with CSR and thus make them aware of the benefits lies in abiding CSR, providing them with country specific needs, initiatives such as CSR awareness and its advantage through local networks via learning events and seminars for corporate executives etc will make “voluntary CSR” work rather then making it mandatory to follow the footsteps laid by the government.

2. Have a look at Shell's Web site and the way it presents the two issues that prompted the company to reinvent itself as a CSR-oriented organization: Brent Spar (http://www.shell .com/Brent spar/) and Nigeria (http://www.shell.comlnigeria/). Do you think Shell's reaction to these problems shows a genuine commitment to change or simply recognition of the need to appear to be listening to key external stakeholders?

Answer –

No I think that reaction to these problems does not show a genuine commitment to change and is simply window dressing.

Shell is a company which operates in critical industry where climate change, human rights, role of multinational companies in the global economy, operating in environmentally sensitive regions, renewable resources, dealing with industrial legacies are some of the major critical factors which have to be taken care of sincerely. For each of these issues, public opinion is not static and may radically change over time. Therefore, it is important to gain an understanding of how global opinion on certain topics may vary. These changing opinions will continue to influence the Shell Group’s view of where it should position itself.

In Nigeria the protest by the Ogoni tribe due to uneven distribution of wealth and the execution of one of their tribe leader by the military which many thinks can be prevented

if Shell intervened at that point of time, damaged Shell’s image a lot. Shell says that it overcame this issue by engaging in dialogue and reconciliation with the various local tribes and then invested in community for their betterment and economic development for indigenous peoples. Shell must have learnt one main lesson here that is related to human rights but it is doubtful whether Shell has really learned anything from its mistakes in Nigeria. There is a new Shell venture in the West African country Tshad that looks as big as the Nigeria operation, and with the same possible consequences.

The Brent Spar affair has brought quite some change of attitude to Shell. Ten years ago the Multinational could afford to blatantly ignore campaigns against the South African Apartheid regime. Then came the Brent Spar incident and car owners were taking en masse to boycotting Shell's petrol pumps, and such an attitude no longer paid off. Shell came to feel the might of the mass market, and bowed down. Though Shell web-site represents the measure of openness about issues previously wrapped in taboo. There are carefully written features on human rights, the environment does they really matters. At the site's discussion forums arranged by subject everybody is allowed a say about Shell's practices. The question is of course whether this form of openness really yields results. The forums are not intended for people to question Shell; the email facility is provided for that. The email service is actually being used quite intensively to put questions to Shell--these are the 1,100 emails coming in every month. What the nature is of these questions, and the answer to these, remains between Shell and the emailers. Looking at all this one might conclude that this amounts to a fake openness, for show purposes only. After all, in public true discussions are being eschewed. They have changed a lot in their communication, they're far more careful about how they present themselves to the outside world. Adopting a code of conduct regarding human rights and the environment is simply not enough. What counts is implementation and enforcement. Shell has not in any way made clear how they intend to translate their good intentions into concrete practice. There is no independent body to monitor the implementation of the code of conduct.

3. Enter the search terms csr, mandatory, voluntary into Google. Have a brief look at some of the relevant documents this search produces. What is your sense of the argument that is playing out within the business world? Where would most corporations like the balance to fall? Is that the same as the nonprofit organizations or NGOs that are also participating in the debate?