GLOBALIZATION AND GLOBALIZATION AND CORPORATE RESPONSIBILITYCORPORATE RESPONSIBILITY
Rising Expectations: Taking Stock of the Global Sustainability Evolution
WEC 2nd Sustainability ForumApril 26-27 2001
Adam B. GreeneU.S. Council for International Business
SustainabilitySustainability
“Sustainable development is a very simple idea. It is about ensuring a better quality of life for everyone, now and for generations to come.”
“Opportunities for Change” UK Strategy for Sustainable Development, Feb. 1998
USCIB ActivitiesUSCIB Activities
Promote responsible business practices
Contribute to the development and implementation of codes, standards, and principles
Raise awareness of the positive contributions made by business.
“The plain truth is that market liberalization by itself does not lift all boats, and in some cases, it has caused severe damage. What’s more, there’s no point denying that multinationals have contributed to labor, environmental, and human-rights abuses.”
Business Week, Nov. 6, 2000
Context: Corporate PowerContext: Corporate Power Do companies seek out countries with
weak governments and low standards?
– OECD share of world trade fell from 80% in 1984 to 70% in 1998
– OECD countries account for 90% of FDI outflows and 75% of FDI inflows
– Non-OECD trade and FDI concentrated in Latin America and East Asia/Pacific
– Trade between developing countries rose from 25% of exports in 1980’s to 40% in 1998
Context: Race to the BottomContext: Race to the Bottom
Do trade and investment lead to lower labor or environmental standards?
– International trade and investment concentrated in countries with high standards
– On average, foreign companies pay higher wages and have superior environmental performance than domestic companies
– Share of sales in local markets ~ 60-80%
Context: Trade ImpactsContext: Trade Impacts
Do international rules for trade and investment undermine national standards?
– No conflicts between WTO rules and an MEA
– Trade rules recognize the right of governments to set standards at levels they deem appropriate
– Disputes between countries have focused on discriminatory administrative measures
Context: National FactorsContext: National Factors
Democracy and individual liberty Good governance and the rule of law Sound monetary and fiscal policies Implementation and enforcement of sound
environmental and labor laws Secure property rights and transactions
Measuring One FactorMeasuring One Factor
Real estate assets held extra-legally: (US$ Billion)
Haiti: $5 Peru: $90 Philippines:$133 Egypt: $240 Mexico: $315
World: $9.3 trillion
Institute for Liberty & Democracy, Peru
“A more realistic view is now gaining hold…Trade and inflows of private capital are still essential to achieving strong, sustainable growth and to reducing poverty. But it acknowledges that multinationals…have social responsibilities in nations where the rule of law is weak.”
Business Week, Nov. 6, 2000
Drivers for Corporate Drivers for Corporate ResponsibilityResponsibility
Globalization Trade & investment
liberalization Privatization Global communications Government corruption NGO/Activist pressure Government mandates
Company reputation Crisis incidents Customer expectations Investment screens Shareholder initiatives Codes of conduct Acquisitions and
growth
Impacted Business PracticesImpacted Business Practices
Corporate governance Products / Services Marketing Ethics Environment, Health &
Safety Community relations Philanthropy / Grants Human resources
Workplace diversity Compensation / Benefits Human / Indigenous
rights Religious Freedom Contracts / Supply chain
management Communications Public policy
Key Management IssuesKey Management Issues
Appropriate role of the company in non-business activities
Determining audience Scope of one’s “sphere of influence” Supply chain management Internal coordination among functions Implementation options
Management ToolsManagement Tools
Training Operations manuals Internal monitoring Benchmarking Reports to Boards of Directors External communications External monitoring and verification
Codes of ConductCodes of Conduct
Voluntary expressions of commitment that set standards and principles for business conduct
Vary greatly depending on:– objectives, issues covered, audience, partners
Main Issues Addressed:– fair business practices, compliance, ethics– environment, labor policy, human rights– customer/supplier and community relations
AlignmentAlignment
Value-added of a code will depend on the objectives of the company
The primary audience will vary: employees, host governments, local communities, customers and suppliers
Potential for partnerships/collaboration
Multiple codes are creating redundancies for companies, primarily in reporting
OECD Guidelines forOECD Guidelines forMultinational EnterprisesMultinational Enterprises
Adopted in 1976 and revised in 2000 as voluntary recommendations to companies
Part of the OECD Declaration on International Investment and Multinational Enterprises:– National Treatment, Conflicting Requirements,
Incentives and Disincentives
Main objectives are to encourage positive contributions of MNEs and minimize and/or resolve “difficulties.”
Issues CoveredIssues Covered
Sustainable Development
Human rights Corporate
Governance Suppliers and
Contractors Disclosure
Employment Environment Bribery Consumer Interests Science and
Technology Competition Taxation
““Cases” under the GuidelinesCases” under the Guidelines
“Implementation in specific instances”
NCP offer a forum for discussion among the parties involved
Assess the issues and, where merited, help the parties resolve the issue: mediation/arbitration
If unresolved, issue a statement and make recommendations to the parties
Include in annual NCP reports to CIME
"The objectives of the Global Sullivan Principles are to support economic, social and political justice by companies where they do business;
to support human rights and to encourage equal opportunity at all levels of employment, including racial and gender diversity on decision making committees and boards;
The Global Sullivan PrinciplesThe Global Sullivan Principles
to train and advance disadvantaged workers for technical, supervisory and management opportunities;
and to assist with greater tolerance and understanding among peoples; thereby, helping to improve the quality of life for communities, workers and children with dignity and equality.”
The Rev. Leon H. Sullivan
The Global Sullivan PrinciplesThe Global Sullivan Principles
The Global Sullivan PrinciplesThe Global Sullivan Principles
Support for human rights
Equal opportunity Voluntary freedom of
association Compensation to meet
basic needs, opportunity to improve
Safe workplace, protect environment
Promote fair competition, oppose corruption
Work with others to improve quality of life
Promote the application of these principles with business partners
Be transparent in our implementation
UN Global CompactUN Global Compact
Compact between the UN and the private sector to promote human rights, improve labor conditions and protect the environment:– Companies will become public advocates for the
Global Compact.– Companies will post annual examples of progress
made on the principles of the Compact on the UN web site.
– Companies will join the UN in partnership projects.
Next StepsNext Steps
UN agencies working on implementation Annual policy dialogues:– Role of business in zones of conflict
Company postings - “learning examples” Partnership projects National & regional “Compacts” Recruitment
Ongoing DevelopmentOngoing Development
Ownership / Direction Interpretation of the nine principles Linkages with other initiatives Role of non-business partners The nature and scope of partnerships Monitoring
Code of Conduct for Code of Conduct for European EnterprisesEuropean Enterprises
EP resolution supporting a code of conduct for European enterprises operating in developing countries
Monitoring mechanism with EP tribunals where companies would defend their conduct
Combines environmental, social, and economic standards
On-going discussions in EU
McKinney Code of ConductMcKinney Code of Conduct
Would require U.S. companies that employ more than 20 people in a foreign country to implement a corporate code of conduct including labor rights, human rights, and environmental provisions.
Would require companies to submit an annual and public report to the departments of State, Commerce, Labor, and EPA.
Would reward companies with preference for government contracts.
Extractive Industry InitiativeExtractive Industry Initiativeon Human Rights and Securityon Human Rights and Security
In coordination with the U.S. and U.K. Governments:– Engage in an open and substantive dialogue with
human rights and development NGOs– Raise human rights and other governance issues
directly with host government– Consider the human rights aspects of their
security arrangements
SA 8000SA 8000
Commercial venture developed by the Council on Economic Priorities.
Auditing and certification of compliance with ILO labor standards and UN human rights conventions.
Provides fee-based monitoring by an independent auditor and gives oversight responsibilities to NGOs and labor unions.
ISO Business Conduct ISO Business Conduct Management System Standard?Management System Standard?
Single set of voluntary, internationally recognized standards and tools to manage corporate ethics, compliance, and business conduct programs
Framework to measure, evaluate, and audit programs
Allow for self-declaration or third-party certification
ConclusionsConclusions
Effective national governance is critical Growing expectations for companies to
assume social responsibilities Proliferation of Codes and Initiatives No “one-size” approach or response Real value in internal process changes Key issues: areas of influence and
monitoring/verification
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