Friday, October 2, 2015

Is CSR BS?

Today I will present on a panel with colleagues that spent a week with me this summer in Guatemala meeting with indigenous peoples, village elders, NGOs, union leaders, the local arm of the Chamber of Commerce, a major law firm, government officials, human rights defenders, and those who had been victimized by mining companies. My talk concerns the role of corporate social responsibility in Guatemala, but I will also discuss the complex symbiotic relationship between state and non-state actors in weak states that are rich in resources but poor in governance. I plan to use two companies as case studies. 

The first corporate citizen, REPSA (part of the Olmeca firm), is a Guatemalan company that produces African palm oil. This oil is used in health and beauty products, ice cream, and biofuels, and because it causes massive deforestation and displacement of indigenous peoples it is also itself the subject of labeling legislation in the EU. REPSA is a signatory of the UN Global Compact, the world's largest CSR initiative. Despite its CSR credentials, some have linked REPSA with the assassination last month of a professor and activist who had publicly protested against the company's alleged pollution of rivers with pesticides. The "ecocide," that spread for hundreds of kilometers, caused 23 species of fish and 21 species of animals to die suddenly and made the water unsafe to drink. REPSA has denied all wrongdoing and has pledged full cooperation with authorities in the murder investigation. The murder occurred outside of a local court the day after the court ordered the closing of a REPSA factory. On the same day of the murder other human rights defenders were also allegedly kidnaped by REPSA operatives although they were later released. Guatemala's government is reportedly one of the most corrupt in the world-- the President resigned a few weeks ago and went to jail amidst a corruption scandal-- and thus it is no surprise that the government has allegedly done little to investigate either the ecocide or the murder.

The other case study concerns Tahoe, a Canadian mining company with a US subsidiary that used private security forces who shot seven protestors. Tahoe is facing trial in a Canadian court, a case that is being watched worldwide by the NGO community. Interestingly, the company's corporate social responsibility and the board's implementation are indirectly at issue in the case. Tahoe feels so strongly about CSR that it has a  CSR blog and quarterly report online touting its implementation of international CSR standards, including its compliance with the UN Guiding Principles on Business and Human Rights, the Voluntary Principles on Security and Human Rights, the Equator Principles (related to risk management for project finance in social risk projects), the IFC Performance Standards and a host of other initiatives related to grievance mechanisms for those seeking an access to remedy for human rights abuses. Tahoe is in fact a member of the CSR Committee of the International Bar Association. Nonetheless, despite these laudable achievements, none of the families that my colleagues and I met with in the mining town mentioned any of this nor talked about the "Cup of Coffee With the Mine" program promoted in the CSR report. Of course, it's possible that Tahoe has made significant reforms since the 2013 shootings and if so, then it should be applauded, but the families we met in June did not appear to give the company much credit. Instead they talked about the birth defects that their children have and the fact that they and their crops often go for days without water. They may not know the statistic, but some of the mining processes use the same amount of water in one hour that a family of four would use in 20 years.

Of note, the Guatemalan government only requires a 1% royalty for the minerals mined in the country rather than the 30% that other countries require, although legislation is pending to change this. Guatemala also provides its police and military as guards for the mines to protect the Canadian company from its own citizens. Guatemala probably helps shore up security because even though 98% of the local citizens voted against the mine, the mine commenced operations anyway despite both international and Guatemalan human rights law that requires free, prior, and informed consent (see here). 

Given this turmoil, perhaps it was actually the more risky climate of mining in Guatemala that caused Goldcorp to sell a 26% stake in Tahoe earlier this year rather than the stated goal of focusing on core assets. Norway's pension fund had already divested in January due to Tahoe's human rights record in Guatemala. Maybe these investors hadn't read the impressive Tahoe CSR report. With the background provided above, my abstract for my book chapter and today's talk is below. I welcome your thoughts in the comment section or by email at mnarine@stu.edu.

North Americans and Europeans have come to expect even small and medium sized enterprises to engage in some sort of corporate social responsibility (CSR). Large companies regularly market their CSR programs in advertising and recruitment efforts, and indeed over twenty countries require companies to publicly report on their environmental, social and governance (ESG) efforts. Definitions differ, but some examples may be instructive for this Chapter. For example, the Danish government, which mandates ESG reporting, defines CSR as considerations for human rights, societal, environmental and climate conditions as well as combatting corruption in business strategy and corporate activities. The United States government, which focuses on responsible business conduct, has explained, CSR entails conduct consistent with applicable laws and internationally recognised standards. Based on the idea that you can do well while doing no harm, RBC is a broad concept that focuses on two aspects of the business-society relationship: 1) the positive contribution businesses can make to economic, environmental, and social progress with a view to achieving sustainable development, and 2) avoiding adverse impacts and addressing them when they do occur.

Business must not only have a legal license to operate in a country, they must also have a social license. In other words, the community members, employees, government officials, and those affected by the corporate activitiesthe stakeholdersmust believe that the business is legitimate. It is no longer enough to merely be legally allowed to conduct business. Corporate social responsibility activities can thus often add a veneer of legitimacy.

With this in mind, what role does business play in society in general and in a country as complex as Guatemala in particular? Guatemalan citizens, including over two dozen different indigenous groups, have gone from fighting a bloody 36-year civil war to fighting corrupt leadership that often appears to put the interests of local and multinational businesses above that of the people. For example, although the Canadian Trade Commission has an office with resources related to CSR in Guatemala, some of the most egregious allegations of human rights abuses relate to mining companies from that country. Similarly, many of the multinationals that proudly publish CSR reports and even use the buzzwords social license in slick videos on their websites are the same corporations accused in lawsuits by human rights and environmental defenders. How do these multinationals reconcile these acts? How and when will consumers and socially-responsible investors hold corporations accountable for these acts? Is the Guatemalan government abdicating its responsibility to its own people or is the government in fact complicit with the multinationals? And finally, do foreign governments bear any responsibility for the acts of multinationals acting abroad? This chapter will explore this continuum from corporate social responsibility to corporate accountability using the case study of Guatemala in general and the extractive and palm oil industries in particular.

 

https://lawprofessors.typepad.com/business_law/2015/10/is-csr-bs.html

Commercial Law, Compliance, Corporate Governance, Corporations, CSR, Current Affairs, Human Rights, International Business, International Law, Litigation, Marcia Narine Weldon | Permalink

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