Don't write off corporate social responsibility - we need it

December is the 20th anniversary of the Bhopal disaster, perhaps the world’s worst corporate crime, when 27 tons of lethal gases leaked from the Union Carbide plant in India killing 8,000 people immediately. Today more than 150,000 people suffer from exposure-related health effects such as cancer, neurological damage, and mental illness. Has corporate responsibility improved since then? This cannot be answered with a simple yes or no, although of course many corporate and government leaders would like us to think things have improved.

According to John Howard corporations are “good citizens” that would be unnecessarily restricted by legislation, while Rev Harry Herbert from the Uniting Church has referred to them as “dangerous animals that must be kept in cages, regulated as much possible and treated with suspicion”. My 4 year research project, interviewing corporate leaders from some of the world’s biggest multinational corporations, shows that those in charge of these “dangerous animals” want to see legislative controls put in place. Most said they want governments to lead, and to set regulatory frameworks to create “level playing fields” and catch freeloading companies - and hopefully ensure another Bhopal never happens again.

Former Coalition leader John Hewson, now Dean of the Macquarie Graduate School of Management, stated his unequivocal support for government legislation in a speech at the National Press Club in 2003 saying, “Where a legislative, regulatory and compliance framework is present, companies, because they are required to comply, tend to perform better in terms of social responsibility,” and that in Europe “there is such concern about sustainability that companies simply cannot operate unless they can demonstrate their social responsibility credentials”. Former ACCC boss Alan Fels, in a recent interview on the SBS Insight program, said, “change the laws and you might get some changes in company behaviour”.

In the late 1980s and early 1990’s, as social and environmental problems intensified, global NGOs called for government action to reign in corporate behaviour. To stave off government intervention the business community responded with its voluntary Corporate Social Responsibility (CSR) agenda, which business leaders claimed would make companies more responsible. But how successful has this CSR been?

The current asbestos scandal wracking the James Hardie corporation, and about to embroil BHP-Billiton over its treatment of asbestos affected workers, and the corporate governance scandals which caused the collapses of HIH and One Tel in Australia, and Enron, Worldcom and Arthur Anderson in the US, show that CSR is clearly not working to make corporations accountable.

Many environmentalists are highly cynical of CSR, perceiving it as an elaborate “green wash” exercise by the business community, pointing to the fact that many of those companies most loudly trumpeting their responsible citizen credentials, are being repeatedly caught out breaching their own standards, especially when their operations in developing countries come under the microscope. It is clear that many companies are still involved in socially and environmentally damaging projects despite their voluntary codes.

Climate change and other global environment problems, especially pollution, can mostly be traced back to companies not taking responsibility for the impacts of their operations. And, the evidence is there that the global environment is deteriorating faster than ever, despite a plethora of voluntary CSR codes and agreements. The effects of global warming are increasing at a dramatic rate with extreme weather events such as cyclones, hurricanes, floods and droughts impacting on communities and individuals around the world. And the CSIRO’s frightening report (pdf file 2.58MB) released a couple of weeks ago, confirms that Australia is already suffering, and that things will deteriorate even more in coming decades.

But don’t write-off CSR just yet. It has at least made companies more aware of their responsibilities, and many are developing policies on social responsibility. While a very small number of companies are trying to act responsibly, unfortunately far too few actually “walk the talk”. Some act responsibly in industrialised countries where national environment policies exist and community expectations are high, but in developing countries, where environment policies are weak, non-existent, or poorly enforced, the story is often very different.

What should governments be doing? While there seems to be a growing acceptance that it is okay to intervene militarily in other sovereign states, countries like Australia and the US shy away from intervening in the market place, with the emphasis continuing to be on voluntary codes and agreements. But corporations operate inside, and as part of society - they access their wealth from the world’s resources, they make their profits from the labour of members of society, and sell their products to society - therefore, it is reasonable to demand that they must operate within rules and boundaries set by society. And if the rules and boundaries are ineffectual and the operations of companies are harming society, then those rules and boundaries must be strengthened.

National governments need to take a lead role and develop internationally co-ordinated regulatory frameworks to underpin CSR. They need to set minimum standards for the social and environmental performance of companies, and reporting mechanisms for companies must be established with a requirement to report annually against these standards. Most importantly there must be mechanisms for enforcement, including the use of prosecutions and public outing for those companies that flagrantly breach these standards.

Companies too need to develop their role, and change their culture. CSR needs to be integrated into the management and decision making structures of companies. It must be supported at the Board and or CEO level, and remuneration and bonus packages for CEOs and Directors must be based on an assessment of their performance in making companies more ecologically sustainable.

The situation is too urgent - corporations and governments must act now. Corporations have to take greater responsibility for their actions, and governments must ensure that corporations are informed, that they take responsibility and are made accountable. A sustainable future, with no more Bhopals, is possible, but strong and decisive action is required.