CSR is being bandied about in various ways. Some use CSR for superficial reasons, some because they genuinely care about their impact, and some, such as the extractives industry, use it to gain a social licence to operate. It is clear that big business, as a creator of economic value, is becoming aware of its tremendous impact on the world, the people in it and its ecology.
As trade barriers fall and investment becomes more globalised, the role and size of governments reduce, shifting more power to business. The corporation rules the world like never before. Many governments are handing over traditional services of the state – such as transport, healthcare, energy and education – to the private sector.
This shift in responsibility is so pervasive that even alleviating poverty in developing nations may require the private sector to play a role.
In the 19th century, the USA introduced Limited Liability laws, meaning that a corporation was deemed a “person” – giving it individuality and immortality. This granted corporations constitutional protection, a right to freedom of speech, the right to lobby governments and make political campaign contributions – making politicians beholden to business interests.
Profits and growth now precede people.
The root cause of the business and human rights predicament lies in the governance gaps created by globalisation – the gaps between the scope and impact of economic forces and actors, and the capacity of societies to manage adverse consequences. These governance gaps provide a permissive environment for wrongful acts by companies without adequate sanctioning or reparation.
If there is a lack of respect and no mutually beneficial relationship with communities, corporations can find themselves on the receiving end of violent protest
In this context, can we leave issues related to poverty alleviation, gender equality, social development, education, environment, health, HIV/AIDS, sustainable production, labour standards, cultural and social implications to the corporation?
If we are to do so, corporate responsibility becomes crucial.
For extractive companies, the adoption of voluntary CSR codes as a supplement to national regulatory schemes is crucial to secure a social licence to operate and to avoid state intervention in the future.
Many genuinely gain a social licence to operate as the alternative – building walls around compounds and having hired guns to protect management – does not make business sense. If there is a lack of respect and no mutually beneficial relationship with communities, corporations can find themselves on the receiving end of violent protest, as demonstrated in the case of Barrick Gold. Barrick Gold, built a $14-million wall around their mine after violent clashes resulted in 19 deaths in North Mara, Tanzania.
Risks and Opportunities for Business
Apart from risking a tarnished image, there is pressure on corporations to improve sustainable development performance. This pressure comes from government regulations, NGOs and insurance companies seeking to reduce liability. Pension funds in particular rely increasingly on the Dow-Jones Sustainability and Carbon Disclosure Project indices.
There are also business opportunities that arise from being a good corporate citizen. A committed workforce gives high productivity and a valid social licence, providing a safe and secure environment. Less wastage and eco-efficiency through energy saving and use of renewable technologies add to the bottom-line.
These risks arise from dissatisfied employees, customers walking away, protests from threatened and disenfranchised local communities, environmental threats from pollution and climate change.
Emerging economies create new worldviews different to the “Western economic paradigm”. These have cultural, financial, socio-economic and political implications which change the way business is done.
Business has to step up to the plate to become more responsible – it can no longer focus on shareholder value alone, as not paying attention to natural capital will pose risks to its own sustenance.
In the extractives sector, Washington consensus is questioned across Africa. Rising resource prices, large profits among multinational mining companies, the inability of liberalised mining regulations to meet African development challenges and externally driven regulatory processes pressure governments to renegotiate contracts and revise mining codes with remedial policies and a larger share of revenues.
These complexities require a transformation of leadership to recognise and value not only the tangibles of labour, material, energy and capital costs, but also the intangible environmental, political, cultural and socio-economic costs internal and external to business. This transformation requires human values of respect, integrity and transparency.
The UN Global Reporting Initiative (GRI) has incorporated human rights “due diligence” into reporting requirements. A sustainability report is rapidly becoming essential, providing information about economic, environmental, social and governance performance.
All of this is good, yet external and superficial.
Getting to the Core
Making a difference requires a shift in consciousness with individual leaders – a transformation from a traditional, linear, task-oriented management to an inspirational leader balancing intelligence with sensitivity to the human condition and the environment through values and spiritual integrity. Then it becomes personal, human and close to nature.
In a Guardian interview Unilever’s Paul Polman was critical of companies claiming their fiduciary duty was to maximise profits for shareholders in the short-term, arguing that it is a narrow a model of Milton Friedman’s old thinking:
“If we focus our company on improving the lives of the world’s citizens and come up with genuine sustainable solutions, we are in sync with consumers and society and ultimately this will result in good shareholder returns”.
This change in consciousness and behaviour is not easy with the rational, reductionist worldview supported by education. A more holistic education, with a focus on the complex-self as well as the external world from a young age will help in the long run.
However, change is needed now and courageous leaders like Polman are going against the grain. Among thousands of corporate leaders we count few like him – Anita Roddick of The Body Shop and Ray Anderson of Interface Carpets are two such examples.
This is why adult learning programmes on leadership for sustainability – like the former Bath University MSc for Responsibility and Business Practice and the current Ashridge Business School’s Responsible Business Masters are important.
In Leadership for Sustainability, editors Judi Marshall, Gil Coleman and Peter Reason (who founded the original Bath MSc course with Anita Roddick) pondered as they planned: “What gives people sense of agency, resources, awareness, the approach and the crafts to practice to take action in the service of a more environmentally sustainable and socially just world?”
They created a leading-edge course helping participants to step outside and challenge current formulations of society and business – as transformation requires knowledge, wisdom and courage to question the status quo.
MIT-Sloan School of Management’s Edgar Schein speaks of assumptions we make based on values that are ingrained through long-term acceptance – this is the way business is done – and how its contrarian when going against this grain. This is what Marshall, Coleman, Reason and Roddick were trying to unhinge by designing an innovative course in a traditional school of management to influence change through action-research and self-reflective inquiry, systemic thinking, power and diversity, acting with and against organisations and communities. Thus was born the concept of the “Tempered Radical” who influences change from within.
This innovative MSc was transformative for many people, and inspired new leaders to face the sustainability challenge head on. Alumni are leading the way in the sustainability space, but we need a bigger effort in order to forge ahead in creating authentic corporations as an extension of their authenticity.
Authentic leaders will shift the way corporations create value not for themselves alone but to share their value for our common and mutual benefit and the longer-term interest of this planet.
An article by Lalith Gunaratne
Lalith has formed the company Sage Ontario for Mindful Business and has written a chapter on Sri Lanka for The World Guide to CSR: A Country-by-Country Analysis of Corporate Sustainability and Responsibility, published by Greenleaf Publishing.
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