2 7 2010 CSR Envt London

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Corporate Social Responsibilityand the Environment

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Course Introduction

I. Corporate Law BackgroundII. What is Corporate Social Responsibility (CSR)?How does it relate to environmental concerns?II. International regimesIII. Regional measuresIV. State measures

V. Industry measuresVI. ExamplesVII. Conclusion

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Background Corporate Liability

Generally, corporations do not, as a matter of law,exist as a person for purposes of criminal and civillaw, and thus cannot be held liable for their actions.

However, corporate liability is created at law throughthe designation of a corporate entity as a legalperson.This status is very important in CSR instrumentsbecause using it gives CSR instruments a wider scopeof application and jurisdiction.

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Background jurisdiction/extraterritoriality

Jurisdiction of a state over the conduct of anactor is very important in CSR.

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Background - CSR

What is CSR?

How does CSR relate to environmentalmatters?

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International Environmental Regimes

Rio Declaration ± Overall, the Rio Declaration stresses the need to

protect the environment and health of all peoples,especially when in relationship to development.

± This was also stressed regarding trade andnational legislation to create and implement

liability for environmental degradation.

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Agenda 21 ± Created as a wide-ranging, worldwide policy

statement, addressing the following areas inrelationship to the environment, sustainabledevelopment, and economic growth.

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Kyoto Protocol ± The Kyoto Protocol, which will expire in 2012 unless

extended by State Parties, created the framework forcarbon markets international, regional or national and their functioning.

± Included in the carbon market framework were theClean Development Mechanism and JointImplementation, which provides ways for developedcountries to fund emissions reducing projects in boththe developing and developed worlds and receivecredits that could be used in the carbon marketsystem.

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The regulations that have been promulgated togovern CDM & JI projects in part ensure that theprojects that have been contracted for are

actually completed in a sustainable way thatmeets the asserted emissions reductions targets.This is an important consideration for corporatesocial responsibility in that the CDM and JI ruleswill ensure that these projects are undertaken ina responsible way that does actually result inemissions reductions at the project site.

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International Regimes

It should also be noted that, if there is an act of briberyor corruption that involves circumventingenvironmental laws/regulations, for example thecompletion of a meaningful environmental impactassessment, there are international and regional corruption regimes that are related to CSR.

± UN Convention Against Corruption ± OECD Convention on Combating Bribery of Foreign Public

Officials in International Business Transactions ± Uniform Framework for Preventing and Combating Fraud

& Corruption ± Asian Development Bank, OAS Inter-American Convention

Against Corruption, Council of Europe & EU,

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European Union

The European Union has identified corporatesocial responsibility as being key to sustainabilityand economic growth.

In Europe, corporate social responsibility hasbeen extended to small and medium enterprisesas well as the large corporate entities with whichit is usually associated. This has been done

through an EU-wide education campaign,creating awareness and stressing the importanceof good business practices.

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European Union

Corporate social responsibility has also beenidentified by the EU as important to thedevelopment of business competitiveness.

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European Union

Liability & Polluter Pays & PrecautionaryPrinciple

± Under EU Directives, corporate entities arerequired to make restitution for environmentaldamages incurred as a result of their actions/fault.

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European Union

Sixth Environment Action Programme, 2010 ± States that efforts to ensure corporate compliance

with environmental regulations and voluntarycommitments regarding environmental protectionare a key part of the EU s strategy to combatenvironmental problems.

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United States

USEPA Compliance mechanisms ± The USEPA provides businesses and other

regulated entities assistance in complying with theterms of US environmental laws and regulations.

± Compliance mechanisms are non-punitive andgenerally consist of voluntary EPA inspections, and

auditing/self-disclosure policies.

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United States

CERCLA responsibility provisions ± Under the Comprehensive Environmental

Response, Compensation, and Liability Act

(CERCLA) businesses which currently are pollutingor who have polluted.

± Based on CERCLA s responsibility provisions, it ispossible for the current owner of a property on

which a toxic substance was spilled to sue up thechain of owners to get to the owner(s) responsiblefor the actual pollution.

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International CSR agreements OECD

Guidelines for Multinational Enterprises ± General Principles

Stresses that good corporate governance and corporateprofit are not exclusive;Stresses the need for corporate operations to be awareof environmental and social factors of operations;

± Ch. V Environment

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International CSR agreements OECD

OECD Risk Assessment Awareness Tool forMultinational Enterprises in WeakGovernment Zones

± Provides corporations in these situations withquestions that they might face and realisticanswers, including questions relating to the

application of laws and environmental standards.

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International CSR agreements Uniform Framework

± Uniform Framework for Preventing and CombatingFraud & Corruption

� Signed by the World Bank, African Development Bank, ADB,

EBRD, EIB, IMF, IADB.� Creates Joint International Financial Institute on Anti-

Corruption Task Force.� Also provides basic agreement on the actions of these banks

regarding financing and lending� Strengthens cooperation and coordination between

institutions regarding fraud and corruption.

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International CSR agreements Uniform Framework

± Uniform Framework for Preventing and CombatingFraud & Corruption

± Requires that member entities ensure that theyare involved in transactions and relationshipswhere laws, including environmental laws, arefollowed.

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International CSR agreements WorldBank

Lending policies & projectdesign/Environmental Assessment

± The World Bank now requires that potentialfunding projects undergo significant andmeaningful Environmental Impact Assessmentsfor the communities in which the project wouldbe located and/or effect.

± The World Bank s lending policies includerequirements that the environment be included inthe consideration of the project overall.

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International CSR agreements WorldBank

Compliance assurance departments within theWorld Bank

± In order to self-monitor, as well as to monitor theoutside entities that are involved in the WorldBank s projects, as well as their internalprocurement departments, there are complianceassurance departments.

± Among the considerations of these departments iswhether the project/contractor is fulfilling itsenvironmental requirements.

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International CSR agreements ParisDeclaration

Paris Declaration emphasises theimportance of environmental impactassessments for both donor and partnercountries.

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Regional CSR Agreements - ADB

ADB/OECD Anti-Corruption Initiative for AsiaPacific

± Emphasizes the importance of CorporateResponsibility and Accountability

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Regional CSR Agreements - ADB

Lending practices/requirements ± Among the ADB s lending requirements is the

requirement that the project to be funded doesnot cause environmental damage.

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Regional CSR agreements - IADB

Lending principles and guidelines ± Among the IADB s lending requirements is the

requirement that the project to be funded doesnot cause environmental damage.

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Regional CSR agreements AfricanDevelopment Bank

Lending practices/requirements ± Among the African Development Bank s lending

requirements is the requirement that the projectto be funded does not cause environmentaldamage.

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Regional CSR Agreements EuropeanDevelopment Bank

Environmental Impact Assessments arerequired for projects that are to beundertaken by the European DevelopmentBank. These must be thorough andconvincing, and examine the impacts on theaffected communities.

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Regional CSR Agreements EuropeanInvestment Bank

Incorporation of environmental considerationand protection as part of the internal andlending considerations of the EIB.

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The UN Global Compact

The UN Global Compact offers businesses a wayto adhere to the MDGs and internationalprinciples of sustainability by pledging to abide by

10 Principles.Key among the 10 Principles are:

± Principle 7: Businesses should support aprecautionary approach to environmental challenges.

Recommended ways of implementing this at abusiness level involve the promulgation of corporatecodes of conduct and standards for business practicesrelated to the environment.

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The UN Global Compact

Principle 8 Undertake initiatives to promote greaterenvironmental responsibility. Recommended methodsof implementing this include ensuring transparencywith local suppliers and contractors.Principle 9 Encourage the development anddiffusion of environmentally friendly technologies.Recommended methods of implementing this includereviewing corporate investment policies in order toensure that they promote the development of environmentally friendly technologies.

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Industry Practices

Forestry Stewardship Council ± An independent NGO founded over 15 years ago with the goal of

promoting sustainable and responsible forestry practices within theindustry.

± Uses rules, certification, trademark assurances and accreditionservices to ensure the industry and consumers that participatingentities adhere to sustainable and responsible forestry practices andforestry management.

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Industry Practices

GIA draft standards ± The Gemological Institute of America is examining

the enactment of standards for gold and other

mining practices, which would allow the customerto be assured that they have purchased an itemthat was not made in harmful labour practicesituations.

±

Like the Kimberley Process, this necessarilyimplicates the environmental practices of themine.

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Industry Practices

Extractive Industries Transparency Initiative(EITI)

± An initiative that uses principles to certify thetransparency of oil, gas and mining operations.

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Industry Practices

EITI Principles ± We share a belief that the prudent use of natural resource

wealth should be an important engine for sustainableeconomic growth that contributes to sustainable

development and poverty reduction, but if not managedproperly, can create negative economic and social impacts. ± We affirm that management of natural resource wealth for

the benefit of a country s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.

± We recognise that the benefits of resource extractionoccur as revenue streams over many years and can behighly price dependent.

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Industry Practices

EITI Principles ± We recognise that a public understanding of government

revenues and expenditure over time could help public debateand inform choice of appropriate and realistic options forsustainable development.

± We underline the importance of transparency by governmentsand companies in the extractive industries and the need toenhance public financial management and accountability.

± We recognise that achievement of greater transparency must beset in the context of respect for contracts and laws.

±

We recognise the enhanced environment for domestic andforeign direct investment that financial transparency may bring.

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Industry Practices

EITI Principles ± We believe that payments disclosure in a given

country should involve all extractive industry

companies operating in that country. ± In seeking solutions, we believe that all stakeholders

have important and relevant contributions to make including governments and their agencies, extractive

industry companies, service companies, multilateralorganisations, financial organisations, investors, andnon-governmental organisations.

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Industry Practices

EITI Criteria ± Regular publication of all material oil, gas and mining payments

by companies to governments ( payments ) and all materialrevenues received by governments from oil, gas and miningcompanies ( revenues ) to a wide audience in a publiclyaccessible, comprehensive and comprehensible manner.

± Where such audits do not already exist, payments and revenuesare the subject of a credible, independent audit, applyinginternational auditing standards.

± Payments and revenues are reconciled by a credible,independent administrator, applying international auditingstandards and with publication of the administrator s opinionregarding that reconciliation including discrepancies, should anybe identified.

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Industry Practices

EITI Criteria ± This approach is extended to all companies including

state-owned enterprises. ± Civil society is actively engaged as a participant in the

design, monitoring and evaluation of this process andcontributes towards public debate.

± A public, financially sustainable work plan for all theabove is developed by the host government, withassistance from the international financial institutionswhere required, including measurable targets, atimetable for implementation, and an assessment of potential capacity constraints.

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Industry Practices

International Council on Mining & Metals ± 10 Principles for Sustainable Development

implement and maintain ethical business practices andsound systems of corporate governance.

Integrate sustainable development considerations within thecorporate decision-making process.Uphold fundamental human rights and respect cultures,customs and values in dealings with employees and otherswho are affected by our activities.Implement risk management strategies based on valid dataand sound science.Seek continual improvement of our health and safetyperformance

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Industry Practices ± 10 Principles for Sustainable Development

Seek continual improvement of our environmentalperformanceContribute to conservation of biodiversity and integratedapproaches to land use planningFacilitate and encourage responsible product design, use,re-use, recycling and disposal of our productsContribute to the social, economic and institutional

development of the communities in which we operateImplement effective and transparent engagement,communication and independently verified reportingarrangements with our stakeholders

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Industry Practices InternationalAssociation of Oil & Gas Producers

Promotion of environmental protection aspart of members operations and businesspractices.

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Industry Practices Better CottonInitiative

Seeks to improve the environmental and social conditionsin which cotton is grown and cotton products are produced.The long term objectives of the Better Cotton Initiative are:

± To demonstrate the inherent benefits of Better Cotton

production, particularly the financial profitability for farmers ± To reduce the impact of water and pesticide use on human andenvironmental health

± To improve soil health and biodiversity ± To promote Decent Work for farming communities and cotton

farm workers ± To facilitate global knowledge exchange on more sustainable

cotton production ± To increase the traceability along the cotton supply chain

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Industry Practices Better CottonInitiative

Production Principles: ± Better Cotton is produced by farmers who minimise the

harmful impact of crop protection practices ± Better Cotton is produced by farmers who use water

efficiently and care for the availability of water ± Better Cotton is produced by farmers who care for the

health of the soil ± Better Cotton is produced by farmers who conserve

natural habitats ±

Better Cotton is produced by farmers who care for andpreserve the quality of the fibre ± Better Cotton is produced by farmers who promote decent

work

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Industry Practices Global e-Sustainability Initiative

Emphasis on the use of environmentalstandards throughout the communicationsindustry supply chain (which is very broadlydefined).

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Industry Practices - ITRI

A key platform of the association is toencourage sustainability throughout the cycleof the tin industry, especially at the miningstages.

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Industry Practices InternationalChamber of Commerce

Has issued recommendations for corporateincorporation of environmental standards intobusiness practices, especially in terms of supply chains.

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International Practices InternationalStandards Organization

Currently working to create a standard forsocial responsibility that will includeenvironmental concerns and practices.

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Example: Starbucks

Starbucks has started working very closelywith the coffee farmers from whom itpurchases its coffee beans in order tominimize their carbon use and allow them toenter into the carbon markets as a result of this carbon reduction.

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Starbucks

As a corporation, Starbucks has takenmeasures to use more recycled products intheir packaging, ensure that the designs of their stores utilize sustainable products andare energy efficient, reduce the amount of water used in stores and in the process of

making coffee and other retail items, andreduce the emissions of its retail entities.

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Starbucks

Starbucks has also partnered with otherenvironmental groups to educate its coffeefarmers in sustainable practices andencourage their use.

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Example: IKEA

Previously, IKEA was dogged with allegationsregarding child labour and unsustainable businesspractices.

In order to combat these allegations and tocreate a responsible corporate policy, IKEAengaged with international groups, such as theWWF, UNICEF, and the Save the Children, to

understand the responsibility and sustainabilityissues that the corporation would need toconsider.

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IKEA

IKEA now uses a series of factors to evaluate whetherto enter into a business relationship with an entity;environmental considerations are among these factors.IKEA s suppliers are required to implement plans thatreduce the impact of their activities on theenvironment.IKEA has implemented a code of conduct for itssubsidiaries, suppliers, and employees that seeks toassure environmental protection. This has beenparticularly important to IKEA s business practices inAsia.

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IKEA

In addition, IKEA has taken measures to ensurethat its catalogues are produced with materialsthat are recycled or otherwise friendly to theenvironment.In conjunction with various European retailers,IKEA has begun programs to track and reduce theenvironmental impact of source of transportationfor its products.

Also has enacted a policy to make its productsenvironmentally friendly themselves, such asdesigns for energy efficient light bulbs.

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Example: Patagonia

Patagonia is an outdoor clothing andequipment store that was founded in the US.Patagonia is involved in many environmentalconservation efforts, from assistingconservation groups in their missions toproviding grants to smaller environmentalprojects that often don t qualify for largercorporate grants to creating a national park inArgentina.

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Patagonia

Patagonia also funds the Freedom to Roam project,aimed at protecting migratory species and theirhabitats.Patagonia s Workplace Code of Conduct states thecorporate belief that their products should be madecausing as little harm to the environment as possible.The Code of Conduct also requires that factories usedfor their products have reduced emissions, fulfill alllocal and other environmental requirements, havestatements of environmental policy, and minimize theirimpact on the environment generally.

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Patagonia

Patagonia used, and continues to use, thirdparty auditors to investigate and evaluate thecompliance levels of the factories it uses.

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