Alexandra R. Harrington

Doctor of Civil Law Candidate, McGill University

Senior Manager & Associate Fellow, CISDL

Corporate Social Responsibility and the

Environment

I. Corporate Law BackgroundII. What is Corporate Social Responsibility

(CSR)? How does it relate to environmental concerns?

II. International regimesIII. Regional measuresIV. State measuresV. Industry measuresVI. ExamplesVII. Conclusion

Course Introduction

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

However, corporate liability is created at law through the designation of a corporate entity as a “legal person.”

This status is very important in CSR instruments because using it gives CSR instruments a wider scope of application and jurisdiction.

Background – Corporate Liability

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

Background – jurisdiction/extraterritoriality

Internationally (and domestically) some corporations engage in contracting for goods or services with states, regional entities/banks, and international organizations.

In the contracting system, the term debarment is used when a contractor is removed from eligibility or otherwise sanctioned – this can occur for many reasons, including corruption.

Debarment can result in a contractor losing an already awarded contract.

Debarment usually results in the imposition of a period during which the contractor is not allowed to bid for or otherwise seek contracts or sub-contracts with or related to the debarring institution.

Background – Contracting/Procurement Practices

What is CSR?

How does CSR relate to environmental matters?

Background - CSR

Rio DeclarationOverall, 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 and national legislation to create and implement liability for environmental degradation.

International Environmental Regimes

Agenda 21Created as a wide-ranging, worldwide policy

statement, addressing the following areas in relationship to the environment, sustainable development, and economic growth.

International Environmental Regimes

Kyoto Protocol The Kyoto Protocol, which will expire in 2012

unless extended by State Parties, created the framework for carbon markets – international, regional or national – and their functioning.

Included in the carbon market framework were the Clean Development Mechanism and Joint Implementation, which provides ways for developed countries to fund emissions reducing projects in both the developing and developed worlds and receive credits that could be used in the carbon market system.

International Environmental Regimes

The regulations that have been promulgated to govern CDM & JI projects in part ensure that the projects that have been contracted for are actually completed in a sustainable way that meets the asserted emissions reductions targets.

This is an important consideration for corporate social responsibility in that the CDM and JI rules will ensure that these projects are undertaken in a responsible way that does actually result in emissions reductions at the project site.

International Environmental Regimes

It should also be noted that, if there is an act of bribery or corruption that involves circumventing environmental laws/regulations, for example the completion of a meaningful environmental impact assessment, there are international – and regional – corruption regimes that are related to CSR.UN Convention Against CorruptionOECD Convention on Combating Bribery of Foreign

Public Officials in International Business TransactionsUniform Framework for Preventing and Combating

Fraud & CorruptionAsian Development Bank, OAS Inter-American

Convention Against Corruption, Council of Europe & EU,

International Regimes

The European Union has identified corporate social responsibility as being key to sustainability and economic growth.

In Europe, corporate social responsibility has been extended to small and medium enterprises as well as the large corporate entities with which it is usually associated. This has been done through an EU-wide education campaign, creating awareness and stressing the importance of good business practices.

European Union

Corporate social responsibility has also been identified by the EU as important to the development of business competitiveness.

European Union

Liability & Polluter Pays & Precautionary PrincipleUnder EU Directives, corporate entities are

required to make restitution for environmental damages incurred as a result of their actions/fault.

European Union

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

compliance with environmental regulations and voluntary commitments regarding environmental protection are a key part of the EU’s strategy to combat environmental problems.

European Union

USEPA – Compliance mechanismsThe USEPA provides businesses and other

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

Compliance mechanisms are non-punitive and generally consist of voluntary EPA inspections, and auditing/self-disclosure policies.

United States

USEPA – enforcement mechanisms There are several mechanisms through which

the USEPA enforces the compliance of businesses.

One mechanism is through civil sanctions, such as financial penalties.

Another mechanism is through the enforcement of cleanup provisions in the event that there has been a form of spill.

Finally, criminal mechanisms are available against corporate entities, for example in the event of illegal dumping.

United States

CERCLA responsibility provisionsUnder the Comprehensive Environmental

Response, Compensation, and Liability Act (CERCLA) businesses which currently are polluting or who have polluted.

Based on CERCLA’s responsibility provisions, it is possible for the current owner of a property on which a toxic substance was spilled to sue up the chain of owners to get to the owner(s) responsible for the actual pollution.

United States

Guidelines for Multinational EnterprisesGeneral Principles

Stresses that good corporate governance and corporate profit are not exclusive;

Stresses the need for corporate operations to be aware of environmental and social factors of operations;

Ch. V – Environment

International CSR agreements – OECD

OECD Risk Assessment Awareness Tool for Multinational Enterprises in Weak Government ZonesProvides corporations in these situations with

questions that they might face and realistic answers, including questions relating to the application of laws and environmental standards.

International CSR agreements – OECD

Uniform Framework for Preventing and Combating Fraud & 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.

International CSR agreements – Uniform Framework

Uniform Framework for Preventing and Combating Fraud & CorruptionRequires that member entities ensure that they

are involved in transactions and relationships where laws, including environmental laws, are followed.

International CSR agreements – Uniform Framework

Lending policies & project design/Environmental AssessmentThe World Bank now requires that potential

funding projects undergo significant and meaningful Environmental Impact Assessments for the communities in which the project would be located and/or effect.

The World Bank’s lending policies include requirements that the environment be included in the consideration of the project overall.

International CSR agreements – World Bank

Compliance assurance departments within the World BankIn order to self-monitor, as well as to monitor

the outside entities that are involved in the World Bank’s projects, as well as their internal procurement departments, there are compliance assurance departments.

Among the considerations of these departments is whether the project/contractor is fulfilling its environmental requirements.

International CSR agreements – World Bank

Paris Declaration – emphasises the importance of environmental impact assessments for both donor and partner countries.

International CSR agreements – Paris Declaration

ADB/OECD Anti-Corruption Initiative for Asia Pacific Emphasizes the importance of Corporate

Responsibility and Accountability

Regional CSR Agreements - ADB

Lending practices/requirementsAmong the ADB’s lending requirements is the

requirement that the project to be funded does not cause environmental damage.

Regional CSR Agreements - ADB

Lending principles and guidelinesAmong the IADB’s lending requirements is the

requirement that the project to be funded does not cause environmental damage.

Regional CSR agreements - IADB

Lending practices/requirementsAmong the African Development Bank’s

lending requirements is the requirement that the project to be funded does not cause environmental damage.

Regional CSR agreements – African Development Bank

Environmental Impact Assessments – are required for projects that are to be undertaken by the European Development Bank. These must be thorough and convincing, and examine the impacts on the affected communities.

Regional CSR Agreements – European Development Bank

Incorporation of environmental consideration and protection as part of the internal and lending considerations of the EIB.

Regional CSR Agreements – European Investment Bank

The UN Global Compact offers businesses a way to adhere to the MDGs and international principles of sustainability by pledging to abide by 10 Principles.

Key among the 10 Principles are:Principle 7: “Businesses should support a

precautionary approach to environmental challenges.” Recommended ways of implementing this at a business level involve the promulgation of corporate codes of conduct and standards for business practices related to the environment.

The UN Global Compact

Principle 8 – “Undertake initiatives to promote greater environmental responsibility.” Recommended methods of implementing this include ensuring transparency with local suppliers and contractors.

Principle 9 – “Encourage the development and diffusion of environmentally friendly technologies.” Recommended methods of implementing this include reviewing corporate investment policies in order to ensure that they promote the development of environmentally friendly technologies.

The UN Global Compact

Forestry Stewardship Council An independent NGO founded over 15 years ago with

the goal of promoting sustainable and responsible forestry practices within the industry.

Uses rules, certification, trademark assurances and accredition services to ensure the industry and consumers that participating entities adhere to sustainable and responsible forestry practices and forestry management.

Industry Practices

Kimberley ProcessIn response to growing public concerns and

NGO campaigns regarding “conflict” or “blood” diamonds, the diamond industry, together with interested states, came together and adopted the Kimberley Process, which is a certification scheme for diamonds that involves all levels of public and private involvement in the diamond mining and trading process.

This involves not only the conflict but, necessarily, the environment in which mining practices are carried out, especially in times of conflict.

Industry Practices

GIA draft standardsThe Gemological Institute of America is

examining the enactment of standards for gold and other mining practices, which would allow the customer to be assured that they have purchased an item that was not made in harmful labour practice situations.

Like the Kimberley Process, this necessarily implicates the environmental practices of the mine.

Industry Practices

Extractive Industries Transparency Initiative (EITI)An initiative that uses principles to certify the

transparency of oil, gas and mining operations.

Industry Practices

EITI PrinciplesWe share a belief that the prudent use of natural

resource wealth should be an important engine for sustainable economic growth that contributes to sustainable development and poverty reduction, but if not managed properly, 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 extraction occur as revenue streams over many years and can be highly price dependent.

Industry Practices

EITI PrinciplesWe recognise that a public understanding of government

revenues and expenditure over time could help public debate and inform choice of appropriate and realistic options for sustainable development.

We underline the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability.

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

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

Industry Practices

EITI PrinciplesWe believe in the principle and practice of

accountability by government to all citizens for the stewardship of revenue streams and public expenditure.

We are committed to encouraging high standards of transparency and accountability in public life, government operations and in business,

We believe that a broadly consistent and workable approach to the disclosure of payments and revenues is required, which is simple to undertake and to use.

Industry Practices

EITI PrinciplesWe 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, multilateral organisations, financial organisations, investors, and non-governmental organisations.

Industry Practices

EITI CriteriaRegular publication of all material oil, gas and mining

payments by companies to governments (“payments”) and all material revenues received by governments from oil, gas and mining companies (“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible manner.

Where such audits do not already exist, payments and revenues are the subject of a credible, independent audit, applying international auditing standards.

Payments and revenues are reconciled by a credible, independent administrator, applying international auditing standards and with publication of the administrator’s opinion regarding that reconciliation including discrepancies, should any be identified.

Industry Practices

EITI CriteriaThis 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 and contributes towards public debate.

A public, financially sustainable work plan for all the above is developed by the host government, with assistance from the international financial institutions where required, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.

Industry Practices

International Council on Mining & Metals10 Principles for Sustainable Development

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

Integrate sustainable development considerations within the corporate decision-making process.

Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and others who are affected by our activities.

Implement risk management strategies based on valid data and sound science.

Seek continual improvement of our health and safety performance

Industry Practices

10 Principles for Sustainable DevelopmentSeek continual improvement of our environmental

performance Contribute to conservation of biodiversity and

integrated approaches to land use planning Facilitate and encourage responsible product design,

use, re-use, recycling and disposal of our products Contribute to the social, economic and institutional

development of the communities in which we operate Implement effective and transparent engagement,

communication and independently verified reporting arrangements with our stakeholders

Industry Practices

Promotion of environmental protection as part of members’ operations and business practices.

Industry Practices – International Association of Oil & Gas Producers

Seeks to improve the environmental and social conditions in 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 farmersTo reduce the impact of water and pesticide use on human and

environmental healthTo improve soil health and biodiversityTo promote Decent Work for farming communities and cotton

farm workersTo facilitate global knowledge exchange on more sustainable

cotton productionTo increase the traceability along the cotton supply chain

Industry Practices – Better Cotton Initiative

Production Principles:Better Cotton is produced by farmers who minimise

the harmful impact of crop protection practicesBetter Cotton is produced by farmers who use water

efficiently and care for the availability of waterBetter Cotton is produced by farmers who care for

the health of the soilBetter Cotton is produced by farmers who conserve

natural habitatsBetter Cotton is produced by farmers who care for

and preserve the quality of the fibreBetter Cotton is produced by farmers who promote

decent work

Industry Practices – Better Cotton Initiative

Emphasis on the use of environmental standards throughout the communications industry supply chain (which is very broadly defined).

Industry Practices – Global e-Sustainability Initiative

EICC Code, which stresses environmental responsibility as a key platform for the industry and its members.

Industry Practices – Electronic Industry Citizenship Coalition

A key platform of the association is to encourage sustainability throughout the cycle of the tin industry, especially at the mining stages.

Industry Practices - ITRI

Has issued recommendations for corporate incorporation of environmental standards into business practices, especially in terms of supply chains.

Industry Practices – International Chamber of Commerce

Currently working to create a standard for social responsibility that will include environmental concerns and practices.

International Practices – International Standards Organization

Starbucks has started working very closely with the coffee farmers from whom it purchases its coffee beans in order to minimize their carbon use and allow them to enter into the carbon markets as a result of this carbon reduction.

Example: Starbucks

As a corporation, Starbucks has taken measures to use more recycled products in their packaging, ensure that the designs of their stores utilize sustainable products and are energy efficient, reduce the amount of water used in stores and in the process of making coffee and other retail items, and reduce the emissions of its retail entities.

Starbucks

Starbucks has also partnered with other environmental groups to educate its coffee farmers in sustainable practices and encourage their use.

Starbucks

Previously, IKEA was dogged with allegations regarding child labour and unsustainable business practices.

In order to combat these allegations and to create a responsible corporate policy, IKEA engaged with international groups, such as the WWF, UNICEF, and the Save the Children, to understand the responsibility and sustainability issues that the corporation would need to consider.

Example: IKEA

IKEA now uses a series of factors to evaluate whether to enter into a business relationship with an entity; environmental considerations are among these factors.

IKEA’s suppliers are required to implement plans that reduce the impact of their activities on the environment.

IKEA has implemented a code of conduct for its subsidiaries, suppliers, and employees that seeks to assure environmental protection. This has been particularly important to IKEA’s business practices in Asia.

IKEA

In addition, IKEA has taken measures to ensure that its catalogues are produced with materials that are recycled or otherwise friendly to the environment.

In conjunction with various European retailers, IKEA has begun programs to track and reduce the environmental impact of source of transportation for its products.

Also has enacted a policy to make its products environmentally friendly themselves, such as designs for energy efficient light bulbs.

IKEA

Patagonia is an outdoor clothing and equipment store that was founded in the US.

Patagonia is involved in many environmental conservation efforts, from assisting conservation groups in their missions to providing grants to smaller environmental projects that often don’t qualify for larger corporate grants to creating a national park in Argentina.

Example: Patagonia

Patagonia also funds the “Freedom to Roam” project, aimed at protecting migratory species and their habitats.

Patagonia’s “Workplace Code of Conduct” states the corporate belief that their products should be made causing as little harm to the environment as possible.

The Code of Conduct also requires that factories used for their products have reduced emissions, fulfill all local and other environmental requirements, have statements of environmental policy, and minimize their impact on the environment generally.

Patagonia

Patagonia used, and continues to use, third party auditors to investigate and evaluate the compliance levels of the factories it uses.

Patagonia

Conclusion