Corporate responsibility and humanitarian action · PDF fileCorporate responsibility and...

Click here to load reader

  • date post

  • Category


  • view

  • download


Embed Size (px)

Transcript of Corporate responsibility and humanitarian action · PDF fileCorporate responsibility and...

  • RICR Dcembre IRRC December 2001 Vol. 83 No 844 947

    Corporate responsibilityand humanitarian actionWhat relations between the business andhumanitarian worlds?

    parGilles Carbonnier

    Environmental and social concerns have been on the agendaof business leaders for over a decade and gained worldwidevisibility at the Earth Summit (Rio de Janeiro, 1992) and theSocial Development Summit (Copenhagen, 1995). Human

    rights and armed conflicts have recently emerged as additional con-cerns. In May 2000, the weekly journal The Economist highlighted thechallenges faced by companies operating in war-prone regions:Pipelines can be blown up by terrorists. Contracts can be torn up bycrooked partners. Fragile economies can collapse.And in recent years,firms doing business in countries with unpleasant governments havebeen pilloried by non-governmental organisations (NGOs), endanger-ing the most priceless of assets, their good name.1 At the request ofseveral multinational companies, the first Issues Dialogue Meetings initi-ated in 2001 under the UN Global Compact specifically addressed therole of private companies in armed conflicts.2

    Non-governmental organizations and reporters areincreasingly focusing on the economic dynamics underlying todaysarmed conflicts. The media report daily on the role of naturalresources in war-torn countries such as gold and coltan in theDemocratic Republic of Congo, oil in Chechnya,Colombia or Sudan,

    GILLES CARBONNIER is Economic Adviser and Coordinator for Private Sector

    Relations with the International Committee of the Red Cross.

  • or diamonds in Angola and Sierra Leone. Controversies over the so-called blood diamonds brought over thirty governments, NGOs andthe diamond industry around the negotiating table to regulate trade sothat diamonds do not fuel conflicts and conflicts do not tarnish theimage of diamonds as a symbol of love.

    As a result, the role of private companies in conflict-proneareas has come under tighter public scrutiny.The following examplesare a good illustration of the diversity of cases involved.TIME Asia, forinstance, reported in its 6 August 2001 issue that in some places inAceh, Indonesia, people literally line up to tell stories of abuses andmurders committed by the troops they call Exxons Army. AnAmerican NGO has filed a lawsuit in the United States against thegiant oil company ExxonMobil on behalf of eleven Acehnese peoplewho say they have been tortured by Indonesian soldiers paid out offunds the company provides with the governments agreement.3 Forthat purpose, a centuries-old American legal instrument has beenrevived: the Alien Tort Claims Act (ATCA) of 1789 allows US and for-eign companies to be sued in the United States for alledged abuses or complicity in abuses of internationally recognized social andhuman rights standards committed outside the United States.

    The media widely reported on another plaintiffs actionbrought under the same Act against Royal Dutch/Shell.The plaintiffs,supported by several NGOs, accused the company of complicity withthe former Nigerian military government in the execution of Ogonileader Ken Saro-Wiwa and other members of the Ogoni Movementin 1995.Americas Supreme Court cleared the way for a civil action toproceed in New York on 26 March 2001. This decision was takendespite efforts by Shell to have the action dismissed on grounds that aNew York court had no right to hear a case that involves Nigerianpeople and an Anglo-Dutch company.4

    11 Business in difficult places: Risky

    returns, The Economist, 20 May 2000.22 The Global Compact was launched by the

    UN Secretary-General at the 1999 World

    Economic Forum in Davos, calling on compa-

    nies to adhere to nine principles in the areas

    of human rights, labour standards and the

    environment. See .33 Mark Mitchell, TIME Asia, 6 August 2001,

    vol. 158, No 5.44 See e.g. Andrew Buncombe, The

    Independent, 27 March 2001.

    948 Corporate responsibility and humanitarian action

  • In mid-July 2001, the New York Times reported that Coca-Cola was accused of using right-wing paramilitary groups to intimidateand in some cases assassinate labour organizers in Colombia. AnAmerican labour-rights group filed a suit in the United States againstthe Atlanta-based company together with the United SteelworkersUnion. Coca-Cola adamantly rejected the accusations and stated thatthe company adheres to the highest standards of ethical conduct andbusiness practices, requiring all operating units and suppliers to abideby the laws and regulations in the countries that they do business.5 It isworth noting that while the company and regional director were citedfor these alleged crimes, the government did not rate any mention at all.

    This article looks at the rationale for developing relationsbetween the humanitarian and business worlds. Part 1 provides somehistorical background on the evolving role of multinational compa-nies. Part 2 looks at the business case for engagement, i.e. why manycompanies are now seeking to engage in a dialogue with humanitarianorganizations. Part 3 raises some key questions as to the meaning andapplicability of international humanitarian law to business, includingprivate security firms. Part 4 outlines the overall private sector strategyof the ICRC and describes its position towards companies that have adirect or indirect influence on parties to conflict and on the situationof people in distress. In other words this section deals with the posi-tioning of a humanitarian organization such as the ICRC vis--vis thebusiness sector with regard to its own core business. Part 5 highlightssome challenges facing the International Red Cross and Red CrescentMovement when dealing with the corporate sector.The article endsby summing up the conclusions and developments hitherto.

    The evolving role of multinational companiesCorporate social responsibility has become a fashionable

    subject and is being included in standard MBA curricula. A vigorousdebate opposes those who maintain that corporations should not bediverted from their traditional objective, i.e. maximizing shareholder

    55 Juan Forero, New York Times, 26 July


    RICR Dcembre IRRC December 2001 Vol. 83 No 844 949

  • value,6 to others who contend that companies must take into accountthe interests of a much wider circle of stakeholders including host com-munities, consumers, present and future generations, etc. Preliminaryempirical evidence suggests that business strategies addressing theconcerns of a broad range of stakeholders pay off in the long run.

    With the advent of globalization, the private sector is play-ing an increasingly prominent role in international relations.The influ-ence of some multinational corporations on war situations and on par-ties to conflict is growing steadily.A few facts and figures will serve toillustrate this: official development assistance accounted for three-quarters of the

    resource transfers from OECD countries to the developing worldin 1990.Ten years later, foreign direct investment alone has becomea multiple of official development finance to developingeconomies ($240bn and $84.9bn respectively);7

    successive waves of mergers and acquisitions have given birth tocorporate giants whose turnover and profit surpass the combinednational income of several war-torn countries.The net income ofthe oil giant ExxonMobil, for example, peaked at a record $17.7billion (bn) in 2000.The gross domestic product (GDP) of Angolawas $5.9bn in 1999, that of Burundi $0.7bn and that of theDemocratic Republic of Congo $7.0bn (1998).8 Percy Barnevik,the Chairman of Investor, ABB, AstraZeneca and Dandvik, pointsout that fifty-one of the 100 largest economies in the world arecompanies. He adds that Shell is bigger than Venezuela and

    66 This view is for instance supported

    by Nobel Laureate in Economics Milton

    Friedman.77 Sources: World Investment Report 2001,

    UNCTAD, Geneva, 2001; and 2000 Develop-

    ment Co-operation Report, OECD/DAC, Paris,

    2001. It should be noted that most foreign

    direct investment in the developing world

    concentrates on a few recipient countries

    such as China and India. It is much smaller in

    war-prone regions, but is nonetheless signifi-

    cant in the oil and mining sectors.88 Source: World Bank statistics. Note that

    GDP figures are underestimated in that infor-

    mal activities often go unrecorded in official

    macroeconomic data.

    950 Corporate responsibility and humanitarian action

  • General Motors is bigger than Ireland, New Zealand and Hungarycombined;9

    in parallel, both political instability and liberal economic reformhave reduced the States power and prerogatives in many countrieswhere the ICRC operates.Todays diplomacy confers a greater roleon the private sector. This is in particular the case when dealingwith major global challenges such as preserving biodiversity, allevi-ating poverty, coping with population growth or ensuring access todrinking water. Instead of creating new intergovernmental bodiesto deal with these emerging issues, key stakeholders have cometogether in flexible networks comprising private firms, indepen-dent experts, governments, non-governmental and internationalorganizations (e.g. World Commission on Dams, ForestStewardship Council).

    The pivotal role of private firms in international relationsis not new. At the end of the eleventh century, the constitution of atrading consortium in the Italian city of Genoa, the Compagna, wascrucial in creating a State with ports and colonies from the Aegean tothe Black Sea. Between the sixteenth and the nineteenth century,European countries granted charter companies such as the Dutch WestIndia Company and the British East India Company a trad