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7/30/2019 Keynote address by Jan Pronk: ''Corporate Social Responsibility. Don't put all your eggs in one basket''
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Corporate Social Responsibility. Dont Put All Your Eggs in One Basket
WorldconnectorJan Pronk,professor ofTheory and Practice of International Development at the
Institute of Social Studies in The Hague, held the following Keynote Address during the 2nd
Conference on Global Social Responsibility on 28 February 2013 in Dhaka, Bangladesh. For more
information and publications by Jan Pronk, visit his website:http://www.janpronk.nl/index.html.
What do we have in mind when we speak about sustainability? I have to confess that twenty years ago
I was not particularly thrilled by the concept. Sustainability had the flavour of something static, a
standstill, not change, only more of the same. It seemed boring and dull. I did prefer innovation,
renewal, progress, and growth.
However, I learned to understand that growth can wreck development, which will result in regress
rather than progress, or in progress for some, but regress for many. That would mean more poverty,
more inequality and fewer chances for many more children to survive, let alone to be happy.
So, sustainability demands fundamental change. It is the opposite of a boring status quo. Sustainability
is a challenge, an adventure. It requires a forward looking approach and a fighting spirit.
That was the spirit which prevailed at the World Summit on Environment and Development, in Rio de
Janeiro, in 1992, where we adopted a new agenda for the future: Agenda 21.
However, since then we have not made much progress:
- Still one third of world population is poor or very poor. Inequalities have increased, between and
within countries
- The international economic system shows signs of bankruptcy: financial crisis, resulting in economic
distortions, both globally and nationally.
- Erosion of values, resulting in unbalanced priority setting: abundance of luxury goods, but shortages
of basic amenities such as primary health care, nutrition and drinking water.
- Deterioration of the natural environment: floods and water shortages, pollution, climate change,
deforestation, and less fertile land, risking the poor today more than the middle classes, and risking
future generations across the board.
These phenomena manifest themselves in all countries. In Bangladesh you have your proper share of
all of them.
Addressing these tendencies does not only require embracing new concepts and new broad agendas,
but concrete action: new priorities, new policies, new decision making procedures, and new forms of
cooperation, including partnerships between all stakeholders.
Let me share with you some lessons of experience gained during our efforts to translate concepts such
as sustainability and responsibility into action. Here are seven dos and donts:
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First: Do not fake sustainability.
Sustaining sustainability, so to say, requires fundamental structural change in patterns of investment,
production, trade and consumption. To continue harming peoples welfare and the natural
environment, though providing compensation for harmful effects, is nothing more than buying off
unsustainable behaviour, faking sustainability. Planting trees in order to compensate for ongoing CO2
emissions is no solution. Climate change ought to be modified and slowed down, not indulged and
made good. Providing financial assistance to developing countries in order to buy a license for fishing
ships from abroad, using sophisticated technologies to clear out coastal fishing waters, is an ostrich
policy. Let us not fool ourselves by focusing on compensation for unsustainable practices, rather than
turning back those very practices themselves.
Second: Do not romanticize CSR
Win-wineverybody will benefit is an attractive option. But it is not always possible. On the
contrary: all societies are full of inherently conflicting interests. Choices must be made.
Corporate social responsibility (CSR) is a fascinating concept. What would provide greater
satisfaction than corporate behaviour in the interests of all people everywhere, labourers, consumers
and shareholders, present people and future generations, and also in the interest of nature, our planet,
and our physical environment? Who wouldnt go for this? However, dont be romantic. Markets are
ruthless. The main interest of a corporation is to stay in the market and to continue its operations. That
is legitimate, but it will limit the viability of CSR.
Why? Because corporate social responsibility implies a different cost benefit analysis. CSR means that
the corporation sees after its own interests, including those of its workers, but also respects consumers
rights and the rights of people affected by its operations, present people and future generations. In a
market economy many of these interests are considered to be external effects, not included in market
prices. This holds true both for so called external benefits (such as an enhancement of public health
due to corporate hygiene) as well as external costs (such as pollution).
Corporate behaviour short of CSR implies that the corporation will be guided first and foremost by the
costs and benefits it will carry and cash itself, both short and long term. CSR goes beyond these
considerations. As long as a CEO believes that meeting sustainability conditions is sound business,
because it will enhance the image of the corporation, it will be rational to bear the costs involved. The
costs are known, but to which extent external benefits to society will result in gains for the company
itself, is uncertain. When the aspirations of competitors diverge from CSR, cost differences will rise,
and initial CSR benefits for the corporation will disappear, in particular when consumers would no
longer be willing to pay higher prices. The company will then have no other option than discarding
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CSR, on penalty of steadily increasing losses, shrinking activities and bankruptcy. Markets may be
liberal, but they are not generous.
So, sustaining sustainability cannot be left to the market. Dont be romantic. Public political choices
are unavoidable: create a level playing field for all companies on the market, enforce corporate
behaviour in accordance with public and peoples interest.
Third: Build up countervailing public market power.
Governments should not lean backwards, relying on NGOs, hoping that a stakeholder dialogue
between NGOs and big corporations can keep the latter on track. Admittedly, there are quite a few
CEOs with sound business judgement, willing to take a risk in favour of CSR. There are also many
highly dedicated professionals, applying technological solutions and business practices in accordancewith conditions of sustainability. Since a decade or two scores of students, highly committed to hold
up principles of social responsibility and environmental sustainability, have found a job within a
corporation. But they have to face shareholders, most of whom having a completely different mind-
set: short term maximization of profits and fast accumulation of capital, rather than securing peoples
welfare and preserving the planet. When big financial power is involved, there is no balance between
people, planet and profit. Profit will always win. When push comes to shove, in a stakeholders
dialogue NGOs, defending the interests of people and planet, cannot but lose.
Confronted with corporate power NGOs may choose a strategy of accommodation, betting on the
long run, negotiating some slight successes, hoping that in the end reason will prevail and big financial
corporations will convert to sustainability. I am afraid that history demonstrates the opposite. Big oil
and gas companies, minerals corporations, power plants, large plantations (timber, palm oil, biofuels),
pharmaceutical and chemical industries, food and beverage industries, commercial advertisement, the
arms industry and - last but not least - transnational financial corporations and banks, demonstrate a
pattern of behaviour which is bound to clash with requirements of sustainability. Misapplication of
insecticides and pesticides, forced introduction of genetically modified crops, emission of greenhouse
gasses, insufficient testing of possibly hazardous chemicals, pollution of seas, rivers, ground-, surface
and drinking water, irreversible cutting of forests, risky mining, and so on, these practices can only be
curbed with the help of strong public countervailing power. The power of NGOs, irrespective of the
number of people they represent, will always be smaller than the power of capital. Codes of behaviour,
for instance regarding child labour, minimum wages or a safe working environment, will never be
sufficient. They are easily dodged and violated, with impunity.
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So, governments should not shy away from law making, imposing rules and regulations, forceful
inspections, effective compliance mechanisms, enforcement, and vigorous sanctions. Striving for
sustainability is not a game, but a fight.
Fourth: PSR is a precondition for CSR.
Achieving sustainability demands that public authorities represent the interests of the people and the
planet, and act accordingly. This implies vigorous action against corruption, to ensure that
governments, parliamentarians and the bureaucracy will not be lured into serving merely the interests
of capital and profit. It means zero tolerance for double bookkeeping, full transparency of public
decision making and a halt to commercial lobbying behind the scenes. It also implies democratisation
of public decision making, broad information of the general public and full accountability of public
authorities to their constituencies. All these political conditions should guarantee public social
responsibility. PSR is a precondition for CSR to become a solid basis for trustworthy market
operations.
Fifth: Be ambitious, but cautious
Achieving sustainability requires urgent and radical changes in economic behaviour. However, be
cautious: radical and urgent is not the same as trading off one particular risk - say, climate change - for
another, such as nuclear disaster. Exchanging unsustainable conditions into sustainable directions is a
process. The focus ought not to be on end states considerations only, but also, and perhaps more
importantly, on the necessary transitions towards that end. Timing and directing transitions and
choosing the valid characteristics of those transitions requires precaution. This holds true for all
transactions that are initiated in order to establish sustainable social and economic circumstances: the
energy transition, greening the economy, urban renewal, waste reduction and recycling, and transitions
in sanitation, and clean and safe water supply. Mistakes which have irreversible consequences will
wreck the very objective of sustainability. Confronted with fragile ecological conditions it is better to
go for small and slow, rather than big and fast. Learning from experience and fostering resilience
implies making choices in favour of reversible change.
Sixth: Go in stages and stay within your own domain.
Changing an unsustainable status quo sometimes will demand a jump in the opposite direction.
However, policy wise it may be preferable to widen the scale of change gradually, introducing
experiments and pilot schemes and scaling them up to the level of the sector as a whole, and sideways
to other regions.
Going in stages requires choosing the right order of those stages. Sustainability and corporate social
responsibility should be brought in right at the beginning of a business enterprise. Starting up a
business with the sole objective of financial sustainability, with the intention to incorporate social and
environmental sustainability only later, may be rational, given prevailing market conditions, but may
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result in postponing socially responsible behaviour indefinitely. What may look rational is not yet
reasonable. After all, risk taking is part of good business behaviour. And taking risks does not mean
unloading risks on to others, passing the buck.
Governments can help businesses accepting reasonable risks by guaranteeing a level playing field with
the help of rules and regulations, equally binding all corporations, both foreign and domestic.
However, again, governments must be trustworthy themselves and demonstrate transparent political
behaviour. Governments will have to define ambitious long run sustainability objectives, for public
policies as well as market operations, but in doing so governments should understand that market
partners will only invest in green technologies, if they can trust that policies will not change
arbitrarily.
Establishing Public Private Partnerships (PPPs) can be the right approach towards agreeing on
transitions such as the ones mentioned earlier. Neither governments, nor business can do it alone.
However, be aware of your own particular domain. For governments this means: proper (democratic)
setting of rules. For business: proper (social) market behaviour. And between them: proper allocation
of responsibilities.
Can subsidies play a role in bridging conflicting interests between the government and private
business? Here again caution should prevail. Private business cannot claim that striving towards
sustainability is only affordable if they are rewarded out of public funds. And even when everybody
agrees that such efforts are in the interest of the general public, governments should be reluctant
applying this instrument rather than setting rules. Public subsidies often are an easy way out: costly in
terms of finance, but relatively cheap compared to the alternative: standing firm against powerful
corporations seeking their own profits only. Public rule setting may be politically more difficult, but it
is the best way: democratic, equitable, without discrimination.
This is not only the case for individual nations, but also internationally. Western industrialized
countries, subsidizing private business companies in order to enable those meeting public and
environmental standards, are putting developing countries, which lack adequate means, in a
disadvantaged position. International cooperation resulting in common rules is a much better
alternative.
Seventh: People first
Sustainability is often seen as an environmental problem only. It is not. There is an environment-poverty nexus. Environmental degradation and deterioration of livelihoods result in ongoing
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deprivation. The poor in our world have been pushed towards the worst places on planet earth. They
are the first victims of environmental disasters, climate change, water pollution, soil erosion and other
dysfunctions of the present economic system. So, environmental sustainability, besides being a major
objective in its own right, is also a precondition for social and economic justice.
The opposite is also true. Putting an end to poverty, besides being a first moral and political
imperative, is a condition sine qua non for meeting environmental sustainability targets. Achieving
overall sustainability requires peoples participation, all people, first and foremost well-to-do and
middle class people, but also the poor. The poor are not in a position to give high priority to
environmental sustainability, if they consider this a luxury, affordable to the rich, but not to them.
Widening economic inequalities and persisting absolute poverty are a major drag on sustainability.
So, we need a two track approach. Both tracks should lead to greater peoples welfare: present people
and people yet unborn. Our responsibility concerns also the protection of the developmental
capabilities of future generations. People first.
After all, development is for, of and by people. Development implies guaranteeing human rights: the
rights of workers, women, children and the yet unborn. Development requires peoples participation,and a bottom up approach. Where people are in control of their own resources, their own habitat and
livelihood, they will take care of them, and make the right choices, right for themselves, right for their
offspring, right to planet earth and its people.
In many societies we witness excellent small scale bottom up initiatives towards sustainability. This is
a reason for optimism. However, let us not fool ourselves by relying on such initiatives only. Both
environmental sustainability, social justice, peoples welfare and overall human development require
political choices beyond the capacity of local communities, grass root movements, NGOs and private
business. Such initiatives are crucial, but not sufficient. At the end of the day, achieving a sustainable
society, in which all stakeholders can be held responsible for peoples welfare as a whole, is a matter
of politics, at both the local, the national and the international level.