The ABC’s of Corporate Social Responsibility for Lawyers

By Mary Cornish Cavalluzzo Hayes Shilton McIntyre & Cornish

Co-Chair, CBA ILS Rights of Persons and Communities Committee

mcornish@cavalluzzo.com – 416-964-5524

CSR CLE Sessions

This overview presentation is the first of three CLE sessions

March 26, 2009 – Heenan Blaikie, Toronto, 12:00 noon. Expert panel on CSR in labour and human rights context.

May, 2009, Vancouver. Expert panel on environmental context. Details to be announced.

ILS Rights of Persons and Communities Committee

This Committee’s mandate is to further understanding, practical knowledge and commitment to the wide range of international instruments and mechanisms which protect the rights of persons and communities.

These include human rights, labour and environmental protections and political, civil, social and economic rights.

Committee welcomes new members to plan activities including monitoring developments; preparing briefs; working on CLEs; and providing material for the Committee's webpage and Section's electronic newsletter.

If you are interested in participating or being part of the list serve, please contact the Co-Chairs, Mary Cornish or Monique Pongracic-Speier, monique@schroeder.bc.ca

Outline of this Presentation Provides basic overview of what lawyers

should know about Corporate Social Responsibility: What is CSR? Why did it develop? Relationship to international/domestic

obligations Review of different CSR mechanisms International and domestic use. Monitoring and Role of NGOs Practice areas affected by CSR

What is Corporate Social Responsibility Generally “soft law” or voluntary mechanisms which operate

to define the acceptable standards of business practices in a socio-economic area, (eg. Business, labour and environment) and create monitoring and remedial steps to implement the standards.

Jurisdiction may be global, regional, national, entreprise, sectoral or industry-wide.

Oversight may be internal or external.

Sometimes referred to as “decentred regulation”.

Mechanisms range from purely voluntary to sectoral, multi-stakeholder and regulatory mechanisms;

CSR Now Commonplace Most major companies have adopted some

kind of statement, policy or management system concerning what could loosely be called their corporate social responsibility (CSR).

1999 study showed more than 85% of big US corporations already adhere to such codes. A survey by KPMG (2000) among the biggest 1000 national firms showed a similar portrait on the Canadian scene. Figures likely higher now.

CSR – Response to Governance Challenges

Emerged with globalization transforming the global political economy and challenging the ability of states to regulate effectively business practices, particularly for Transnational Corporations (TNCs).

Dynamics Leading to CSR Initiatives Globalization of production, information and capital; Domestic labour, human rights and environmental

practices significantly affected by international and regional trade arrangements and investment and TNC businesses practices;

Tax cuts, privatization of public services and weakening of state regulation (eg. Collective bargaining, human rights and environmental laws) and ability to control extra territorial conduct;

persistence of inequitable and harmful labour market, human rights and environmental practices, eg. Child labour, environmental destruction, climate change, gender discrimination.

Relationship to International and Domestic Obligations Recognition that more traditional local,

national and international governance mechanisms not working to deliver the necessary justice outcomes guaranteed by international and domestic labour, human rights and environmental instruments.

International standards, while not binding law in Canada, play an important role in CSR mechanisms.

Eg. Agree to abide by ILO Core Labour Standards.

June, 2008 UN Ruggie Report Protect, Respect and Remedy: Framework for Business

and Human Rights submitted by John Ruggie to UN Human Rights Council.

Report seeks to close the gaps that exist "between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences".

In calling for a new framework of rules, practices and institutions to address the intersection of business and human rights, the Report points to markets as posing "the greatest risks-to society and business itself-when their scope and power far exceed the reach of the institutional underpinnings that allow them to function smoothly."

Ruggie Core Principles Three core principles with each supporting the other in

achieving sustainable progress.

1. the State duty to protect against human rights abuses by third parties, including business;

2. the corporate responsibility to respect human rights; and

3. the need for more effective access to remedies.

Report calls on states to fulfill their duty by making it a urgent policy priority to "foster a corporate culture respectful of human rights". This could be done by requiring sustainability reporting and making a companies policies and practices relevant to legal accountability standards.

Early CSR Initiatives Early mechanisms developed as a result of consumer or

lobbying campaigns highlighting inequitable labour practices. Eg. Nike, the Gap. See nike.com

With the production, distribution and consumption of products globally interconnected through TNC supply chains, the conditions of workers in those chains (situated in Canada or abroad) or the human and environmental rights of neighbouring commmunities is often driven by the production imperatives of upstream firms.

Codes were developed by upstream firms to control their corporate behaviour and that of downstream contractors.

Voluntary Codes Voluntary codes created where

employer/business was both the author and administrator and the entity regulated.

Workers were not usually involved with design

As codes developed, NGO groups lobbied to get stronger codes and independent monitoring mechanisms. Eg. Ethical Trading Initiative.

Many Different CSR Mechanisms Unilateral Mechanisms –

Corporate, Sectoral or Trade Association Codes of Conduct - eg. Nike, Gap, Walmart, Exxon.

External Multi-Stakeholder Codes (MSIs)

eg. Fair Labor Association, Ethical Trading Initiative, ETI - social labelling - Rugmark . Social labelling authorizes the use of a physical label to communicate the conditions surrounding the production of a product or rendering of a service

Global CSR Mechanisms

Global and Regional Mechanisms,

eg UN Global Compact, ILO Multinational Enterprises Declaration, OECD Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy.

Global Framework Agreements between Employers and Unions

Agreements between Unions and Employers to control practices of employer’s supply chain contractors.

State Regulatory CSR

Eg. Use of corporate disclosure regulations

Australian Industrial Relations (Ethical Clothing Trades) Act 2001 establishes an Ethical Clothing Trades Extended Responsibility Scheme.

requires reporting practices and other measures throughout the supply chain to prevent practices or commercial arrangements designed to avoid payment of workers' lawful entitlements.

extends fair labor practices protections to the "outworkers" in the trades‘ domestic and international supply chains.

Domestic CSR Use

While Canadian work has focussed on more on the use of CSR to address international issues, increasing use of these approaches to control domestic corporate conduct.

Labour and HR Mechanisms Set out working conditions and HR

standards.

often cover not only the activities of direct corporation but also its subcontractors.

Some codes focussed on one area.eg.The Calvert Women's Principles developed in partnership with UNIFEM was the first gender-focused global code of conduct.

Labour and HR Mechanisms Corporate codes of conduct, consumer

campaigns, social labelling and other sectoral or global mechanisms often target the discrimination, low wages and poor working conditions faced by workers in precarious employment.

Focused on those who fall outside the enforceable scope of traditional “hard” laws.

Financial CSR Mechanisms

Institutions such as the World Bank have also included labor, human rights and and environmental protections in their lending practices.

The Bank's International Finance Corporation requires all private sector borrowers to agree to Performance Standard 2 which requires compliance with the ILO's Core Labour Standards (CLS).

The World Bank itself has recently incorporated the CLS in standard bidding documents for public works projects.

World Bank also has environmental standard which must be met for project to be financed. See www.worldbank.org and www. Ifc.org.

Environmental CSR Standards There are many CSR schemes adopted by

businesses for regulating environmental management practices.

Codes are developed in context of ensuring sustainable development.

should carry out its activities in a waythat promotes sustainable development and provides for social and environmental justice for stakeholders communities

See Corporate Social Responsibility and Environmental Management Journal

Issues to Consider What are the limits of self-regulation? Will there be resurgence of state

regulation? Will there be emergence of

supranational public regulation? Will there be hybrid model of

regulation in which state, market and civil society share regulatory responsibilities?

Issues to Consider: CSR Effectiveness

Codes are becoming most significant feature of fragile system of transnational business regulation, particularly in labour area, but also increasingly in environmental area.

Yet the “public interest” and “worker” interest if often missing with no state public regulation process.

Issues to Consider: Need for Soft and Hard Laws While effective enforcement and resourcing

of “hard” laws is still critical to securing labour, human rights and environmental protections, supplementary forms of regulation have also become necessary.

Research has shown that voluntary measures will not be effective without strong enforcement of “hard” laws and government oversight of these new enforcement forms.

Issues to Consider: Monitoring Monitoring increasingly uses

independent compliance inspections of production or business sites.

Nike went a step further recently and posted on its website the addresses of all its subcontractors around the world in order to meet the consumer and union demand for transparency in its operations.

Issues to Consider -Role of NGOs

Unlike state regulation, NGOs often play key role in CSR mechanisms.

Some do independent monitoring. Others participate in multi-

stakeholder CSR mechanisms, eg. Canada’s Maquila Solidarity Network

Issues to Consider:Engendering CSR Mechanisms need to explicitly address the

situations, experiences and wishes of women, and the gendered nature of economic, trade and environmental policies.

Gender discrimination forms an integral part of the market economy.

Measures that fail to challenge the underlying causes of gender discrimination which risk upholding gender divisions and oppression and spreading the perception among policymakers that gender issues are being adequately addressed

References Corporate Social and Environmental Responsibility Selected Sources of Information,

accessed at http://www.un-ngls.org/documents/publications.en/develop.dossier/dd.07%20(csr)/Section%20III.pdf

UN Business and Human Rights Resource Centre, http://www.business-humanrights.org/Gettingstarted/UNSpecialRepresentative - great resource.

Ruggie, John: "Protect, Respect and Remedy: a Framework for Business and Human Rights, April 7, 2008; access at above website.

Human Rights and Socially Responsible Investment in North America: An Overview, Elizabeth Umlas, January 2009, access at above website.

WIDE, “Key Feminist Concerns Regarding Core Labour Standards, Decent Work and Corporate Social Responsibility, accessed at http://www.wide-network.org/index.jsp?id=228.

Cornish, Mary, New Governance Approaches to Ending Canadian Labour Market Discrimination: The Use of International Norms and Soft Law Approaches. http://www.cba.org/cbastore/search.aspx?pubid=2&subject=International%20Law.

Winston, Morton, NGO Strategies for Promoting Corporate Social Responsibility, Ethics & International Affairs, Vol. 16, 2002

References Arthurs, Harry, “Private Ordering and Workers Rights in the Global

Economy: Corporate Codes of Conduct as a Regime of Labour Market Regulation, in Labour Law in an Era of Globalization, Transformative Practices and Possibilities, ed. by Joanne Conaghan, Richard Michael Fischl, Karl Klare, Oxford University Press, 2005.

Atleson, James, Lance Compa, Kerry Rittich, Calvin William Sharpe and Marley S. Weiss, “International Labour Law, Cases and Materials on Workers Rights in the Global Economy” Chapt. 5 – Corporate Codes of Conduct.

Lapointe, Alivn and Corinne Gendron Corporate Codes of Conduct:The Counter-Intuitive Effects of Self-Regulation, Université du Québec à Montréal, Canada, http://www.crsdd.uqam.ca/Pages/docs/pdfArticles/LapointeGendroncodes.HTM.

Corporate Social Responsibility and Environmental Management Journal