Towards Strategic Coordination In The Corporate Accountability Movement

Corporate Accountability Project | Thu, Jan 24, 2002

IntroductionIn designing a project about how the private sector influences prospects for sustainable and equitable development, the Center of Concern proposed an analytical framework of nine arenas in which civil society groups have sought leverage with the business community:a) global governance over business b) labor influence on business practice c) standards/compliance/verificationd) consumer/investor influence on businesse) domestic regulation and disclosure rulesf) ""alternative"" business approachesg) civil society/business partnershipsh) business and human rights i) business and the environmentResearch on what is happening in each of these arenas quickly begs a core question: if the various strategies employed in these categories were successful, would they together produce a fundamental shift in business practice that contributes to the development process? If not, are there other categories of action more likely to have an impact that civil society groups should be exploring? To address this question, Center staff identified colleagues in organizations that follow these arenas, and brought them together in two separate ""focus groups"" (4/25/01 and 5/4/01) to discuss trends in their work, and strategies for shifting business towards practices more conducive to development. A second objective was to explore potential synergies among these arenas, which could help the ""corporate accountability"" movement to achieve a more comprehensive result beyond the sum of its existing parts. Finally, on the basis of these discussions, participants were asked for their ideas on how a Center of Concern project could best contribute to the strengthening of the corporate accountability movement, thereby enhancing its influence on business practices as they relate to development.The notes that follow constitute a brief summary of participant input from the two meetings. They have been edited to fit into manageable categories, and obviously cannot reflect the depth of the great discussions over the two mornings. Ideally, the notes will serve as a basis for further discussions as the Private Sector in Development Project evolves.Trendsa) Global governance: Civil society strategies to establish global governance over business have focused on trade and investment agreements (FTAA, MAI, WTO, NAFTA, etc) as a venue in which corporate rights are being asserted over rights of states. Movements have had some success in challenging agreements, especially MAI, but focus is on ""blocking"" rather than on developing some of the alternative ideas out there (e.g. adding business obligations to trade agreements, not just rights). There is a need for education on possibilities, and for broader conversation on how we want globalization to happen (rather than ""whether."") The sense is that technocrats handling the detailed negotiations are not engaged with the civil society critique or alternatives, hence limited impact there. Civil society must link the street protests with the people doing negotiations, though some activists doubt whether trade institutions are a proper venue, because they are biased against progressive causes. Another approach to ""global governance"" has been through monitoring and advocacy of voluntary multilateral standards and codes of conduct such as the OECD guidelines for multinational enterprises and the UN Global Compact. On the one hand, these guidelines could be used to push for a public policy approach to corporate behavior, and they already exert a certain amount of public relations pressure on companies. On the other hand, codes may also reduce incentives for governments to enforce their own laws, leaving many activists convinced of the inadequacy of codes, voluntary or otherwise, which don't change behaviors or systems: ""if companies are left to police themselves, it will not happen."" The NGO Task Force on Business and Industry has pushed this point through a multi-stakeholder review of voluntary codes.Other civil society advocacy strategies look at UN agencies and conferences (ILO, UNCSD, FFD) to push for coherence and consistency in development policy and practice, thereby establishing some form of global governance or norms that have consequences for corporations. For example, there is talk in the Rio +10 conference about coherence among environmental institutions, reporting and verifying corporate accountability data, and possibly creating a new ""world environment organization."" One ""divide"" among civil society strategies is thus between activists who favor the trade issue as a global governance arena in which to secure binding commitments on business, and those who look to UN or other voluntary arrangements, despite the current absence of enforcement mechanisms. Could these efforts be mutually reinforcing, especially if coordinated with other forms of pressure on companies to abide by codes?b) Domestic Regulation and Disclosure Rules: Discussion focused on the US, while acknowledging the need to help civil society movements elsewhere reinforce their own domestic regulatory structures. Participants described the need to engineer a shift back from voluntary to mandatory guidelines, from private sector responsibility to public policy mandates. But the challenge is to look at the incentives that guide business thinking such that rules make it cheaper to ""do the right thing.""One approach is the ""International Right to Know Campaign,"" which seeks to impose disclosure obligations on US firms operating abroad. Though it is impossible to apply absolute standards to companies overseas, disclosure of corporate social and environmental impact provides a tool that communities in developing countries can work with. This information can then be used in advocacy on such topics as government procurement policy and pension fund issues, as intermediate tools. The campaign may have to build small slices at a time, for example on child labor rules, before building to other broader issues. It may succeed in bringing more companies to the table, though their interests might involve paying lip service to purely voluntary initiatives so as to avoid binding regulations. The campaign will play to the strength of corporations who seek a ""level playing field,"" competitiveness, measures against corruption, etc. The hope is that achieving domestic regulatory controls will also help build international multilateral practices. Another regulatory approach focuses on disclosure issues with an emphasis on investors and shareholders. Short-term quarterly profit targets drive corporate staff to make unsustainable and irresponsible decisions. Wealth does not flow back to the people who create it. To break this cycle, some advocate reform of securities legislation (SEC rules) to get environmental and social information out and increase shareholder debate on investment criteria. The goal is to get financial reports to tell more about environmental and social considerations. There is an international effort to harmonize stock exchange disclosure requirements around the world, to counter the current trend toward reducing information flows or providing conflicting data. However, these efforts will depend on the willingness of foreign governments to fine companies for social and environmental damage, to force shareholders to recognize the financial consequences of inappropriate corporate behavior. This trend may have been helped by the Asian financial crisis, which many business people believe was made more acute through lack of transparency. Ironically, ""ugly American cultural insensitivity"" may also push the disclosure agenda, as ""Arrogant American Investors"" demand the right to good information. As a regulatory tool, disclosure is hard to argue against in the context of ""competitive markets driven by perfect information."" There may thus be more leverage for disclosure than prohibitive regulation. How then can other civil society movements help reinforce the call for corporate disclosure in their own work?c) Business/CSO/Government Partnerships: Participants foresee an inevitable increase in cross-sectoral partnerships, based on the absence of alternatives, that will raise questions about the accountability and capability of NGOs to meet the demands of these relationships. This goes beyond the resource gaps between NGOs and corporate sector, to include issues of culture and attitude - the challenge is to get beyond different modes of working to find ways to bridge gaps. Civil society must recognize the differences in agendas, but engage those firms with substantial resources that acknowledge their development responsibilities. Not all corporations are alike. In developing countries, prospective NGO partnership builders should consider (1) their leverage points with corporate partners (public pressure campaigns, government regulation, financial and other forms of disclosure, economic incentives for good corporate behavior), (2) the venue (specific conditions and circumstances in any given developing country), and (3) the distinction between policy objectives (macro changes) and program goals (the specific outputs that a partnership can generate.) As with earlier discussion, there was consensus on the importance of incentives -- no long-term prospect for businesses to play a role unless they perceive it is in their economic interest. This involves engaging not just the corporate leaders and public relations staff, but also those making hard decisions on the production side. All sides acknowledge major process challenges in partnership building.d) Labor Influence on Business: Beyond the standard labor/management bargaining on wages, hours and working conditions, its important to place labor advocacy in historical perspective, starting with efforts in 1970s to impose controls on TNCs after revelations of ITT's role in the Chilean coup. These demands were headed off by the first set of OECD and ILO non-binding guidelines. Now that those have been judged to be ineffective, public pressure has led to the marketing concept of ""corporate responsibility."" But despite the good intentions of some business leaders, competition and quarterly profit targets make it harder for most to be ""responsible"" - instead we must focus on a system that requires ""accountability,"" and on creating countervailing forces to corporate power. Thus labor movement pushes for the incorporation of labor standards in international agreements, reform of corporate governance rules, and the use of union pension funds to influence business behavior and to steer investment towards developing countries which enforce labor standards.e) Standards, Compliance, Verification of Corporate Behavior: There are multiple initiatives to establish benchmarks for the measurement and comparison of companies' social and environmental impact - the Global Reporting Initiative, the Fair Labor Association, the SA 8000 standard, among others. Some activists believe that even small victories in companies' acknowledgement of labor and environmental standards can lead to bigger changes, but they recognize the challenge of respecting standards all the way through the supply chain, especially when it reaches into the work of multiple sub-contractors. There are also issues related to how compliance with standards is to be monitored - by local NGOs, by professional auditing firms, through self-reported company data, etc. Other activists feel that certification programs allow companies to claim the high ground despite lack of meaningful structural change in their operations, or to hide the violations of their sub-contractors. Despite the challenges, a growing number of firms are signing on to benchmarking initiatives.f) Consumer/Investor Impact on Business: The socially responsible investment movement has taken off dramatically in recent years, such that somewhere between 12-20% (depending on data source) of all assets under management are now screened according to some social or environmental criteria. Nonetheless, the power of consumers and investors has not been effectively harnessed to influence sustainable development. The danger in the US is that as more ""ordinary"" people invest in the stock market, short-term quarterly profit logic will become more prevalent. The best chance for major impact on business practice comes in sectors that are brand-sensitive, where there are regulatory frameworks (and thus the option of litigation), or topical issues of public interest (such as money laundering, biotech issues in food production, environmental pollution, etc). The movement links to the concerns of ordinary investors, acknowledging the need for selective targeting, highlighting the ""horror stories"" of corporate abuse. That said, it must also get beyond a piecemeal approach to think about comprehensive strategy and coordinated negotiations. An encouraging trend is the increasing contact between religious and civil society groups, though much more coordination is needed in the movement, including stronger links between consumer and investor groups. This could include coordinated campaigns on specific business sectors, or on the impact of portfolio investment in particular countries (Brazil and India were mentioned).g) ""Alternative Business"" Approaches: CoopAmerica's network of some 2000 US progressive/activist businesses is the best example of a growing trend, concentrated in the micro- and small business category, but important nonetheless. These in turn join over 100 members of the Fair Trade Federation, linking small producers in developing countries with US and European markets. While there is clearly plenty of room and potential for growth in this sector, questions remain about how much its business culture and ""triple bottom line"" (financial/social/environmental) approach will influence mainstream corporate behavior, for example, through command of growing market share in certain production sectors.h) Impact of Human Rights on Business: Civil society leverage depends on which ""human right"" is at issue, in which market. Advocacy from human rights groups confronting business has covered a broad range -- indigenous rights, environmental degradation and racism, government corruption, child labor, forced labor, pharmaceutical price-fixing in developing countries, and even the rights dimension of financial services (how taxpayers underwrite the risk of corporate investment in emerging markets through public finance entities such as the IFC, OPIC and other export credit agencies). Activists have learned that changes in corporate behavior have to be institutional, including the training of a new generation of managers (importance of influencing business school curriculum). But there is also disagreement on the tactics needed, and finding the balance between public protest and dialogue. Rights-based advocacy has been effective with a small number of high-profile corporate campaigns, but there are tens of thousands of other corporations that have not and could not all be targeted. No comprehensive strategy for addressing that problem is yet on the horizon, nor is there an adequate system for sharing and substantiating reliable information on corporate abuse of rights (this is particularly lacking in the Global Compact, where no independent verification of compliance with the nine principles is factored in). Nonetheless, the ILO has launched a Business and Social Initiatives Database ( to begin to gather and share data.i) Business and the Environment: The environmental movement, by some accounts, gained the attention of the business community before social development NGOs, and may still be taken more seriously in some private sector circles. Problems with bio-diversity and climate change continue to be a focus for public opinion and corporations are thus sensitive to them. Nonetheless, the movement faces challenges based on corporate short-term profit motives that underval