New Options for Strengthening Standards on Social and Environmental Responsibilities of Corporations and their Implementation
The negative external effects of profit oriented businesses on the environment and society have become increasingly visible following the financial crisis, and are most extreme in developing countries where high corruption rates often impede meaningful enforcement of existing legislation and where compensation measures for adversely affected groups rarely exist. This study provides an overview of current Corporate Social Responsibility (CSR) initiatives on the international level as well as specific approaches developed by NGOs and the private sector. The strengths and weaknesses of the implementation of CSR are analyzed both in general and more specifically in a case study on the mining sector in the Democratic Republic of Congo. The study ends with suggestions for future policy action to enhance CSR as a complementary tool to legislation for a range of economic, social and environmental challenges. The study is available for download.
The study is part of the Framework Contract on Development Policy for the European Parliament. It mainly explores the following questions:
- What role can Corporate Social Responsibility (CSR) play in developing countries?
- What are the weaknesses of current CSR implementation and how can they be overcome?
- How can CSR be generally strengthened by EU policies in order to contribute to the achievement of sustainability goals in a meaningful manner?
This study highlights the recent proliferation of CSR approaches and standards and distinguishes two tiers, the first being general frameworks on CSR: international norm-setting initiatives like OECD Guidelines for Multinational Enterprises and the UN Global Compact that are often voluntary in nature, and the second being specific frameworks tailored to certain aspects of CSR or particular sectors. While the general frameworks have succeeded in introducing a common language and understanding of CSR they have been less effective in implementing these principles and approaches in part because international and national governments lack the political will to promote CSR in a meaningful way.
As an effect, CSR has become highly susceptible to greenwashing, which has weakened its reputation. Under the general frameworks, participating companies use CSR to communicate on their claimed high environmental and social performance, while at the same time making they often fall short in delivering and reporting on standards and criteria. In contrast, specific frameworks are often more effective, because of their narrow approach and the enforcement through the use of labeling and certification schemes. However, the thematic scope of specific CSR frameworks is often selective and very issue specific (e.g. human rights in the textile industry). Thus, both social and environmental issues are often not contained in a single sector instrument.
The rapid proliferation of diverse but sometimes very specific CSR tools, labels, and standards has led to a situation where significant overlaps exist and implementation is fragmented, thus eclipsing the holistic definition of CSR established in the norms of the general framework initiatives.
In the case study, the situation of the mineral mining sector in the Democratic Republic of Congo illustrates how many CSR instruments are actively in use on the ground, but how they ultimately fail to be mutually supportive and enforceable leading to a great presence of CSR architecture but limited confluence.
Building on lessons from the case study, the paper concludes that instead of developing another CSR standard, the wiser course for the EU would be to seek to massively scale-up engagement of EU business entities in existing initiatives and to improve the effectiveness of (and the consistency between) the most widely-used initiatives.