GLOBALIZATION AND GLOBALIZATION AND CORPORATE RESPONSIBILITYCORPORATE RESPONSIBILITY

Rising Expectations: Taking Stock of the Global Sustainability Evolution

WEC 2nd Sustainability ForumApril 26-27 2001

Adam B. GreeneU.S. Council for International Business

SustainabilitySustainability

“Sustainable development is a very simple idea. It is about ensuring a better quality of life for everyone, now and for generations to come.”

“Opportunities for Change” UK Strategy for Sustainable Development, Feb. 1998

USCIB ActivitiesUSCIB Activities

Promote responsible business practices

Contribute to the development and implementation of codes, standards, and principles

Raise awareness of the positive contributions made by business.

“The plain truth is that market liberalization by itself does not lift all boats, and in some cases, it has caused severe damage. What’s more, there’s no point denying that multinationals have contributed to labor, environmental, and human-rights abuses.”

Business Week, Nov. 6, 2000

Context: Corporate PowerContext: Corporate Power Do companies seek out countries with

weak governments and low standards?

– OECD share of world trade fell from 80% in 1984 to 70% in 1998

– OECD countries account for 90% of FDI outflows and 75% of FDI inflows

– Non-OECD trade and FDI concentrated in Latin America and East Asia/Pacific

– Trade between developing countries rose from 25% of exports in 1980’s to 40% in 1998

Context: Race to the BottomContext: Race to the Bottom

Do trade and investment lead to lower labor or environmental standards?

– International trade and investment concentrated in countries with high standards

– On average, foreign companies pay higher wages and have superior environmental performance than domestic companies

– Share of sales in local markets ~ 60-80%

Context: Trade ImpactsContext: Trade Impacts

Do international rules for trade and investment undermine national standards?

– No conflicts between WTO rules and an MEA

– Trade rules recognize the right of governments to set standards at levels they deem appropriate

– Disputes between countries have focused on discriminatory administrative measures

Context: National FactorsContext: National Factors

Democracy and individual liberty Good governance and the rule of law Sound monetary and fiscal policies Implementation and enforcement of sound

environmental and labor laws Secure property rights and transactions

Measuring One FactorMeasuring One Factor

Real estate assets held extra-legally: (US$ Billion)

Haiti: $5 Peru: $90 Philippines:$133 Egypt: $240 Mexico: $315

World: $9.3 trillion

Institute for Liberty & Democracy, Peru

“A more realistic view is now gaining hold…Trade and inflows of private capital are still essential to achieving strong, sustainable growth and to reducing poverty. But it acknowledges that multinationals…have social responsibilities in nations where the rule of law is weak.”

Business Week, Nov. 6, 2000

Drivers for Corporate Drivers for Corporate ResponsibilityResponsibility

Globalization Trade & investment

liberalization Privatization Global communications Government corruption NGO/Activist pressure Government mandates

Company reputation Crisis incidents Customer expectations Investment screens Shareholder initiatives Codes of conduct Acquisitions and

growth

Impacted Business PracticesImpacted Business Practices

Corporate governance Products / Services Marketing Ethics Environment, Health &

Safety Community relations Philanthropy / Grants Human resources

Workplace diversity Compensation / Benefits Human / Indigenous

rights Religious Freedom Contracts / Supply chain

management Communications Public policy

Key Management IssuesKey Management Issues

Appropriate role of the company in non-business activities

Determining audience Scope of one’s “sphere of influence” Supply chain management Internal coordination among functions Implementation options

Management ToolsManagement Tools

Training Operations manuals Internal monitoring Benchmarking Reports to Boards of Directors External communications External monitoring and verification

Codes of ConductCodes of Conduct

Voluntary expressions of commitment that set standards and principles for business conduct

Vary greatly depending on:– objectives, issues covered, audience, partners

Main Issues Addressed:– fair business practices, compliance, ethics– environment, labor policy, human rights– customer/supplier and community relations

AlignmentAlignment

Value-added of a code will depend on the objectives of the company

The primary audience will vary: employees, host governments, local communities, customers and suppliers

Potential for partnerships/collaboration

Multiple codes are creating redundancies for companies, primarily in reporting

OECD Guidelines forOECD Guidelines forMultinational EnterprisesMultinational Enterprises

Adopted in 1976 and revised in 2000 as voluntary recommendations to companies

Part of the OECD Declaration on International Investment and Multinational Enterprises:– National Treatment, Conflicting Requirements,

Incentives and Disincentives

Main objectives are to encourage positive contributions of MNEs and minimize and/or resolve “difficulties.”

Issues CoveredIssues Covered

Sustainable Development

Human rights Corporate

Governance Suppliers and

Contractors Disclosure

Employment Environment Bribery Consumer Interests Science and

Technology Competition Taxation

““Cases” under the GuidelinesCases” under the Guidelines

“Implementation in specific instances”

NCP offer a forum for discussion among the parties involved

Assess the issues and, where merited, help the parties resolve the issue: mediation/arbitration

If unresolved, issue a statement and make recommendations to the parties

Include in annual NCP reports to CIME

The Rev. Leon H. SullivanThe Rev. Leon H. Sullivan

1922-20011922-2001

"The objectives of the Global Sullivan Principles are to support economic, social and political justice by companies where they do business;

to support human rights and to encourage equal opportunity at all levels of employment, including racial and gender diversity on decision making committees and boards;

The Global Sullivan PrinciplesThe Global Sullivan Principles

to train and advance disadvantaged workers for technical, supervisory and management opportunities;

and to assist with greater tolerance and understanding among peoples; thereby, helping to improve the quality of life for communities, workers and children with dignity and equality.”

The Rev. Leon H. Sullivan

The Global Sullivan PrinciplesThe Global Sullivan Principles

The Global Sullivan PrinciplesThe Global Sullivan Principles

Support for human rights

Equal opportunity Voluntary freedom of

association Compensation to meet

basic needs, opportunity to improve

Safe workplace, protect environment

Promote fair competition, oppose corruption

Work with others to improve quality of life

Promote the application of these principles with business partners

Be transparent in our implementation

UN Global CompactUN Global Compact

Compact between the UN and the private sector to promote human rights, improve labor conditions and protect the environment:– Companies will become public advocates for the

Global Compact.– Companies will post annual examples of progress

made on the principles of the Compact on the UN web site.

– Companies will join the UN in partnership projects.

Next StepsNext Steps

UN agencies working on implementation Annual policy dialogues:– Role of business in zones of conflict

Company postings - “learning examples” Partnership projects National & regional “Compacts” Recruitment

Ongoing DevelopmentOngoing Development

Ownership / Direction Interpretation of the nine principles Linkages with other initiatives Role of non-business partners The nature and scope of partnerships Monitoring

Code of Conduct for Code of Conduct for European EnterprisesEuropean Enterprises

EP resolution supporting a code of conduct for European enterprises operating in developing countries

Monitoring mechanism with EP tribunals where companies would defend their conduct

Combines environmental, social, and economic standards

On-going discussions in EU

McKinney Code of ConductMcKinney Code of Conduct

Would require U.S. companies that employ more than 20 people in a foreign country to implement a corporate code of conduct including labor rights, human rights, and environmental provisions.

Would require companies to submit an annual and public report to the departments of State, Commerce, Labor, and EPA.

Would reward companies with preference for government contracts.

Extractive Industry InitiativeExtractive Industry Initiativeon Human Rights and Securityon Human Rights and Security

In coordination with the U.S. and U.K. Governments:– Engage in an open and substantive dialogue with

human rights and development NGOs– Raise human rights and other governance issues

directly with host government– Consider the human rights aspects of their

security arrangements

SA 8000SA 8000

Commercial venture developed by the Council on Economic Priorities.

Auditing and certification of compliance with ILO labor standards and UN human rights conventions.

Provides fee-based monitoring by an independent auditor and gives oversight responsibilities to NGOs and labor unions.

ISO Business Conduct ISO Business Conduct Management System Standard?Management System Standard?

Single set of voluntary, internationally recognized standards and tools to manage corporate ethics, compliance, and business conduct programs

Framework to measure, evaluate, and audit programs

Allow for self-declaration or third-party certification

ConclusionsConclusions

Effective national governance is critical Growing expectations for companies to

assume social responsibilities Proliferation of Codes and Initiatives No “one-size” approach or response Real value in internal process changes Key issues: areas of influence and

monitoring/verification