The
progress made by US companies in the field of CSR is largely the result
of an overriding need to manage reputation, not of government prodding
The
aftermath of the state visit of a US president to the UK is a good time
to take stock of the current administration’s achievements in the field
of CSR. At first glance, its record is poor: the US has not signed the
Kyoto protocol designed to slow global warming and has a poor record on
industrial pollution.
But as European countries have
found, CSR policy can also be advanced by modest voluntary and
legislative initiatives that seek to nudge, and not coerce, companies
into responsible behaviour. The UK pensions disclosure regulation,
which consists of a few lines in an act several hundred pages long, and
applies to pension funds and not to companies, is a good example of
this approach, though its precise impact is disputed.
At
this level, the Bush administration’s performance is mixed. On the
positive side, it has carried forward the first ever human rights
standards for oil, gas and mining companies. Bennett Freeman, who led
the development of the Voluntary Principles on Security and Human
Rights as US deputy assistant secretary of state for democracy, human
rights and labour in the previous administration, says: ‘The government
has been using its convening power, diplomatic resources and
negotiating skills to carry forward this work. As a result of its
efforts, the number of extractive companies involved has almost
doubled.’
Freeman, now managing director for corporate
responsibility at the public relations firm Burson Marsteller, cites
two other examples of CSR policy initiatives started under the previous
administration and taken forward by the current one – the Apparel
Industry Partnership (AIP) and the Kimberley Process, which seeks to
ensure that the profits from diamond sales do not fuel guerrilla wars
in Africa. ‘The administration can take credit for getting the Fair
Labor Association going, which arose out of the AIP, and secondary
credit with others for the Kimberley Process,’ says Freeman.
However, these strictly sectoral initiatives are pretty modest,
compared with what European governments are doing. Eric Biel, acting
director of the Lawyers Committee for Human Rights in Washington, says:
‘The Bush administration deserves credit for following through on the
Voluntary Principles but frankly there wasn’t much of a brilliant track
record for it to follow. The previous administration was very quiet
too.’
CSR proponents in the US also received only a modest
dividend from the corporate governance crisis that followed the
collapse of the energy trading company Enron: despite presidential
utterances on the need for greater corporate responsibility, the only
regulation within Sarbanes-Oxley directly to the point is the
requirement for mutual fund managers and investment advisers to declare
how they cast proxy votes at company meetings, which is expected to
cause the number of shareholder resolutions on CSR topics to rise.
Scrutiny by regulators, of course, is only one factor that prompts
companies to consider their responsibilities to society more closely.
Mick Blowfield, an adviser at the influential San Francisco-based
non-profit body Business for Social Responsibility, says: ‘CSR is a
part of the neo-conservative agenda in a way that does not really
relate to the UK experience. US companies see the benefit of showing
that business can provide moral leadership by taking their
responsibilities to society seriously. It also helps to pre-empt the
prospect of legislation, which they see happening in Europe.’
This may help to explain the rapid rise of employee volunteering in the
US, identified by president Bush as a key way for companies to
demonstrate social responsibility.
The consensus is that
the US lags behind Europe on CSR. ‘One of the motivators for the
Voluntary Principles was to help close the gap between UK and US
extractives companies on their willingness to engage with
non-government organizations on human rights and related issues,’ says
Freeman. ‘We wanted to capitalize on the fact that BP and Shell and Rio
Tinto were already further down the road, and to get them into the same
room with US companies and NGOs to try to talk the same language. It
was deliberately done in a UK/US transatlantic context.
‘My sense is that US companies have far greater difficulty in
recognizing the legitimacy of stakeholder concerns than did UK
companies. It is an issue of legitimacy, both of issues and of groups.
But that is changing.’
The changes are driven by the
growing awareness that whatever a government does, or does not do, to
promote CSR, it is companies’ rather than politicians’ reputations that
are at stake. And, one might add, the interest of investors. Wall
Street is now very aware of the risks associated with poor governance.
But that awareness extends only to classical corporate governance. If
Wall Street follows Europe’s example and gives weight to wider concerns
of sustainability, change will accelerate – and for some, the change
has already begun.
