An introduction to corporate social responsibility in the extractive industries.

• Date: 01 January 2008
• Author: Smith, Gare A.

Mr. Smith was invited to deliver the keynote speech at the Yale Human Rights & Development Law Journal's Symposium on Corporate Social Responsibility in the Extractive Industries, at Yale Law School, on March 8, 2008. The following Preface is based on that speech.

1. INTRODUCTION

   Many congratulations to the Board and staff of the Yale Human Rights & Development Law Journal for hosting this timely and important Symposium on Corporate Social Responsibility in the Extractive Industries, and for devoting this volume of the Journal to an in-depth analysis of the key issues addressed in the Symposium.

   This Preface is designed to paint a broad Corporate Social Responsibility (CSR) backdrop for this special volume and to provide a context for the more detailed articles that follow. To that end, it defines the concept of CSR, particularly as it relates to the extractive industries, and identifies the primary business drivers behind it. In addition, this introduction highlights some of the key CSR issues facing the extractive industries today and in the coming years, and previews how the succeeding articles may help to resolve them.

2. THE YIN AND YANG OF CSR

   One of the challenges of working in the relatively new field of CSR is that people have highly varied perspectives regarding what CSR means and entails. Some view CSR as a form of philanthropy, others as a public relations exercise. Some regard it as a type of corporate volunteerism, others as a guideline for risk management.

   For the purposes of this Preface, I propose employing the definition put forward by former U.N. Secretary General Kofi Annan. According to Mr. Annan, CSR is a business concept embraced in the 1990s pursuant to which corporations seek to responsibly address social and environmental issues raised in the course of business through support for international norms and sustainable practices. Norms and sustainable practices of particular focus include broad-based human rights, labor rights, and the rights of indigenous peoples; environmental stewardship; and transparency. (1)

   In essence, CSR is a by-product of corporate globalization. It reflects the yin and yang of the advantages of, and the concerns regarding, the impact of globalization.

   To multinational companies, globalization is the cornerstone of business in the new millennium. It provides the opportunity to explore new regions of production, increase efficiency, spur business growth, and augment the rate of return to shareholders. Many industry leaders regard CSR initiatives as a means of managing attendant legal and reputational risks.

   Some stakeholders, however, worry that globalization can also lead to less beneficial ends. Specific concerns include the potential for exploitation of workers and the environment, the diminution of respect for human rights, and the fueling of global inequalities. With respect to the extractive sector, this is a particular concern in relation to what has been identified as the "resource curse," a phenomenon explored in depth in this volume.

   Indicators that contribute to such concerns include that while the wealth of developed countries and their citizens continues to grow, due in no small part to the business activities of their multinational companies, the relative wealth of many developing countries and their citizens continues to shrink--despite the fact that these nations provide many of the resources essential to sustaining the developed world. Of the 100 largest economies in the world, most are multinational companies, a number of which are members of the extractive sector. (2) Three hundred multinationals currently account for 25% of the world's total assets, and only 21 nations have gross domestic products that exceed the annual sales of each of the six largest multinationals. (3)

   These statistics are relevant to CSR because they underscore the global economic impact of multinational companies. The inequalities highlighted also establish the challenging political context facing today's business leaders as...