CORPORATE SOCIAL RESPONSIBILITY: NEW TRENDS

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 1
(Apr 2007)
CHAPTER 3A
CORPORATE SOCIAL RESPONSIBILITY: NEW TRENDS
Ramon Mullerat O.B.E. ¹
Former President of the Council of Bars and Law Societies of the European Union (CCBE)
Co-chair of the Corporate Social Responsibility Committee of the IBA
Attorney, KPMG Abogados
Barcelona, Spain

RAMON MULLERAT O.B.E.

Ramon Mullerat O.B.E. is a lawyer in Barcelona and Madrid, Spain; Avocat à la Cour de Paris, France; Honorary Member of the Bar of England and Wales; Honorary Member of the Law Society of England and Wales; Professor at the Faculty of Law of the Barcelona University; Adjunct Professor of the John Marshall Law School, Chicago; Former President of the Council of the Bars and Law Societies of the European Union (CCBE); Member of the American Law Institute (ALI); Member of the American Bar Foundation (ABF); Member of the Board of the Institute of North-American Studies; Former Co-Chairman of the Human Rights Institute (HRI) of the International Bar Association (IBA); Member of the London Court of International Arbitration (LCIA); Member of the Council of Justice of Catalonia; Former Chairman of the Editorial Board of the European Lawyer; Member of the Board of the Iberian Lawyer.

I. Corporate Social Responsibility

A group of six blind men watched an elephant. Someone asked the first blind man: "What does an elephant look like? "Like a pillar" said the one who has been grabbing the elephant by one of its legs"; "like a snake" said the one who had grabbed the tail; "like a fan" the one who had touched the ear; "like a hose" the one who had grabbed the trunk, and so on and so forth.

With CSR something similar happens. Each one of us has a different concept or at least prioritizes some of its aspects according to our particular background and views: an economic theory, an ethical aspiration, a legal regulation, a market tool, a management risk instrument, and so on and so forth.²

CSR is an offspring of business ethics. However, business ethics is more centripetal and concerned particularly with moral values, while CSR is more centrifugal and focuses more on social, environmental and human rights issues.

II. Definition

In our days economic corporations are ruling the economy and the world in general with greater power and influence than many states.³ The increase in corporate power under the

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auspices of the global implementation of a neo-liberal policy agenda has been controversial. After the fall of communism, an expansion of neo-liberal capitalism and globalisation followed suite. Yet, although indisputably globalization has contributed to the reduction of poverty, the promise of more freedom and more prosperity is by now widely perceived to have failed the majority of the citizens of the newly globalized world. Through CSR, corporations propose to fix this situation.

Gradually, CSR is ceasing to be that vague, imprecise and somehow misty concept that has been for so many years.⁴ Today it is every time more clear that it is an entrepreneurial activity, which, in addition to making profits, looks to promote the interests of the stakeholders and the community, thus showing that corporations have a soul and wish to act as good citizens.

As the ICC say "CSR is a voluntary commitment by business to manage their roles in society in a responsible way". The EU Commission also defines CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis".⁵

III. New trends

In addition to be more precisely defined and to determine its meaning and value, the CSR movement is evolving following some trends that I intend to briefly describe in this note:

. A movement in expansionFirst

There are no more a few companies, which have converted themselves to this new doctrine, but the majority of large enterprises have introduced it in their agenda. Approximately 90% of Fortune 500 companies have already adopted CSR programs. At the same time charitable giving has increased exponentially.⁶

It is true that, following Milton Friedman' proposition that "there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits",⁷ still some commentators believe that CSR is an oxymoron since the company is by its nature compelled to maximize its own interest whatever its external price. They sustain that the corporation has no social responsibility, that is only responsible for obeying the laws and that does only have a responsibility to their shareholders to produce results in

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terms of growth, sales, and profit.⁸ But the number of CSR opponents is clearly decreasing. The Economist survey,⁹ which attracted so much attention maintaining that CSR is eroding the basis of the free enterprise system, provoked a strong reaction from all quarters including many international institutions.

The reality is that indisputably the CSR movement is one of the most important economic and social movements of our time and that CSR's expansion and favorable results are generally recognized. In the most sweeping research, the University of Redlands' Marc Orlitzky and the University of Iowa's Sara Rynes and Frank Schmidt looked at 52 studies -- covering 34,000 companies worldwide -- on CSR over a 30-year period. Their 2004 study found that well-run, profitable businesses also boasted strong social and environmental records, and vise versa. Overwhelmingly, firms that rewarded employees with good work climates and higher pay and benefits ultimately saw stronger sales and stock prices, plus less employee turnover.¹⁰

If the CSR doctrine has recruited so many converts among corporations, consumers are even greater supporters of the CSR movement. For instance, travel-loving Germans are skipping air travel and vacation at home instead to save the environment.¹¹

Therefore, the traditional pronouncement "the business of business is business" should be replaced by "the business of business is socially responsible business".

. A movement covering further concernsSecond

Since the term "triple bottom line" (people, planet, profit) was first introduced in 1994¹² an accelerating progression from early concerns about safety, health and environment to a growing range of social concerns have been seen, among them human rights and diversity.

Recently other preoccupations like fair trade pricing and fair wages as well as socially investing have increasingly made headlines.¹³ The trend is clearly to enlarge the number of these social concerns.

There is a growing conviction that there is not a conflict but a positive correlation between CSR and profitability and that those profits can go hand-in-hand with social and environmental responsibility.¹⁴

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. Publication and accountabilityThird

CSR is not just another passing trend, but is the direction which all successful 21st century businesses will have to take in order to survive in an age of globalisation. Only ten years ago, the words "corporate social responsibility" turned up around a few company reports on an internet search engine. Today, thousands of companies display their newly developed ethical codes and socially responsible projects at the click of a mouse.¹⁵

The social responsible enterprises every time more publish their CSR activities for their shareholders and the public in general, either in their general yearly reports or in CSR specific reports. According to a survey of KPMG in 2002, 45% of corporations issued environmental, social or sustainability reports compared with 35% in their 1999 survey. Corporate Register shows some 2.200 corporations publishing CSR autonomous responses in 2005.¹⁶ Undoubtedly, greater transparency is a means to improve accountability and trust.

Some nations already require CSR reporting and have made obligatory for listed companies to add social, environmental and social information within their yearly report to shareholders.¹⁷

In addition, there is also a great deal of ratings of corporations' activities in CSR and, although someone questions whether these ratings really predict socially...