Multinational corporations, social responsibility and conflict.

Author:Bennett, Juliette
Position:Economic and Social Implications

"The international business community will increasingly need to promote greater economic inclusion and social justice in its operations, or it will be blamed for contributing to the conditions that lead to violent conflict."

It is not a coincidence that the World Trade Center and the Pentagon were part of the same attack. In an increasingly global economy, these pillars of business and government are now tied together as the symbol of a growing link between the public and the private sector. The attacks are evidence of a rising perception that globalization creates poverty and inequality, which in turn create the motive for much violence. In response, the private sector is becoming more public-minded, while the public sector is becoming more business-minded. The events of September 11, 2001, the demise of Enron and a worsening recession clearly demonstrated that good corporate governance at home and abroad, promoting economic inclusiveness and community goodwill, are important elements of international security. This interweaving of roles calls for new partnerships between business and government, in which sharing skills and expertise can be valuable in promoting regional and global stability.

The security operations normally associated with peacekeeping are uniquely governmental responsibilities, which corporate actors actively avoid. Conflict is endemic to failed states, where violence becomes the predominant means to express grievances and to secure control over wealth and key economic goods. While governments have the primary concern in preventing violent conflict, businesses and financial institutions have an important role to play in avoiding or resolving conflicts that are associated with economic production. These include conflict situations that stem from the breakdown of traditional social frameworks, involving an influx of immigrants and the rapid emergence of cash economies. Governments are also responsible for responding to conflict and post-conflict situations.

However, globalization and the mounting number of conflicts occurring in regions where multinational corporations (MNCs) operate have prompted international organizations, the media, human rights groups, social investors and consumers, as well as some corporate executives, to discuss the responsibility MNCs share in promoting peace and avoiding conflict. Corporate social responsibility and business ethics groups assert that corporations have an interest in leveraging their skills and impact to promote stability in their areas of operation, not only because it is the right thing to do, but also because it makes good business sense. The more traditional human rights groups make use of international law to ensure that businesses are not complicit in human rights abuses, while conflict resolution groups offer their problem-solving skills and their expertise in identifying root causes of conflict.

All these players agree that multinational companies operating across borders should bear some responsibility for the effects of their operations on the local environment and population. The role of business in conflict prevention, crisis management, post-conflict reconstruction and peacebuilding was the focus of several conferences held in 2001 by organizations ranging from large multilateral agencies such as the United Nations, the World Bank and the World Economic Forum to the smaller non-governmental organizations such as the International Peace Academy and Transparency International.

In October 2001, at a World Economic Forum workshop on security and political risks, participants agreed that businesses increasingly acknowledge political stability to be crucial to their growth and that "they must construct global political and economic scenarios which do not ignore the potential for systemic discontinuities such as September 11, and the impact such events can have on the private sector." They also asserted that "the systemic failure of governments unable to cope with the forces of globalization leads to the incapacity to provide for populations and opens the door to violent competition among local interests." (1)

In a recent report, UN Secretary-General Kofi Annan pointed out some of the methods armed groups use in international trade to fund wars, observing:

The impact of the pursuit of economic interests in conflict areas has come under increasingly critical scrutiny. Corporations have been accused of complicity with human rights abuses, and corporate ties have continued to fuel civil wars. It has become common knowledge that by selling diamonds and other valuable minerals, belligerents can supply themselves with small arms and light weapons, thereby prolonging and intensifying the fighting and suffering of civilians. (2) Some prominent corporations have been accused of fueling wars and violence through their business operations in conflict-ridden areas. A number of companies have been sued under laws, such as the Alien Tort Claims Act, a US statute that allows aliens to sue in US courts for torts inflicted outside US borders, including those resulting from human rights abuses.

Recent lawsuits include actions against two large oil companies, Unocal and Talisman Energy. In 1996, Burmese villagers sued Unocal in California federal court for human rights violations arising out of the company's involvement in a gas pipeline project in Myanmar (Burma), where an oppressive military government is defending itself against a guerrilla insurgency. The plaintiffs accused the company of participating in human rights violations against them. While the trial judge, in a ruling now on appeal, dismissed the case against Unocal, the judge's opinion was important because it acknowledged that "the evidence does suggest that Unocal knew that forced labor was being utilized and that joint ventures benefited from the practice."

Talisman, Canada's largest energy company, was sued in November 2001 in federal court in New York City by citizens of the Sudan, where the company is involved in oil operations, as civil war rages between the Muslim-dominated government in the North and the predominantly Christian communities in the South. The plaintiffs have accused Talisman of facilitating what appears to be the Sudanese government's ethnic cleansing campaign against black and non-Muslim minorities by supplying financial and logistical support to the government in its oil operations. (3)

The question arises whether an MNC should continue to operate in a region where its business might be directly or indirectly aggravating an existing conflict. Some leaders of MNCs facing this dilemma have argued that leaving the area will simply allow a less scrupulous corporate actor to partner with a corrupt government, thus diminishing the prospect of respect for human rights.

MNCs cannot and should not replace governments as the primary actors in international peacekeeping. However, multinational corporations working in partnerships with government, NGOs and civil society can use their business skills and financial leverage to promote regional stability.


According to one observer, the private sector can contribute to pre-conflict or conflict prevention strategies in stable and peaceful regions in three ways: "through its core business activities, social investment programs, and engagement in policy dialogue and civic institution building." (4) Business can play a role in conflict prevention through activities that incorporate social and environmental policies or guidelines on human rights.

Managing pre-conflict or conflict...

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