THE CORPORATE SOCIAL RESPONSIBILITY IN THE PERUVIAN MINING INDUSTRY: FUTURE CHALLENGES.

Author:Lozada, Edwin Bustinza
 
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"Corporate Social Responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it because it is good for our business."--Niall Fitzerald, Former CEO, Unilever

  1. INTRODUCTION

    What is the future of "Corporate Social Responsibility"? Is the mining industry the lifeline of this initiative? Does "Corporate Social Responsibility" need to become law as part of the International Law? This Comment will review the current position of Corporate Social Responsibility (CSR) in the Peruvian mining industry, understand its implementation by mining companies, and determine what challenges lie ahead. Additionally, this Comment will address the primary concerns regarding the implementation of CSR standards in mining policies and plans and the steps necessary to improve the mining industry's relationship with stakeholders and local communities.

    To begin, Section II "Corporate Social Responsibility under International Law" will explain the current legal framework of CSR standards and policies, which consists of international guidelines, principles, and treaties, as part of international "soft law."

    Section III will detail the connection of the Peruvian mining industry and CSR. Particularly, this section will evaluate current instances of CSR in the Peruvian mining industry, and the key strengths and weaknesses involved.

    Section iii will also address the Extractive Industry Transparency Initiative (EITI) in Peru extractive industries, primarily in mining. Moreover, this section will discuss the flipside of CSR, or "Inverted CSR" in the mining industry which manifests as social and socio-environmental conflicts.

    Then, Section IV will introduce "Future CSR Challenges" for the mining industry. This section will evaluate new trends, such as the "Triple Bottom Line" model, in order to determine applicability in the mining industry. Likewise, this section will present interesting CSR case studies and analyze the programs and plans of certain Peruvian mining companies. Furthermore, this section will consider whether CSR is losing its presence and credibility in the mining industry's corporate activities and operations.

    Finally, Section V will reinforce that CSR programs in the mining industry are effective in reducing economic and social disparities while minimizing conflicts that are common in the extractives industries.

  2. THE CSR UNDER INTERNATIONAL LAW

    The definition of Corporate Social Responsibility is broad, contested, and often times industry-specific. Milton Friedman, an economist and Nobel Laureate of Economy, made a controversial statement regarding CSR when he answered the question "[w]hat are a corporation's 'social responsibilities?'" by responding: "a corporation's responsibility is to make as much money for the stockholders as possible." (1) On the other hand, more modern approaches, such as the viewpoint of the European Commission, consider CSR as referring "to companies taking responsibility for their impact on society." (2)

    Thus, CSR requires corporations, also known as Multinational Enterprises (MNEs), to consider the full impact of their activities on different stakeholders, to look beyond the bottom line of profit and loss. (3) In addition, MNEs should consider implementing internal procedures and policies that target and benefit CSR areas such as sustainability, competitiveness, and innovation. (4) Professor Ilias Bantekas, of Brunei Law School in London, offered another important definition of CSR, expressing that "corporations are not only responsible to their shareholders, but owe, or should owe, particular duties to persons or communities directly or indirectly affected by their operations." (5) This definition includes non-traditional participants in the execution of MNEs' CSR activities, and it seeks to create a more sustainable environment.

    Although CSR is quite expansive, this Comment will focus on CSR as it operates under international law. To this end, the United Nations (U.N.) establishes that international law defines the legal responsibilities of States in their conduct with each other and their treatment of individuals within State boundaries. (6) International law and issues of global concern naturally encompass Corporate Social Responsibility because MNE activities impact the environment and sustainable development, human rights, international waters, global communications, and world trade. (7) Because of this, CSR is increasingly receiving the attention of international law.

    The first determination in this analysis is whether the MNEs are regulated by international law or some sort of international regime. (8) The legal framework of international law concerning CSR must be established. From this point, the argument can be developed that MNEs are recognized as having an international legal personality.

    In international law, "soft law" mechanisms-such as guidelines, principles, resolutions, declarations, rules, codes of conduct, and international standards-dominate CSR standards. (9) The most notable of these international soft law mechanisms are the Organization for Economic Cooperation and Development (OECD) Guidelines for MNEs. (10) The OECD is a "unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation." (11) The OECD Guidelines for MNEs "are addressed to all the entities within the multinational enterprise (parent companies and/or local entities)" (12) and they "provide principles and standards of good practice consistent with applicable laws and internationally recognised standards." (13)

    A prime example of CSR incorporation under international law through the OECD Guidelines is its General Policies statement, that enterprises should "[contribute to economic, environmental and social progress with a view to achieving sustainable development." (14)

    Even though the OECD Guidelines provide a preliminary approach to the obligations of MNEs in an international CSR scenario, the U.N. Global Compact Ten Principles is a specific international initiative regarding CSR in business which focuses on identifying the "strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet but also setting the stage for long-term success." (15) Though the Ten Principles are voluntary for MNEs, they provide important guidance for MNEs in the international environment and suggest that MNEs shall be included in their activities, methodologies, and operations. (16)

    An alternate approach is to evaluate whether the growing trend toward CSR norms could become specific legislation and lead to the solidification of CSR goals in national laws. (17) To date, there is already a concrete answer to this inquiry, this is the case of India. (18) India is "the first country to have corporate social responsibility legislation, mandating that companies give 2% of their net profits to charitable causes." (19) CSR law in India involves areas such as education, poverty, gender equality, and hunger. (20)

    This Comment will not discuss if the implementation has been successful or not. However, as a result of the enforcement of India's CSR law, Mr. Bimal Arora, the chair of the Delhi-based Centre for Responsible Business, stated that "[c]ompanies now have to think seriously about the resources, timelines, and strategies needed to meet their legal obligations." (21)

    The transparency and accountability required under this legal framework will naturally result in complementary tools that encourage the adoption of CSR law. In fact, the European Parliament (22) suggested that "making CSR policies more transparent and more effective" will help in the struggle against "misleading and false information regarding commitments to corporate social responsibility and relating to the environmental and social impact of products and services." (23)

    In summary, the OECD Guidelines for MNEs is the most prominent representation in understanding that CSR shall be applied to MNE activities under the international regime in order to obtain the targets mentioned above. Though the OECD Guidelines for MNEs and U.N. Global Compact Ten Principles are "voluntary and not legally enforceable," there are matters covered by the Guidelines [and Principles] that may also be regulated by national law or international commitments. (24)

  3. CONNECTING THE PERUVIAN MINING INDUSTRY AND THE CSR

    1. Peruvian Corporate Social Responsibility-CSR in the mining industry

      Corporate Social Responsibility has developed significantly in Peru over the recent decades. (25) In early 1990s, under Fujimori's administration, the Peruvian government opened its markets to foreign investments after an extreme economic crisis. (26) Until this moment, the idea of CSR had little presence or importance in Peru.

      Despite the development of CSR initiatives in Peruvian business, CSR is not mandatory and there is no corporate law establishing CSR policies and procedures. However, private institutions such as Peru 2021 (27) and some private universities promote CSR practices in commerce and on an industry-specific basis, like mining.

      The actual context determines that private enterprises are already applying some CSR guidance and standards in business by using as a reference framework the OECD Guidelines for MNEs, the U.N. Global Compact Ten Principles, the IFC's Sustainability Framework, (28) and the ISO 26000. (29)

      For instance, Peru 2021, which is the most recognized Peruvian organization developing CSR standards in Peruvian business, identified its target to cooperate and "make of the private industry a change agent" and "to [build] an inclusive country." (30) Under the Peru 2021 vision, there are four suggested principles to apply in business: "To Connect for impact;" "Innovation;" "Learn and Teach" and "Do Tank." (31) According to this...

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