Issue 53 March 2014
Editorial
Malcolm McIntosh
Professor and Director, Asia Pacific Centre for Sustainable Enterprise,
Griffith University, Queensland, Australia
Turning Point
Large Systems Change: Producing the Change We Want
Steve Waddell with Joe Hsueh, Anna Birney, Amir Khorsani and Wen Feng
GOLDEN for Sustainability Energy Ecosystem Labs, USA
CSR: Will it Change the World?
Hope for the Future: An Emerging Logic in Business Practice
Oliver F. Williams
University of Notre Dame, USA
The Contribution of the UN Global Compact towards
the Compliance of International Regimes: A Comparative
Study of Businesses from the USA, Mozambique,
United Arab Emirates and Germany
Ulrike Hoessle
Walla Walla Solutions, Inc, USA
3-4
5-8
9-26
27-60
Responsible Lobbying: A Multidimensional Model
Theresa Bauer
Humboldt-University Berlin, Germany
61-76
ISO 26000: Three CSR Messages for Management Education
Lars Moratis
Open University, the Netherlands
77-90
The Journal of Corporate Citizenship Issue 53 March 2014
The Journal of Corporate Citizenship
the journal of
Corporate
Citizenship
Issue 53
March 2014
Greenleaf
PUBLISHING
Cover images: © PhotoDisc, Inc. 1997
print ISSN 1470-5001 online ISSN 2051-4700
JCC53_Cover.indd 1
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the journal of
Corporate
Citizenship
Issue 53
March 2014
Editorial
Malcolm McIntosh
Professor and Director, Asia Pacific Centre for Sustainable Enterprise,
Griffith University, Queensland, Australia
Turning Point
Large Systems Change: Producing the Change We Want
Steve Waddell with Joe Hsueh, Anna Birney, Amir Khorsani and Wen Feng
GOLDEN for Sustainability Energy Ecosystem Labs, USA
CSR: Will it Change the World?
Hope for the Future: An Emerging Logic in Business Practice
Oliver F. Williams
University of Notre Dame, USA
The Contribution of the UN Global Compact towards
the Compliance of International Regimes: A Comparative
Study of Businesses from the USA, Mozambique,
United Arab Emirates and Germany
Ulrike Hoessle
Walla Walla Solutions, Inc, USA
3-4
5-8
9-26
27-60
Responsible Lobbying: A Multidimensional Model
Theresa Bauer
Humboldt-University Berlin, Germany
61-76
ISO 26000: Three CSR Messages for Management Education
Lars Moratis
Open University, the Netherlands
77-90
About the Journal of Corporate Citizenship
91
Notes for Contributors
92
© 2014 Greenleaf Publishing Limited.
All written material, unless otherwise stated, is the copyright of Greenleaf
Publishing Limited. Views expressed in articles and letters are those of the
contributors, and not necessarily those of the publisher.
print ISSN 1470-5001 online ISSN 2051-4700
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The Journal of Corporate Citizenship
General Editor Malcolm McIntosh,
Asia-Pacific Centre for Sustainable Enterprise, Griffith Business School, Australia
Regional Editor North America: Professor Sandra Waddock, Boston College, Carroll School of Management, USA
Publisher Claire Jackson, Greenleaf Publishing, UK Assistant Publisher Rebecca Macklin, Greenleaf Publishing, UK
Production Editor Dean Bargh, Greenleaf Publishing, UK
Editorial board
Stephanie Barrientos, University of Manchester, UK
Nick Barter, Griffith University, Australia
Jem Bendell, University of Cumbria, UK
David Cooperrider, The Fowler Center for Sustainable Value,
Weatherhead School of Management, Case Western
Reserve University, USA
Derick de Jongh, Centre for Responsible Leadership, University
of Pretoria, South Africa
Jonathan Doh, Villanova School of Business, USA
Mark Drewell, GRLI Foundation
Ronald Fry, The Fowler Center for Sustainable Value,
Weatherhead School of Management, Case Western
Reserve University, USA
Kyoko Fukukawa, Bradford University School of Management, UK
Mary Gentile, Babson College, USA
Matthew Gitsham, Ashridge Business School, UK
Mark Glazebrook, BP Australia
Brad Googins, Boston College, USA
Jonathan Gosling, University of Exeter, UK
Andre Habisch, Katholische Universität Eichstätt, Germany
Jonas Haertle, PRME Secretariat
Linda Hancock, Deakin University, Australia
Adrian Henriques, Middlesex University Business School, UK
Maria Humphries, Waikato University, New Zealand
Craig Mackenzie, University of Edinburgh Business School, UK
Daniel Malan, University of Stellenbosch Business School,
South Africa
Brent McKnight, McMaster University, Canada
Jane Nelson, Harvard Kennedy School, USA
Paul Nieuwenhuis, Cardiff Business School, UK
Ciaran O'Faircheallaigh, Griffith University, Australia
Jacob Park, Green Mountain College, USA
James Post, Boston University, USA
Juliet Roper, Waikato University, New Zealand
Tapan Sarker, Griffith University, Australia
Stefan Schaltegger, Leuphana University Lüneburg, Germany
Laura Spence, Royal Holloway, University of London, UK
Rory Sullivan, University of Leeds, UK
Cornelius van der Lugt, University of Stellenbosch Business
School, South Africa
Steve Waddell, Networking Action, Boston, USA
Sandra Waddock, Boston College, USA
Oliver Williams, University of Notre Dame, USA
Masaru Yarime, University of Tokyo, Japan
Simon Zadek, Global Green Growth Institute, UK
Correspondence
The Journal of Corporate Citizenship encourages response from its readers to any of the issues raised in the journal. All
correspondence is welcomed and should be sent to the General Editor c/o Greenleaf Publishing, Aizlewood’s Mill, Nursery St,
Sheffield S3 8GG, UK; [email protected].
All content should be submitted via online submission. For more information see the journal homepage at www.greenleafpublishing.com/jcc.
Books to be considered for review should be marked for the attention of the Book Review Editor c/o Greenleaf Publishing,
Aizlewood's Mill, Nursery St, Sheffield S3 8GG, UK; [email protected].
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JCC53_Contents.indd 2
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Editorial
Issue 53 March 2014
Malcolm McIntosh
Professor and Director, Asia Pacific Centre for Sustainable Enterprise,
Griffith University, Queensland, Australia
in this issue of jcc steve waddell
introduces work on large systems
change that members of the GOLDEN
for Sustainability group are conducting. Their emphasis, and Steve’s in
this short piece, is on rethinking
systems change so that we have the
‘change we want’ rather than a clash
of obvious current cultures. JCC will
shortly be issuing a call for papers on
this area of thinking for an upcoming
issue. Watch this space.
There are some who think that
the UN Global Compact is a mere
nudge at the entrapment of industrial
capitalism but for others it is seen as
representing an attempt at substantial systems change thinking. Oliver
Williams is on the Board of the Compact in New York and in this issue he
says ‘Only time will tell whether we
will reach a tipping point when these
sorts of companies [in the UNGC] will
multiply and change the world but
there are good reasons for hope for
the future.’ Do we have enough time?
Ulrike Hoessle takes the research
further by looking at the links between
compliance and the Compact in USA,
Mozambique, the United Arab Emirates and Germany. There really is so
much more work to be done on the
JCC 53 March 2014 JCC53_Editorial.indd 3
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role that instruments such as the
Compact, ISO26000, SA8000, GRI
and others have had in changing the
international political economy. Are
they adopted by business leaders for
competitive advantage or as really
brave leadership? How far would those
companies that have gone down this
route go: responsible, enlightened and
‘I took the other path’? Hoessle points
out that the UNGC fails to deal with
the detail of on-the-ground change
around issues such as tax avoidance
and with its high aspirational goals is
likely being used as green-blue wash. This leads neatly to Theresa Bauer’s
paper in this issue on responsible lobbying where she makes the point that
this could be seen as being as oxymoronic as the term ‘business ethics’.
But in a world where business is seen
as part of the solution, rather than as
part of the problem, there would be
no contradictions or parody in talking about both business ethics and
responsible lobbying. Which leads
ineluctably back to Steve Waddell’s
piece on large systems change and
the work of his group. Finally Lars Moratis links three
CSR initiatives to management education, in particular to the Principles
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editorial
for Responsible Management Education (a child of the UNGC). He asks:
‘Can one credibly teach management
education in an educational institution that itself has no solid commitment to CSR?’ Similarly one can ask
‘can one preach CSR in a business
that itself is not practising a new paradigm?’ Where are you sitting now? Along with the upcoming call for
papers on large systems change, JCC
currently has a call for papers out for
a transdisciplinary conference being
held in Pretoria, South Africa in
November 2014 in an attempt to blow
some of the clichés out of the responsible leadership literature. Take a look
and join in, please. Malcolm McIntosh
March 2014
Griffith University, Australia
q
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Turning Point
Large Systems Change
Producing the Change We Want
Steve Waddell with Joe Hsueh, Anna Birney,
Amir Khorsani and Wen Feng
GOLDEN for Sustainability Energy Ecosystem Labs, USA
Transformation and large systems change is not something that can be planned.
However, understanding change pathways can support strategies to enhance our
ability to produce desired futures. Systems mapping provides a range of ways to visualise change systems, a concept that is introduced here as critical to understanding
change pathways. This is followed by a proposal of how to look at the DNA of these
systems through two additional concepts: five sub-systems and seven functions in
each of those systems.
T
here is ample evidence that
something basic is wrong with
the way we are approaching
change and transformation. It is
not simply a problem of ‘political will’—a
term that covers a wide range of failings.
It is not as though we can magically have
an enlightened public and private leaders and ‘presto’ the problem is taken care
of… No. A fundamental problem is that
we don’t know how to change at a scale
that the challenges require. They require
global change in basic frameworks,
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© Greenleaf Publishing 2014
OO Transformation
OO Transitions
OO Large systems
change
OO Whole systems
change
OO Change systems
sense-making, definitions of purpose, and
organising and production processes, all
with huge power implications.
The pressures for timely action to
respond to clear environmental imperatives appear to be overwhelming our ability to undertake large system change and
transformation. We are blowing through
climate change stabilisation goals, biodiversity is collapsing and the seas are rising. Taking a more systemic approach to
developing change systems is critical to
reversing this situation.
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steve waddell et al.
process, with government as the key
actor
One powerful way to improve the situation is to much more categorically focus
on the development of ‘change systems’.
There are many, many initiatives aiming
for change but they are not, collectively,
a change system. They represent a lot of
individual, insightful entrepreneurs and
initiatives that are focused on particular
pieces of the change challenge. However,
they do form the elements of what can
emerge as effective change systems.
Take the electricity system, for example. It comprises a diverse group of activities, usually broken down into generation,
transmission, distribution and consumption. Each of these represents subsystems of the electricity system that supports
many other activities. New technologies
are providing fundamental challenges to
each of these systems and how to organise electricity production. These systems
comprise expertise organised around
particular technologies, and physical and
organisational structures to support electricity production.
The change system for electricity, on the
one hand, has a very different group of
subsystems and consequently requires
very different competences, relationships and knowledge. In the GOLDEN
Energy Lab, we look at the change system as comprising five key subsystems
that we suggest are quite generic change
subsystems:
2. The innovation change subsystem
produces new technologies. This
is dominated by researchers and
companies that are developing new
physical technologies and new ways
of organising them
3. The finance change subsystem
is investing in technologies and
optional ways to produce electricity.
Although government historically
played a dominant role in many countries, today private sector capital is
dominant
4. The consumer change subsystem is
about demand for electricity and how
it is used. Strategically it is useful to
divide it into commercial and retail
consumers
5. The production change subsystem—
the infrastructure of plant, transmission lines and power grids—is mixed
in ownership, but increasingly private and experiencing fundamental
change
Figure 1 presents these as five interacting subsystems that collectively create the
change system for electricity. This is to say:
each operates in distinct spheres and with
distinct logics and stakeholder structures,
but they interact intensely and are highly
inter-dependent. Pulling them apart provides strategic power and insight about
how to approach them as change challenges. We can start working to create
‘effective change (sub) systems’.
1. The public policy change subsystem
comprises all the activities that surround changing of policy to support
emergence of sustainable energy
production. It is a multi-stakeholder
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large systems change
Figure 1 The change system for electricity
Innovation
(Tech,social)
subsystem
Finance
subsystem
The Change System
for
Electricity
Consumption
Subsystems
A core concept in enhancing effectiveness is ‘function’: what are the roles and
activities that need to work well, for a
change system to be ‘healthy’? Although
Policy
subsystem
Production
(electricity)
subsystem
this may prompt an overwhelming list,
in fact there are only a few key functions.
One analysis suggests a total of seven, as
presented in Table 1.
Table 1 Functions of an effective change system
Function
Goal
Shared visioning
Creating events and interactions that generate shared
understanding and vision
System organising
Bringing together an emerging global system of diverse
stakeholders to generate coherence in strategies
Learning, research,
Developing and disseminating new knowledge and tools
capacity development with research, piloting new approaches, and training
Measuring/certifying
Developing indices, assessments, and/or certification
processes
Financing
Combining forces to aggregate their impact and create a
more efficient funding vehicle than any one could do on
its own
Advocating
Mobilising voice and increasing pressure on specific
stakeholders who are blocking (actively or inactively)
change
Prototyping
Developing examples of the future
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steve waddell et al.
The ‘health’ of each of the five change
subsystems, and the total change system
they collectively represent, can be assessed
in terms of these functions. In the energy
arena, for example, we can see several
change initiatives—the Global Reporting Initiative’s electricity supplement,
the Greenhouse Gas Protocol and the
­Carbon Disclosure Project—all represent
measuring functions aimed at influencing
the finance, production and consumption
subsystems in particular.
We can then ask, for example: how well
is the measuring function working for
the finance system? We can identify the
key change initiatives that are addressing
that function, to address the question and
encourage them to think as collectively
working to play the role in the system.
We can support creating coherence among
change initiatives, to develop the scale,
capacity and effectiveness that is necessary to create change systems that can
address our challenges. As well, we can
support accountability of initiatives to the
change systems’ needs, rather than their own
institutional ones.
Of course the scale of transformation
we need is intimidating. It means bringing together personal change methodologies to shift attentions, behaviours and
sense-making; it involves changes in production processes and products; and the
transformation requires significant shifts
in values, policies and markets. However,
a strategic focus on developing effective
change systems is the critical basis for taking our futures into our own hands to craft
them, rather than be subject to clashing
forces producing a future no one wants.
8
JCC53_Waddell.indd 8
Steve Waddell is Principal of
NetworkingAction and Lead Steward at
GOLDEN Ecosystems Labs. Responding
to the 21st century’s enormous global
challenges and realising its unsurpassed
opportunities require new ways of acting
and organising. For 30 years Steve has
been supporting this with organisational, network, and
societal change and development. He does this through
NetworkingAction with collaborative consultations,
education, research, and personal leadership. For the
last 10 years he’s focused largely on multi-stakeholder
global change networks (Global Action Networks).
Currently he is deeply engaged with development of
Ecosystems Labs as a loose network of global change
platforms.
u14 Upton St., Boston, MA 02118, USA
[email protected]
q
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CSR: Will it Change the World?
Hope for the Future: An Emerging Logic
in Business Practice*
Oliver F. Williams
University of Notre Dame, USA
There is growing concern that the problems of the global community are mounting
and that unless business takes a more prominent role in solving them, we are destined
for serious hardship. Granted that governments and individuals can do much; business is considered a powerful institution that must be part of the solution. Whether
it be climate change and our expanding carbon footprint, the painful dislocations
involved with a global economy or the concern for almost a billion people living in
dire poverty, there is a call that corporate social responsibility (CSR) be rapidly
expanded to meet the challenge of shaping an inclusive and sustainable global society.
Is this transformation likely to happen? The article argues that the move toward a
sustainable and inclusive society is well under way and that there is mounting evidence that it will be successful. This optimism is based on the performance of key
business leaders, an emerging, broader understanding of the purpose of business
that includes creating sustainable value for stakeholders, and the consolidation of
these new insights based on the normative values of the human rights in the United
Nations Global Compact and its Principles for Responsible Investment (PRI) and
Principles for Responsible Management Education (PRME). Only time will tell whether
we will reach a tipping point when these sorts of companies will multiply and change
the world but there are good reasons for hope for the future.
OO Sustainability
OO Corporate social
responsibility
OO Creating shared
value
OO Principles for
Responsible
Management
Education
(PRME)
OO UN Global
Compact
OO Purpose of
business
OO Principles for
Responsible
Investment
(PRI)
uMendoza College of Business,
Oliver Williams is a member of the faculty of the Mendoza College of
Business at the University of Notre Dame and is the director of the Center for
Ethics and Religious Values in Business. For the 2012–13 AY he was an
International Scholar at Kyung Hee University in Seoul, South Korea, working
with Yong-Seung Park as his faculty sponsor. Williams is the editor or author
of 18 books as well as numerous articles on business ethics in journals such
as the Harvard Business Review, California Management Review, Business Ethics
Quarterly, and the Journal of Business Ethics. He is a past chair of the Social
Issues Division of the Academy of Management. In 2006, he was appointed a
member of the three-person Board of Directors at the United Nations Global
Compact Foundation. The United Nations Global Compact is the world’s
largest voluntary corporate citizenship initiative with over 8,000 businesses in
135 countries as members.
University of Notre Dame, Notre
Dame, IN 46556, USA
[email protected]
* Parts of this article closely follow sections of Oliver F. Williams, Corporate Social Respon-
sibility: The Role of Business in Sustainable Development (London: Routledge, 2013).
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oliver f. williams
Business leaders for the new millennium
T
he trajectory of CSR in these last 70 years has followed a path from
a generalised corporate philanthropy aiding those external to the business to a notion of creating sustainable value for all key stakeholders
internal as well as external. Two leaders who have embraced this philosophy will be briefly discussed, John Mackey, CEO of Whole Foods (Mackey
and Sisodia 2013), and Bill Gates, the founder and chairman of Microsoft and
the Bill & Melinda Gates Foundation (Bill Gates 2008).
Mackey is CEO of a company with a market capitalisation of over US$8 billion. The company specialises in natural foods and has over 300 stores with
sales of more than $4.5 billion and net profits of about $160 million each
year. Mackey began the company over 35 years ago with $45,000 in capital.
What is remarkable for our purposes, however, is not how well he has created
shareholder value but the philosophy of business which guides his thinking.
Similar to Peter Drucker, he sees pleasing the customer as ‘an end in itself’
rather than a means to the end of maximising profits. But the customer is only
one stakeholder: Whole Foods measures its success by how much value it can
create for all six of its most important stakeholders: customers, team members
(employees), investors, vendors, communities, and the environment (Mackey
and Sisodia 2013, p. 34). For Mackey, creating value for all of the stakeholders
is the purpose of the firm. Milton Friedman’s position on the purpose of the
firm is not wrong, says Mackey, it is just too narrow and does not capture what
business leaders actually do and why they do it (Mackey, Friedman and Rodgers
2005). While profit making is surely important, it is not the only purpose of
business.
Mackey calls his philosophy conscious capitalism to call attention to the fact
that he favours business leaders explicitly taking actions to advance the common good. For example, Whole Foods has not only sought to create sustainable
value for its stakeholders but also has historically donated 5% of the company’s
net profits to CSR projects in the community and the wider world. Conscious
capitalism is being contrasted with ‘hidden hand’ capitalism, a view that the
best way to develop society is to allow the free market to work without interference. This view supposedly represents Adam Smith’s position. Adam Smith
was the 18th-century moral philosopher who first helped the world understand
how wealth was created in his famous An Inquiry Into the Nature and Causes of
the Wealth of Nations (Smith 1804). Sometimes called ‘the bible of capitalism’,
The Wealth of Nations is Smith’s attempt to understand why some nations were
wealthier than others. Part of his answer was that nations that encouraged free
competitive markets were wealthier. In a curious kind of way, in the context of
the economy, when each person pursues his or her self-interest the common good is
enhanced and all are wealthier. Given competition, the baker bakes the very best
bread possible and sells it at the lowest price feasible so that he will have the
resources to buy what he wants. Competition unlocks creativity and innovation.
Although motivated by self-interest, the result is that the community has good
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csr: will it change the world?
bread at a reasonable cost. Thus, Smith showed how economic self-interest is
beneficial for the community (Williams 1993; Werhane 2000). In this sense,
the ‘hidden hand’ of capitalism is working to advance the community.
Making the case that the purpose of business is to create profits and that this
is the best way for business to be socially responsible, Milton Friedman quotes
Adam Smith and argues that self-interest often does more to build a good society than actions taken in the name of the common good (Mackey, Friedman
and Rodgers 2005, p. 4). However, without denying that self-interest can be an
important motivation for unlocking creativity and innovation and thus creating better products and wealth for the community, Mackey draws on a more
comprehensive reading of Adam Smith. He notes that in Smith’s first book, The
Theory of Moral Sentiments, it is clear that human nature is composed not only
of self-interest but also of ‘sympathy, empathy, friendship, love, and the desire
for social approval’ (Mackey, Friedman and Rodgers 2005, p. 3). Thus Mackey
argues that the motivation for CSR can be to consciously and deliberately
want to help the less fortunate even if there is no clear return to the business.
Acknowledging the possibility of this moral motivation as opposed to merely
an instrumental motivation for CSR is a key factor distinguishing Mackey from
Milton Friedman.
Friedman acknowledges that a business may want to ‘generate goodwill’ by
projects that are likely to be perceived as ‘socially responsible’ but, make no mistake, this is hypocritical window-dressing (Friedman 1962, 1970). The actual
purpose of these projects is to increase profits says Friedman; this is what many
call instrumental social responsibility, doing a good thing to make money not
because it is the right thing to do.
For Mackey, pursuing projects to help others can be motivated by the simple
desire to do good; what I call moral social responsibility. Mackey’s conscious
capitalism can involve both instrumental and moral motivation but there
certainly is no requirement that every action his business takes to help others must in some way yield more profits. Mackey’s philosophy of business is
clearly differentiated from Friedman’s even though the two might be involved
in identical actions.
For Mackey business is a high calling, a noble vocation, and its purpose is
creating value for stakeholders. Value is not simply financial value although
investors will require a good return. For employees value might be job security,
education, and respect for work–life complexity; for customers it might be
safe and quality products at a reasonable price; for the environment, it might
be biodegradable packaging, low carbon processes, and pollution control; for
communities it might mean taking measures to assist the least advantaged. Just
as a medical doctor’s purpose is to heal patients, a lawyer’s purpose is to seek
justice, and a teacher’s is to educate, so too a manager’s purpose is to create
value for stakeholders. All these professions have to make money in order to
continue but that is not their purpose.
I have selected Mackey to discuss the changing paradigm of the purpose
of business because he is not only an astute business leader but also a gifted
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oliver f. williams
speaker and writer. Unlike many executives, he has the ability to articulate his
philosophy of business in a compelling fashion. It should be clear, however,
that he is only one of a growing number of contemporary business leaders
who embrace creating value for stakeholders as the purpose of business.
Andrew Witty of GlaxoSmithKline, Paul Polman of Unilever, Joseph Jimenez
of Novartis, Howard Schultz of Starbucks, Herb Kelleher of Southwest Airlines,
Bill George of Medtronic, Ratan N. Tata of Tata Sons, and Biz Stone of Twitter
are only a few of this growing number (Williams 2012). What is remarkable
about these contemporary executives is not that they formulated a new understanding of the purpose of business but rather that they actually brought this
new stakeholder perspective into corporate strategic planning and created value
across the board.
Another important leader in the movement toward a broader understanding
of the role of business in society is Bill Gates. In a 2008 address to the World
Economic Forum in Davos, Switzerland, Gates outlined his philosophy of business called ‘creative capitalism’ (Gates 2008). Obviously Gates is very supportive
of capitalism noting all the prosperity it has delivered to people around the globe
but he is concerned about the billion very poor people who are essentially left
out of the economic developments. We need ‘system innovation’ in the capitalist
world to bring about market-driven efforts that would hasten the elimination
of poverty, says Gates (2008, p. 8). Similar to Mackey, quoting Adam Smith,
Gates reminds us that self-interest is only one of two motivations deeply rooted
in our human nature. The other is ‘caring for others’. Citing Smith’s first book,
The Theory of Moral Sentiments (Smith 1790), Gates quotes:
How selfish soever man may be supposed, there are evidently some principles in
his nature, which interest him in the fortunes of others, and render their happiness
necessary to him, though he derives nothing from it, except the pleasure of seeing
it (Gates 2008, p. 11).
From his experience, Gates argues that ‘positive recognition’ is a marketbased incentive and that caring for others is its own reward.
For Gates, efforts to assist the least advantaged are not a new idea since over
the past 20 years Microsoft has donated more than $3 billion in cash and software, and has provided management skills in less developed areas. The company also provides time for its researchers to work on new products for those
with little education and literacy. These efforts may enhance the company’s
reputation, attract customers and appeal to highly qualified, potential employees (Glaves and Piderit 2009). If so, all well and good. Gates cites a number of
projects where business is practising ‘creative capitalism’, such as ‘tiered pricing’ in the pharmaceutical industry and the Bono (‘RED’ campaign) initiative
to raise money for the poor. He appeals to all companies to get involved.
If we can spend the early decades of the twenty-first century finding approaches
that meet the needs of the poor in ways that generate profits and recognition for
business, we will have found a sustainable way to reduce poverty in the world (Gates
2008, p. 16).
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Scholars advancing the cause of sustainable development
Rosabeth Moss Kanter, a highly regarded business scholar, opens her reflections on the new role of business in society as follows: ‘It’s time that beliefs and
theories about business catch up with the way great companies operate and how
they see their role in the world today’ (Kanter 2011, p. 68). She argues, not too
unlike the practice of Mackey and Gates, for more than a financial logic: for ‘a
social or institutional logic’. ‘Institutional logic holds that companies are more
than instruments for generating money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who
work in them’ (Kanter 2011, p. 68). There is clearly an expanded purpose of
business here that is reflected in the leadership of many contemporary executives, including John Mackey and Bill Gates (Post, Preston, and Sachs 2002).
Scholars have called CSR an ‘umbrella term’ (Scherer and Palazzo 2007) to
capture the complexity of the concept, a concept that includes within it all the
discussions about the role and responsibilities of business whether they are in
the fields of business ethics, stakeholder theory or business and society. Once
understood as corporate philanthropy administered by a special unit in the
company, today CSR points to all those activities which advance sustainable
development and which are embedded in the strategic plan of the business
(Davis 1960; Carroll 1996; Frederick 2006; Mackey and Sisodia 2013).
Stakeholder theory expands the ‘social’ in corporate social responsibility. To
whom is the business responsible? Stakeholders is the answer and a stakeholder
is any person, group or organisation who is affected by the business or who can
affect the business. Obviously there is a range of importance for stakeholders
from those who are crucial to those who are marginal (Freeman 1984; Freeman,
Harrison, and Wicks 2007).
In the new millennium, many argue the business case for CSR using the
term ‘sustainability’. Sustainability is the term most used by companies today
to discuss their CSR activities. Similar to CSR, sustainability is difficult to define
clearly. The term was first given prominence in the 1987 Report of the World
Commission on Environment and Development, the Brundtland Commission.
‘Sustainable development is development that meets the needs of the present
without compromising the ability of the future generations to meet their own
needs’. Here the primary focus was on the physical environment. So, for example, a company cutting down trees should plant a new tree for each one that was
cut. Destroying the physical environment was unsustainable. Today the term
has been broadened so that any activity that destroys the environment necessary for business success and long-term survival is considered unsustainable.
The environment necessary for business long-term survival is thought to be not
only the physical environment but also the economic and governance issues
as well as the social/ethical climate. Sustainability focuses on the long-term
contribution of business to society and the impact of that activity on future
generations (Visser 2009; Waddock and McIntosh 2011). What is clear is that
in the light of globalisation and world trade, many business leaders, academics
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and stakeholders see that business should take a greater role in solving some
of the social problems in the wider society. Business is not only responsible
for its private good but also, to some extent, for the common good. In the final
analysis, for business to flourish, society must flourish. Yet how likely is it that
CSR will take hold in businesses across the globe and transform the world into
a sustainable and inclusive society? One development that holds much promise
is the conceptual formulation of ‘creating shared value’.
Creating shared value
Michael Porter and Mark Kramer published an insightful article in 2011 titled
‘Creating Shared Value: How to Reinvent Capitalism and Unleash a Wave of
Innovation and Growth’ (Porter and Kramer 2011). The basic premise of the
article is that ‘for profit’ business can be a most effective organisation for
solving the problems of society while simultaneously maximising returns for
shareholders, thus the term ‘shared’ value. Some of the highlights of the article
which are most congenial with the thesis of this study include the following:
tt The
purpose of business. The authors call for a redefinition of the purpose
of business from ‘profit per se’ to creating shared value (CSV), capitalism
with a social purpose
tt The
capitalist system is under siege. There is a remarkable lack of trust in
business. ‘The legitimacy of business has fallen to levels not seen in recent
history’
tt The
interdependence of business and society. ‘For a business to thrive it
needs a successful community and communities need vital businesses to
create a wealth and jobs. Business must return to the notion that it has
broader roles in society, meeting important needs of the community and
linking a company’s financial success with societal improvement’
tt Society
has a wide range of unmet needs. The authors list ‘health, better
housing, improved nutrition, help for the aging, greater financial security,
and environmental damage’
tt Business needs to overcome a short-term focus. The short-term focus found
in financial markets and management education must be replaced by a
longer time horizon linking business with societal improvement
Porter and Kramer want to move beyond the typical CSR approach, which
they describe as a redistribution approach, and use shared value to create more
wealth both for the business and those who need assistance. An excellent example of this win–win strategy is what some companies have done to assist poor
farmers who supply their crops to multinationals, for example, cocoa and coffee farmers. The CSR approach is embraced by the fair trade movement and it
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argues that the farmers should get a higher price for their crops and thus some
revenue is redistributed from the company to the farmer. The shared value
approach shows how we can create more wealth both for the farmers and the
companies. Educating the farmers and introducing technology will produce a
better yield and higher quality crops. Rather than cutting the pie in a new way,
the size of the pie is increased to the benefit of all involved. This is not just theory
but is actually being done by numerous companies, including Mars and Nestlé
(Newton and Bee 2008). A number of other companies which are successfully
practising CSV are presented in the article.1
The traditional CSR is passé according to Porter and Kramer; it is ‘a feel-good
response to external pressure’, arising out of charity. ‘Shared value is not social
responsibility, philanthropy, or even sustainability, but a new way to achieve economic success’. It is ‘integral to profit maximisation’. ‘Corporate responsibility
programs—a reaction to external pressure—have emerged largely to improve
firms’ reputations and are treated as a necessary expense’. ‘...most companies
remain stuck in a “social responsibility” mind-set in which societal issues are
at the periphery, not the core’ (Porter and Kramer 2011).
Corporate social responsibility is widely perceived as a cost center, not a profit center.
In contrast, shared value creation is about new business opportunities that create
new markets, improve profitability and strengthen competitive positioning. CSR is
about responsibility; CSV is about creating value (Kramer 2012).
There is no question that CSV has great potential to involve business in the
solution of many social and environmental problems. If Porter and Kramer can
influence business to take a broader and long-term view, overcoming short-term
thinking and focusing on the mutual dependence of business and society, this
would be no small achievement in the sustainability journey. On the other hand,
to sound the death knell of CSR is to make a serious mistake. One of the major
flaws in CSV is one candidly admitted by its proponents, that is, CSV is not the
remedy for all societal problems (Porter and Kramer 2011, p. 17). For CSV to
work companies have to select issues with both economic and social goals, for
example, helping poor farmers more effectively produce coffee beans, and then
utilise company resources to develop market-based solutions. As we have seen,
this has been done by a number of companies and thus a win–win solution is
possible with both economic and social value maximised—better long-term
profits and a stable source of raw materials for the company and a decent living
for the farmer (Newton and Bee 2008).
The problem is that there are many societal problems that do not lend
themselves to a win–win solution. Many companies take on such problems
not because they can formulate a business case to justify it but because they
develop a moral case. Simply put, a company decides that it is the right thing
1 Companies participating in CSV cited by Porter and Kramer include Dow Chemical, Coca-
Cola, Hindustan Unilever, IBM, Intel, GE, Johnson & Johnson, Kindle, Marks & Spencer,
and Nestlé.
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to do. For example, Klaus Leisinger, the recently retired president and CEO of
the Novartis Foundation for Sustainable Development, discusses how Novartis
distributes medicines for the cure of leprosy patients free of charge to millions
of the poorest ‘because it appears to be the right thing to do’ (Leisinger 2008, p.
223). I support Leisinger, for just as in my personal life there are times when the
right action for me may not be the action which accrues the most benefit to me,
so too there are times when the right action for a business may not be the one
which maximises profits. That, of course, is what morality and ethics education
is all about (Donaldson 1989, 2003; Goodpaster 2007; Leisinger 2007). While
Porter and Kramer’s CSV can do much good in the world, it can never replace
CSR and its inherent moral compass. This is another way of saying that the basic
profit maximisation model needs another model to complement and complete
it, that the purpose of business must be expanded, as Mackey and Gates have
practised in the running of their companies, to include creating sustainable
values for stakeholders even when economic incentives may be lacking (Paine
2003; Wettstein 2012).
While Mackey and Gates’s philosophy of business may appear similar to
Porter and Kramer’s ‘shared value’ concept, in my view there is a marked difference. Although Porter and Kramer describe admirably how business can
address social concerns such as environmental pollution, public health, and the
needs of the poor, they want to distance themselves from a moral stance. They
argue for a capitalism in which ‘the ability to address societal issues is integral
to profit maximisation instead of treated as outside the profit model’ (Lohr 2011).
If the motivation in their model is only instrumental and never moral, then this
philosophy of business differs from the Mackey and Gates position.
There is no question that much good can come from Porter and Kramer’s
creating shared value strategy. Steve Lohr in the New York Times discusses how
General Electric’s ‘ecomagination’ programme, designed to produce products
that required less energy as well as less water, increased profits for GE by almost
80%. Customers were concerned about carbon emissions and fuel costs and
GE responded with more sustainable products. GE’s CEO Jeffrey R. Immelt
offered this assessment: ‘We did it from a business standpoint from day 1. It
was never about corporate responsibility’ (Lohr 2011). This stance is surely an
advance over past corporate strategy and, although I would call it instrumental
CSR, it is an important contribution to creating sustainable value.
What will it take to advance CSR?
Although we are still far from the tipping point, business leaders in the mould of
Mackey and Gates have much support in the intellectual community. There is an
ongoing debate about how we might encourage more companies to participate
and bring CSR up to scale so that business could make a substantial contribution to a sustainable future for all. Part of that debate concerns the motivation
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for CSR activities on the part of business. Is it always true that a business case
can be made for CSR? Is it always possible to do well while doing good? Two
prominent scholars, David Vogel and Bill Frederick, each have opposing views
on this point but both of their perspectives give hope for the future. Vogel argues
that most companies will be involved in CSR only when it makes business sense
and hence without more pressure from civil society and legally binding rules
from government, CSR has a limited future. Frederick argues that other values
besides the market can be and are a driver for CSR and he is confident that the
march toward CSR will continue (Frederick 2006, 2007).
David Vogel authored a most insightful book titled The Market for Virtue:
The Potential and Limits of Corporate Social Responsibility (Vogel 2005). In the
conclusion, Vogel cites Jeffrey Hollender of Seventh Generation as a way to
summarise his main thesis:
While there are still valid market forces inducing companies to be better corporate
citizens, those market forces alone are rarely adequate to effect necessary change.
Market forces, when they work, often produce cheaper and more innovative solutions to social and environmental problems, but that in and of itself will not provide
an acceptable solution to the problems we face (Vogel 2005, p. 172).
Vogel argues that if we want to fashion a better society, advancing social and
environmental values, then some of the voluntary standards of CSR must be
made legally binding. He is not denying that civil regulation, ‘soft law’, has
made significant advances but rather is outlining what the next step should be.
He states this well.
It would be better if China enforced its labor laws, but even if the government fails
to act, Mattel can improve conditions for some Chinese workers. It would be better
if Vietnam had more stringent occupational safety and health standards, but in their
absence, thanks to Nike, some workers are exposed to fewer hazards. It would be
better if the Indian government provided schools for all the country’s children, but at
least Ikea and Rugmark Foundation can give more Indian children access to education. It would be better if the United States imposed legally binding restrictions on
emissions of greenhouse gases, but since it has been unwilling to do so, voluntary
corporate programs are better than nothing (Vogel 2005, p. 163).
For Vogel, one of the major tasks of corporate responsibility is to influence
public policy so that all firms are required to be more responsible. Government
rule-making along with increased NGO and stakeholder social pressure are the
tools necessary to bring CSR up to scale. Reviewing the literature and citing the
important study by Margolis and Walsh (2001), Vogel argues that virtue does
not always ‘pay off’ so CSR will never be attractive to many businesses (Vogel
2005, p. 45).
The Vogel study has excellent chapters on three key areas of CSR: working
conditions in developing countries, the environment, and human rights and
global corporate citizenship. Examining the many studies concerning whether
CSR yields higher profits, he concludes that CSR is ‘largely irrelevant to
financial performance’. A small number of firms have created a niche market
and built CSR into their corporate strategy. Vogel mentions, among others,
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Patagonia and Starbucks. He cautions, however, that business should not expect
to be rewarded by the market for responsible behaviour. Those who argue that
CSR is crucial for success in business today are not supported by the evidence.
Robert Reich is much more strident than Vogel, calling CSR a dangerous
distraction (Reich 2008). It is the government’s role to solve social problems
and the lobbying efforts of business are often directed against the very laws
that would serve the public interest. While Reich certainly makes some good
points in Supercapitalism, it is difficult to understand why any role of business
in solving social problems is discouraged. Especially in developing countries,
governments are often unable or unwilling to tackle these social issues. The
global economy does not have any effective global governance so often for many
scholars, the best alternative is a set of soft laws, emerging international standards, for example, the ten principles of the United Nations Global Compact,
which guide multinational companies (Williams 2004, 2008; Rasche, Waddock
and McIntosh 2012).
Frederick, with a standpoint similar to Mackey and Gates, questions whether
a key assumption of both Vogel and Reich is correct. Is it true that the logic
of the market will always be the controlling logic of the majority of business
leaders who espouse CSR? Will they only do CSR projects to maximise profits?
Or are we moving towards a situation where a majority of business leaders are
trying to manage a business with an expanded purpose, a dual logic, the market
capitalism logic and a CSR logic, trying to make money for investors while at
the same time trying to create ‘wealth’ for other stakeholders, with the latter
goal not being subservient to the former? What is clear for Vogel is that the way
to increase the number of companies involved with CSR is to more effectively
demonstrate the business case, to have more government regulation and to
increase the pressure from NGOs and civil society. There is much evidence
that these external drivers for CSR are growing in importance (Waddock 2008).
Bill Frederick, assuming an expanded purpose of business, disagrees with
Vogel: ‘A firm’s commercial gain from social activity is literally beside the
point and is no measure of its social responsibility. The market and business
profit‑seeking, register only part of a more complex process of values transformation’ (Frederick 2007). CSR may or may not enhance a firm’s economically
productive role. CSR activities that enhance life both for the firm and for the
people in wider society have value, although perhaps not financial value for
investors. If the purpose of business is to create value for stakeholders, then
CSR activities that do so are part of the purpose.
The division of thought here is between those holding the traditional view of
business where responsible conduct, CSR activities, are done to ensure financial profit, and those holding the new paradigm. The new paradigm does not see
CSR as a tool to enhance profit generation (although it may) but rather sees business as having a threefold challenge: economic, social and environmental. All
three dimensions are valid parts of the purpose of business and guide business
decisions and projects. The notion that business does not have a sole financial
purpose but rather a broader purpose is captured with the term triple bottom line,
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economic, social and environmental (TBL). This idea has been evolving over the
history of CSR and has only gained prominence in recent years. John Elkington
in his 1997 book Cannibals with Forks: The Triple-Bottom Line of 21st Century Business has given us the vocabulary and framework for thinking about CSR in the
new paradigm but some business leaders have been practising it for years. John
Mackey and Bill Gates are two leaders of this development discussed earlier in
this article. Elkington has popularised the term triple bottom line and encouraged more and more firms to develop social and environmental accounting for
the benefit of investors, activists and other stakeholders (Elkington 1997). The
Global Reporting Initiative (GRI) is an NGO organised to develop a common
metric for reporting social and environmental issues. Today this set of questions
of the GRI is widely used by business (KPMG 2011).
Initially the call was for business to factor social issues into business decisions. Early leaders in CSR did not see environmental issues as crucial for
business (Abrams 1951; Bowen 1951). The 1987 Brundtland Report was a
wake-up call for business to pay attention to the natural environment, and
subsequent United Nations meetings in Rio de Janeiro (the Earth Summit) in
1992, in Johannesburg (World Summit on Sustainable Development) in 2002,
and in Rio de Janeiro (Rio + 20 Corporate Sustainability Forum) in 2012, put
environmental issues squarely on the business agenda. To give an idea of how
rapidly the concern for TBL developed, in 1995 only a handful of businesses had
triple-bottom-line reports. Today almost all major companies have such reports
(sometimes called sustainability reports, corporate citizenship reports, corporate social responsibility reports, people, planet, and profit reports, and so on).
The point of this discussion for our study is to highlight the fact that for
many scholars social and environmental considerations were not thought to
be subservient to financial considerations but that all three concerns were on
equal footing. For example, anti-apartheid activists never argued that business
should oppose apartheid so that it could make more money but rather because
it was the right thing to do. Even if a company’s opposition to apartheid would
result in some loss of profit, it still should be done (Sethi and Williams 2002). At
least in some cases, CSR is not being embraced simply because it will enhance
return on investment based on a business case that projects in the area of social
and environmental concerns will contribute to a firm’s financial position. CSR
may be motivated by a concern to create value for all stakeholders, especially
the least advantaged. Frederick believes that we will see many more businesses
in the movement, not because it will yield greater profits (although it may) but
rather because it is the right thing to do, it is part of the very purpose of business. At the same time, Vogel’s call for government and civil society to play a
more prominent role in advancing CSR bodes well for reaching a tipping point
in advancing CSR in the future.
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Progressing toward the tipping point
While talented leaders such as Mackey and Gates are moving ahead with a new
paradigm of business success, it has become clear that there is a need for global coordination. As the economy became globalised, there was much public
concern in the 1990s about outsourcing into poor, developing countries with
attendant problems such as child labour and sweatshops. One of the issues
that emerged was the lack of common agreement on the appropriate ethical
norms that should guide business in these situations. What are the norms for
forming a company’s environmental policy when the host country has no legal
framework, at least in practice? Is a multinational company responsible for
human rights violations of its subcontractors?
There was a growing realisation that there was a need to have a central
organisation which could be a forum to gain consensus on the norms and values for sustainable development in the global economy (Palazzo and Scherer
2006). In my view, because of its visibility, global reach, universality, neutrality
and convening power, the United Nations Global Compact (UNGC) is the best
organisation for this crucial role (Williams 2004). The UNGC was launched
by the then secretary-general of the United Nations in 2000 with an explicit
mission to gain consensus on the shared values and moral norms that would
guide the global economy (Annan 1999). To join, a business had to agree to
bring the ten normative principles concerning human rights, labour issues,
environmental concerns, and anti-corruption issues into its strategic planning
and to try to advance broader UN goals such as the Millennium Development
Goals (MDGs) designed to overcome dire poverty. A 2013 survey of companies
participating in the UNGC reported that 70% of the respondents have projects
advancing broader UN goals in the areas of education, poverty eradication,
climate change, and growth and employment (UNGC 2013, pp. 21-22). As of
December 2013 over 7,000 businesses in 135 countries have become signatories. Building on the work of business leaders like Mackey and Gates, the
hope for the future resides, in part, in two new organisations sponsored by the
Compact, The Principles for Responsible Management Education (PRME) and
The Principles for Responsible Investment (PRI).2
What became clear after the first few years of operating the UNGC was that
many executives were ill-equipped to be leaders in the movement to advance
human rights, the environment and anti-corruption programmes. Based on
recommendations of academic and business leaders, an international task
force was formed consisting of 60 members—deans, university presidents, and
official representatives of leading business schools. The task force was charged
to provide a framework for academic institutions to advance corporate social
responsibility through the incorporation of universal values into curricula and
2 See the PRI website for information about the ESG issues (www.unpri.org). See the
PRME website for detailed reports about what the business schools are doing to educate
their students for a sustainable and inclusive economy (www.unprme.org).
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research. The result was the formation of PRME which was launched at the
2007 Global Compact Leaders’ Summit on 5 July in Geneva, Switzerland. Today
PRME has almost 500 of the world’s best business schools as members. The
text and principles of PRME focus on educating students who understand the
importance of global social responsibility and the need for universal values such
as those in the UN Global Compact. Faculty in business schools are encouraged
to do empirical and conceptual research in the area of exploring the creation
of sustainable value for stakeholders and to work with managers of public and
private institutions in this mission.
The significant issue for our study is that when it came to defining just what
the purpose of business is, what we are educating young men and women to
do, there was clear consensus as reflected in Principle 1: ‘…to be future generators of sustainable value for business and society at large’. Echoing Mackey’s
‘conscious capitalism’ and Gates’ ‘creative capitalism’, the document goes on
to advocate working ‘for an inclusive and sustainable global economy’. The
goal is to have 1,000 signatory business schools in PRME by 2015 and by all
accounts this will be realised. It seems clear that the paradigm shift from a
single-minded focus on shareholder value to seeing a wider purpose of business is well under way.
Another hopeful sign that the work of Mackey, Gates and like-minded leaders represents a movement toward a more inclusive and sustainable global
society is the endeavour to broaden the criteria by which the market assesses
the performance of companies. Called the Principles for Responsible Investment (PRI), the credo calls for considering environmental, social/ethical, and
corporate governance (ESG) issues in investment analysis and decision-making
processes. Launched in 2006, as of 2013 the PRI had over 1,000 investment
managers as signatories with over $30 trillion of assets under its management.
Conclusion
The overarching theme of this article is that there is hope that more and more
companies might be persuaded to participate in CSR so that business might
make a substantial contribution to shaping an inclusive and sustainable global
society. David Vogel argues that the market for virtue largely controls CSR participation and that this market is limited. Thus more government regulation
and more pressure from civil society on business is required to increase CSR
participation and there is movement in this direction. Bill Frederick, while
not denying that more regulation and pressure will facilitate the process, is
confident that CSR is motivated not by market rewards but by the wisdom of
corporate leadership and that it will expand, slowly but surely.
John Mackey and Bill Gates exemplify a new kind of leadership that is becoming increasingly important and they espouse a broadened understanding of the
purpose of business, employing the dual logic of the market and CSR in the
quest for ‘creation of sustainable value for all stakeholders’. Drawing on Adam
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Smith’s first book, The Theory of Moral Sentiments, Gates and Mackey argue that
our human nature is so constituted that self-interest is not the only motivation.
‘Caring for others’ is the other deeply rooted drive constitutive of human nature.
That insight makes clear that the profit maximisation model need not be absolutised for the business system to function effectively. The traditional business
logic need not trump the CSR logic but rather both logics can complement and
complete each other in a new understanding of the purpose of business.
Michael Porter and Mark Kramer, focusing exclusively on the market logic,
argue that all business should be involved in the ‘creation of shared value’, making money while at the same time fashioning a better society through projects
in the community which enhance the quality of life. To be sure, there is truth
in all of these perspectives and the best companies employ a combination of
these strategies. Many UNGC member companies contribute to sustainable
development through their CSR activities and their CSV endeavours while creating sustainable value for all stakeholders. Similar to Rosabeth Moss Kanter’s
findings, my conclusions as a board member of the United Nations Global Compact Foundation are that many businesses voluntarily commit to CSR projects
based on moral reasons and not simply on financial reasons. The UNGC document The Blueprint for Corporate Sustainability Leadership3 reminds signatory
companies to the Global Compact that ‘corporate sustainability is defined as
a company’s delivery of long-term value in financial, social, environmental
and ethical terms’. To change the world, there must be many more businesses
involved with CSR. The UNGC has set a target of 20,000 signatories by 2020
to have the critical mass to advance the sustainable vision to reach the tipping
point. With the enhanced UNGC signatory population and the work of other
companies following the broadened understanding of the purpose of business,
we can change the world.
The final point is a reminder that if we are to move toward genuine sustainable development, everyone must get involved. Many consumers must be educated and raise their voices—as some companies have realised. Governments
must examine subsidies that are counterproductive as well as consider creating
a stable price for carbon. NGOs must work harder to apply pressure for change.
Academic institutions must highlight the whole range of sustainability issues
in their programmes as outlined in the Principles for Responsible Management
Education. Investors must increasingly factor environmental, social/ethical and
governance (ESG) issues in investment decisions as the Principles for Responsible Investment (PRI) encourage. Large companies must assist their suppliers
and distributors in moving toward sustainable business.
3 The Blueprint for Corporate Sustainability Leadership was promulgated by the UNGC as
a roadmap for the second decade of the initiative to encourage advanced performance
by leadership companies to realise sustainability. See the website for the full text (www
.unglobalcompact.org).
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Sustainable development and the business contribution, CSR, is a challenge
but also a promise. If we want a better world, we cannot do without it. CSR can
change the world! Whether it will or not depends on us.
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The Contribution of the UN Global
Compact towards the Compliance of
International Regimes
A Comparative Study of Businesses from the USA,
Mozambique, United Arab Emirates and Germany*
Ulrike Hoessle
Walla Walla Solutions, USA
The article summarises the findings of a broader research on the voluntary Global
Compact, proposed by then United Nations Secretary-General Kofi Annan. The Global
Compact defines four different areas of international standards—human rights,
labour standards, environment, and anticorruption—that businesses should apply in
their operations. The research includes case studies of two OECD countries and two
non-OECD countries in which Global Compact networks have been established. It
shows that the Global Compact plays an important role in setting standards for
appropriate behaviour of businesses, especially in non-OECD countries. In particular,
multinational companies with direct consumer contact use the resources offered by
the Global Compact to avoid violations of international standards in their outsourced
operations in developing countries. However, the Global Compact cannot fill the
governance gap resulting from problems linked to the resource curse and/or to failed
states. Although the Global Compact is a learning network, over the years all necessary elements to promote compliance were added. Nevertheless, the results of this
study indicate that there is a lack of consistency regarding the application of some of
these elements.
OO United Nations
Global Compact
OO Corporate social
responsibility
OO USA
OO Germany
OO United Arab
Emirates
OO Mozambique
uWalla Walla Solutions, 16040
Ulrike Hoessle is a consultant at Walla Walla Solutions, Inc in Seattle, USA.
She worked for nearly 20 years in Europe, Africa and Latin America with
nongovernmental organisations and the United Nations, where she managed
programmes in the area of human rights and environmental issues. With her
doctoral research on the United Nations Global Compact, she shifted her
focus to businesses and the implementation of human rights, social and
environmental standards. She has a Master’s degree in Cultural Anthropology
and a PhD in Political Science.
Christensen Road, Suite 320,
Seattle, WA 98188, USA
!UHoessle@wallawallasolutions
.com
* This article is a summary of a PhD thesis at the Institute of Political Science (University
Koblenz-Landau; Germany). The adviser was Professor Dr Siegmar Schmidt. The thesis
was published 2013 in German by Nomos Verlag, Baden-Baden.
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The United Nations Global Compact
A
t the world economic forum in Davos (1999), then UN Secretary-
General Kofi Annan called on the CEOs of some of the biggest multinational corporations to gain consensus in the global community
on the shared values and norms that will guide the global economy
and unite corporations with their subsidiaries worldwide:
I will propose that you, the business leaders gathered in Davos, and we, the United
Nations, initiate a global compact of shared values and principles, which will give
a human face to the global market… Many of you are big investors, employers and
producers in dozens of different countries across the world. That power brings with
it great opportunities—and great responsibilities. You can uphold human rights and
decent labour and environmental standards directly, by your own conduct of your
own business. Indeed, you can use these universal values as the cement binding
together your global corporations, since they are values people all over the world
will recognize as their own. You can make sure that in your own corporate practices
you uphold and respect human rights; and that you are not yourselves complicit
in human rights abuses. Don’t wait for every country to introduce laws protecting
freedom of association and the right to collective bargaining (Annan 1999).
Kofi Annan further urged the CEOs to commit to a global compact, therefore
mitigating negative consequences of the globalisation process:
…Let us remember that the global markets and multilateral trading system we have
today did not come about by accident. They are the result of enlightened policy
choices made by governments since 1945. If we want to maintain them in the new
century, all of us—governments, corporations, non-governmental or­ganizations,
international organizations—have to make the right choices now. We have to choose
be­tween a global market driven only by calculations of short-term profit, and one
which has a human face… Between a selfish free-for-all in which we ignore the fate
of the losers, and a future in which the strong and successful accept their responsibilities, showing global vision and leadership… I am sure you will make the right
choice (Annan 1999).
This call indicates a paradigm shift within the United Nations that started
with Mr Annan’s predecessor Boutros Boutros-Ghali: Businesses are no longer
regarded as part of the world’s problems—contributing to poverty, environmental degradation, conflicts, and human rights abuses—but as part of the solution
to overcome these challenges. One and a half years later, the Global Compact
was launched. Today, approximately 8,000 companies and small- and mediumsized enterprises (SMEs)1 are committed to the ten Global Compact principles
(see Appendix 2) that are based on different regimes, such as international
treaties and declarations, in the area of human rights, environment, labour
standards, and anticorruption.
1 The Global Compact distinguishes between companies (more than 250 employees) and
small- and medium-sized enterprises (less than 250 employees) (UNGC 2010c).
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the contribution of the un global compact
Besides business participants, also business associations, labour unions,
nongovernmental organisations, academic institutions, and cities can commit
to promote or implement these standards. The Global Compact defines itself
as a learning network that offers the participating businesses possibilities of
exchanging experiences and learning from each other. As part of their commitment to the Global Compact, the business participants submit an annual
Communication on Progress (COP) to report on the implementation of the
principles, which is published on the Global Compact website. Failing to provide
the COP or systematic and egregious abuse of one of the ten principles can lead
to the delisting of a business participant. Local Global Compact networks exist
in more than 70 countries, with the aims of implementing the ten principles
and the integrity measures within the national context, discussing specific local
challenges, and developing initiatives to promote the dissemination of social
and ecological standards.
Theoretical approach: compliance theory and the output and
outcome of the Global Compact
After different, more or less unsuccessful, attempts of the United Nations to
establish binding regulations for businesses within different regimes, the Global Compact tries to fill the governance gap that still exists, especially in some
areas of low politics. Compliance theory describes which circumstances lead to
the fulfilment of a treaty’s explicit rules within a regime (Mitchell 1996: 5). Kofi
Annan’s call (UN 1999) refers explicitly to different regimes and requests the
business leaders within their sphere of influence not to wait for government
regulations but to implement certain rules prescribed in international treaties.
Therefore, this article focuses on the question of how the Global Compact contributes to the compliance of international regimes.
There are different arguments about which particular provisions produce
compliance. The enforcement approach focuses on sanction mechanisms. In
contrast, the managerial approach sees compliance as a result of the internalisation of norms within an international process of socialisation and therefore
suggests sunshine methods, such as reporting, peer review, and persuasion.
Within the management approach, noncompliance is a result of the lack of
knowledge or capacity to implement a norm. That means a successful regime
design consists not only of a mechanism for capacity building but also of learning forums that offer the possibilities to discuss and specify the content of a
norm and its implementation. The long-term effect of this process can lead to
a change in the logic of appropriateness and therefore to a behavioural change
(List and Zangl 2003: 382; Raustiala and Slaughter 2002: 543, 552; Chayes and
Chayes 1995; Mitchell 2002: 510). Checkel (2005: 813) suggests that successful
persuasion occurs mainly in a novel and uncertain, nonpublic environment;
the socialising agency uses dialogues instead of lectures, is regarded as competent, and represents an in-group to which the target of the socialisation wants
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ulrike hoessle
to belong. States are the main actors within both approaches, but especially
within the management approach; the inclusion of non-state actors, such as
nongovernmental organisations (NGOs) or business, is relevant, too (Raustiala
and Slaughter 2002: 551; Chayes and Chayes 1995: 251; Mitchell 1998: 125).
A successful Compliance System Design includes, in the first instance, fair and
inclusive participation and learning processes and, subsequently, transparency
and accountability, to guarantee its legitimacy (Beisheim and Dingwerth 2008).
Mitchell (2002: 511) identifies different subsystems that are relevant for a Compliance System Design (see also Chayes and Chayes 1995):
1.
A primary rule system with specified rules that were generated through a
reasonable and equitable process
2.
A compliance information system that collects, analyses, interprets, and disseminates the data and offers incentive and capacity building for reporting
3.
A noncompliance response system that facilities compliance, and prevents
and sanctions violations
Measuring the effects of regimes and norms is challenging: Some authors
(Campe and Rieth 2007; Börzel and Risse 2002; Huckel et al. 2007) use David
Easton’s (1979: 351) classical model of system analysis and distinguish the effects
of a regime in terms of output (creation and introduction of rules) and outcome
(measurable changes). Although it is difficult to evaluate, some authors further
distinguish the impact—the contribution to the solution of a problem. Applied
to and modified for the Global Compact’s possible effects on regime compliance,
the output, outcome, and impact can be described as shown in Table 1.
Table 1 The effects of the Global Compact in relation to participating businesses
Source: Own compilation after Campe and Rieth 2007; Börzel and Risse 2002; Huckel et al. 2007
Output
CEO commitment to the principles of the Global Compact, creation
and introduction of rules within a business since participation in the
Global Compact
Outcome Measurable changes in business practices since participation in the
Global Compact
Impact
Contribution of a business to the solution of a problem since
participation in the Global Compact
Research design and questions
The research includes the business participants of four different countries
where Global Compact networks exist: two OECD (Organisation for Economic
Co-operation and Development) countries (USA and Germany) and two nonOECD countries (Mozambique and United Arab Emirates).
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the contribution of the un global compact
The research focuses on the following questions:
tt To
what extent is the organisational design of the Global Compact congruent with the Compliance System Design of the management approach that
enables learning processes and behaviour change for companies?
tt What
is the output (the creation and introduction of rules and regulations)
within a business after joining the Global Compact?
tt What
is the outcome (the measurable changes in the business practices)
within a business after joining the Global Compact?
tt Is
there a difference between Global Compact participants and nonparticipants?
Although interesting, the following questions are not part of the research:
tt What
is the impact of the introduced changes?
tt Would
the business have introduced the changes without participating in
the Global Compact?
Hypotheses
The Global Compact facilitates learning processes and behaviour change within
companies if:
tt The learning takes place in a ‘safe’ environment with acknowledged experts,
and the content of the learning is based on internationally accepted norms
tt The legitimacy is guaranteed through inclusion, participation, a deliberative
learning process, transparency, and accountability
tt There
are clear rules and regulations regarding information, as well as an
adequate response system in case of noncompliance
The most output or outcome is expected of those companies that:
tt Have
the least know-how in the area of international standards
tt Have
implemented none or only a few standards
tt Achieve,
with few means, more progress
tt Are
operating in countries where international standards are not sufficiently implemented
This means that the most output and outcome are expected from SMEs that
operate in countries where international standards are implemented insufficiently. The least output and outcome are expected from multinational companies that already have a corporate social responsibility strategy, as well as
monitoring procedures, in place.
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Methods
To answer the research questions, a methodological and data triangulation was
applied.
Quantitative assessment and comparison of the ratings of multinational companies—
Global Compact participants versus nonparticipants
For this assessment the rating of Covalence (2010),2 a Swiss-based social rating agency, was used to get an overview of the reputations of the Global Compact
participants in comparison with those of the nonparticipants.
Qualitative assessments, content analysis of the organisational design of the Global Compact, sustainability reports, network meeting reports and interviews
The content analysis of the sustainability reports and the COPs includes all
businesses that have been participants of the Global Compact for more than
two and three years, respectively.3 The target date was 31 May 2010. The analysis focuses on the description of the introduced changes (output and outcome)
in the daily business practice. The central questions are: Which activities
are described under which principle? What are the problems and objectives
involved in the implementation of the principles?
Global Compact participants and nonparticipants, NGOs, researchers, Global Compact staff, and business associations were interviewed to understand
their motivation and expectations, and the learning process within the Global
Compact. Interviews were conducted with 39 people from different countries.4
The interviews were interpreted through qualitative content analysis. Data
banks regarding business and social or environmental issues provided information for validating the reports and interviews (see Business and Human Rights
Resource Center 2011; Multinational Monitor 2011).
2 Covalence analyses different resources, such as internet search engines, company web-
sites and news items, after 45 criteria that refer to international standards (UN Human
Rights Declarations, ILO Conventions, UN Rio-Declaration, OECD Guidelines and the
Global Compact). A code system organises and assesses this information: positive news
receives a plus, negative news a minus. The rating of Covalence includes up to 230 US
companies (Dow Jones Country Titans Indexes)—of that, 28 are Global Compact participants—and up to 24 German companies (Deutscher Aktienindex DAX)—of that, 18 are
Global Compact participants. No ratings are available for businesses of the UAE and
Mozambique. More information on the methodology can be found at www.ethicalquote
.com/index.php/services/methodology (accessed 22 October 2010). The data is available
at [email protected].
3 Participants from OECD countries had to make their first report to the Global Compact
after two years; however since 2011 this has changed to one year. Participants from nonOECD countries have to present their first report after three years (UNGC 2010a, 2012e).
4 Although all Mozambican participants as well as UNDP-Mozambique were contacted, no
interview partner was available.
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the contribution of the un global compact
Comparison between the Compliance System Design and the
Global Compact organisation design
The Global Compact is a learning network and not designed as a compliancebased organisation. Its purpose is to provide information on the implementation
of the ten principles and disseminate best practices from its participants. For good
reasons, the Global Compact never intended to verify the performance of each of
the approximately 8,000 companies with their thousands of suppliers. However,
over the years of its existence, the Global Compact established several procedures
for businesses to demonstrate their commitment and initiatives and to facilitate
learning processes concerning the ten principles. Without being a compliancebased organisation, these procedures that assist in tracking the learning process
of a company coincide with all necessary subsystems of the above-described
Compliance System Design, although not all of them are functioning well.
Table 2 Compliance system design and the Global Compact organisation design
Source: own compilation after UNGC 2012c, d
Legitimacy (see Beisheim
and Dingwerth 2008;
Levy et al. 1993; Chayes
and Chayes 1995)
Subsystems of the
Compliance System
Design (see Mitchell
1996: 16, 2002: 510)
Participation
Primary rule system
General accepted
specified norms and
mechanisms
Global Compact
organisation design
Congruence
between
Compliance
System Design and
Global Compact
organisation design
UN conventions and
High
decla­rations and specific
instructions for their
implementation
Middle
Inclusive, fair, and
representa­tive
participation
Businesses, NGOs,
academic institutes,
business associa­tions;
limited participation
of labour unions,
no participation of
governments
Deliberative learning
processes
Middle
New unknown issues,
broad spectrum of
themes, different formats
(publications, forums,
conferences, on-line
tools). But avoidance of
some important issues
Continued
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ulrike hoessle
Legitimacy (see Beisheim
and Dingwerth 2008;
Levy et al. 1993; Chayes
and Chayes 1995)
Subsystems of the
Compliance System
Design (see Mitchell
1996: 16, 2002: 510)
Adequate environment
Transparency &
accountability
Global Compact
organisation design
Congruence
between
Compliance
System Design and
Global Compact
organisation design
Nonpublic dialogue
High
learning forums with
competent and recognised
resource persons in an
unknown environment
Compliance
information system
Capacity building for
re­porting
Guidance, templates,
Middle
work­shops for those who
are ac­tively participating
Collection, analysis, UN Global Compact
inter­pretation of data Differen­tiation Program
High
Dissemination of the Publication on the Global High
data
Compact website
Transparency &
accountability
Non-compliance
response system
Facilitating
compliance
Some, but not all
companies get
reminders through the
Global Compact office
and networks
Middle
Preventing violations Integrity measures
High
Sanctioning
regarding failed
violations
communication of
pro­gress, delisting of
participants
Low
Integrity measures
regarding egregious
and systematic abuse,
Discussion of com­
plaints and decision
regarding the delisting of
participants in few cases
although of egre­gious
abuse
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the contribution of the un global compact
Background, legislation regarding the ten principles, and CSR
policies in the four countries
The legislation regarding the implementation of the ten principles differs in the
four countries; among the case studies, Germany is the only country in which
all ten principles are binding by law and implemented. However, only recently
in 2002, bribery in foreign operations was declared as no longer tax-deductible
and forbidden by law. In Mozambique, all ten principles are embodied in different laws; nevertheless, the implementation in some areas (especially principle 5, the ban on child labour) is deficient. Binding regulations regarding the
third principle (collective bargaining) does not meet international standards in
the USA and the United Arab Emirates (UAE). In some states in the USA, the
employer can, under certain circumstances, deny collective bargaining rights,
and in the UAE, collective bargaining is forbidden. A challenge is also presented
by principle 6 (anti-discrimination). The Emiratisation legislation in the UAE
requires favouring the employment of Emiratis. In addition, because of the ban
on homosexual practices in Mozambique and the UAE, discrimination against
homosexuals in the workplace is a taboo subject.
Corporate social responsibility (CSR) is in different stages in the four countries. In the USA, which is considered the birthplace of CSR, some businesses,
especially those that sell brands and have direct consumer contact, have a
consistent CSR strategy, including stocktaking, formulation of objectives, and
transparent, independent monitoring with disclosure of problems. In Germany,
CSR is regarded more as an expression of the social market economy; nevertheless, there are noticeable changes toward the implementation of CSR practices.
Some German businesses—again, those with brands and direct consumer contact but also some family-owned businesses—have elaborated their own CSR
strategy; however, in most cases, transparent and independent monitoring and
the disclosure of problems are still missing. In the UAE, CSR is emerging, with
a focus on the environment and anticorruption. In Mozambique, CSR is in the
beginning phase and includes primarily philanthropic activities.
Table 3 Comparison of legislation regarding the ten principles and of CSR
Sources: Gesellschaft für Technische Zusammenarbeit (GTZ) 2007; Meier-Burkert 2011; Human Rights
Watch 2006, 2010; Dubai Chamber of Commerce 2011
National
legislation in
regard to the ten
Global Compact
principles
USA
Mozambique
UAE
Germany
Ratified and
implemented
(Exception
allowed
regarding
principle
3=collective
bargaining)
Ratified
and partly
implemented
Ratified and partly
implemented
(Principle 3 is
forbidden)
Ratified and
implemented
Principle 10 (bribery)
in foreign states
is forbidden since
2002
Continued
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USA
Mozambique
CSR strategy
Initial phase of
with monitoring CSR, main topic
and publication philanthropy
of these results
especially in
companies with
direct consumer
contact
Main focus of
CSR in each
country
UAE
Germany
Initial phase of
CSR, main topic
environment,
anticorruption
Only large
companies have
a consistent CSR
strategy
Similarities and differences of the Global Compact participants
in the four countries
Many of the first businesses to join the Global Compact were model companies
The ratings from the reputation-rating agency Covalence show that those companies in the USA and Germany that are participating in the Global Compact
started out with a better rating than the nonparticipating companies. After joining the Global Compact, their reputation ratings increased more than those of
the nonparticipating companies.
Figure 1 Comparison of the reputations of participating and nonparticipating
companies (USA) (after Covalence) (2002–10/2010)
Source: data from Covalence 2010
200,00
150, 00
100,00
all businesses
nonparticipants
participants
50,00
0,00
2002
2003
2004
2005
2006
2007
2008
2009
2010
-50,00
Unlike in the USA, most of the largest companies in Germany are participants in
the Global Compact. Therefore, the difference in reputation between all companies
and the Global Compact companies in Germany is not as big as that in the USA.
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Figure 2 Comparison of the reputations of participating and nonparticipating
companies (Germany) (after Covalence) (2002–10/2010)
Source: data from Covalence 2010
140
120
100
80
all businesses
nonparticipants
participants
60
40
20
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
One might argue that the graphs do not show the real CSR performance,
only the reputation that could easily be promoted by companies due to smart
PR strategies. However, Figure 3 shows that even the best PR fails in cases
of scandals, such as the bribery case of Siemens and the tax fraud case of the
chairperson of the Deutsche Post, Klaus Zumwinkel.
Figure 3 Changes in the reputation of German companies before and after their
participation in the Global Compact
Source: data from Covalence 2010
300
250
200
150
Deutsche Post AG
E.ON AG
Henkel AG & Co. KGaA Vz
RWE AG
SAP AG
Siemens AG
The Linde Group
100
50
0
year of
participation
Before participation
-50
-100
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Many of the first businesses to join the Global Compact were model companies
and had already implemented a CSR strategy; in recent years, however, more
businesses have joined the Global Compact without having CSR policies in place.
In all countries, most of the participants come from those sectors, i.e. support
services and finance, which require highly qualified employees and/or have direct
consumer contact. Among the participants in the USA and Germany are companies that have already been targeted by civil society organisations due to their
business practices or their area of business. With the commitment to CSR and
the implementation of sound policies, not only the reputation changes but, over
the long-term, these High Sustainability companies also significantly outperform
their competitors in terms of stock market and accounting (Eccles et al. 2013).
In Germany, the majority of the businesses enlisted in the German stock
index Deutscher Aktienindex (DAX) are participants in the Global Compact,
whereas in the USA, only a few companies enlisted in the Dow Jones Indexes
have joined the initiative. More SMEs participate in the Global Compact in the
USA than in Germany. The Global Compact has gained more interest in Germany than in the USA, presumably due to the ambivalent image of the United
Nations in the USA, as well as the possibilities of lawsuits in the USA regarding
the laws on unfair competition law and false advertising.5
Some of the business participants in Mozambique and the United Arab
Emirates had already integrated social or ecological aspects into their business
practices. Most of these business participants depend on a highly qualified
workforce and want to offer them a suitable workplace. In all four countries,
NGOs, business associations, and academic institutes participate in the Global
Compact; however, no labour unions from those countries do.
Table 4 Global Compact participants in the four countries (as of 31 May 2010)
Source: Own compilation after UNGC 2010b
USA
Mozambique
UAE
Germany
All participants
393
23
38
173
All businesses
256
18
34
134
Fortune 500/Global 500
36
Companies (without
Fortune 500/Global 500)
58
7
14
49
SMEs
162
11
20
62
23
Variation between the countries in relation to reporting
Since the early 1990s, when the first companies started to report on their
environmental performance, there has been a remarkable increase in publicly
presenting nonfinancial information and a paradigm shift towards including
5 See, for example, the case of Kasky v. Nike (Williams 2004: 767).
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a broad range of social, environmental, and human rights issues. The Global
Compact and the Global Reporting Initiative (GRI) provided a practical, internationally accepted method and framework for companies to disclose this vast
amount of information (see van der Lugt 2005).
To comply with the requirements of the Global Compact, businesses from
OECD countries have to submit a COP after one year of participation in the
initiative; businesses from non-OECD countries are required to submit their
first COPs after three years. In Germany, most businesses (approximately 80%)
fulfil these requirements, and 11 of the large companies use the GRI framework,
whereas in the USA, generally fewer businesses (approximately 52%) submit
their COPs on time. Compliance with the formal requirements of the Global
Compact is high for large US companies, especially those in the Fortune 500
group that mainly submit a general sustainability report; 14 of the large companies use the GRI framework. On the other hand, only a few US SMEs are compliant with the formal requirements of the Global Compact. Only about 20%
of the US SMEs submit their reports on time, whereas in Germany, about 90%
of SMEs are compliant. The prolongation of the COP submission deadline for
non-OECD countries results in the UAE having only five participants required
to submit a report, of which only one is noncompliant. In Mozambique, despite
the prolongation, 6 out of 16 businesses do not submit their COPs.
Table 5 Status of the businesses that are required to report (as of 31 May 2010)
Source: Own compilation after UNGC 2010b
USA
Mozambique
UAE
Germany
All businesses
256
18
34
134
Active businesses
180
12
19
119
(app. 90%)
(app. 70%)
Businesses required to
report
133
16
5
77
Businesses required to
report and active
56
10
4
62
(app. 52%)
(app. 80%)
Companies required to
report and active (Fortune
500/Global 500)
23
18
(app. 92 %)
(= 100%)
Companies required to
report (without Fortune
500/Global 500)
17
SMEs required to report
and active
16
4
2
18
(app. 70%)
(app. 53 %)
6
2
26
(app. 80%)
(app. 21%)
Different motivations and expectations
The motivations and expectations of the interviewed businesses with regard to
their participation in the Global Compact show a large spectrum; however, there
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are also some commonalities. The fact that the Global Compact is a global initiative with networks in many countries is especially important for businesses
from the USA and Germany that have operations outside their home country.
The internationality of the Global Compact is also important for one interviewee
from the United Arab Emirates because it does not show a strong European
or US dominance, unlike other CSR initiatives. For some of the interviewees,
participation in the Global Compact stands for a commitment to shared international ethical values. The fact that the Global Compact is an initiative of the
United Nations was important for different reasons: Some businesses hoped for
business opportunities with the United Nations; others expected better access
to the expertise of the United Nations. For some, the high reputation of the
United Nations played a crucial role because the organisation has the credibility
to indicate which business practices are internationally acceptable and what
the expectations towards businesses are. For one US company, the motivation
to participate in the Global Compact was to differ from its competitors. Those
businesses whose ideas emerged out of ethical principles are participating in
the Global Compact to share their own experiences and best practices with a
larger circle of interested businesses.
The implementation of the ten principles as a continuous learning process
The implementation of the ten principles is a long, never-ending process that
involves all levels of a business. Although some of the businesses from the
USA or Germany that are active exclusively in their home country indicated that
they have already implemented the ten principles, others still found room for
improvement and enhanced the principles with new content. Those businesses
from the USA or Germany—large multinational corporations, companies, and
SMEs—that have business operations or suppliers in non-OECD countries are
confronted with the same challenges as those from the UAE or Mozambique.
Some of those US or German businesses ignore these challenges and focus on
the implementation of the ten principles in their home country. Others, especially businesses with direct consumer contact, demand that their subsidiaries
and, increasingly, their suppliers include the ten principles in their business
operations. For these businesses, the implementation of the ten principles is
a never-ending process that has just started. This process is more successful
when all the different levels of a business are involved in the elaboration and
implementation of a consistent CSR strategy that includes the formulation of
objectives and transparent monitoring mechanisms. Three companies, one
from the USA and two from Germany, started to elaborate a CSR strategy after
they declared their participation in the Global Compact. The assessment of the
COPs and the sustainability reports shows that whether the implementation of
the ten principles is successful also depends on the area and country in which the
business is active. For businesses dealing with natural resources (e.g. minerals
and fuels), especially in failed states, voluntary commitment to certain standards
is not enough to handle the negative externalities of the so-called resource curse.
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In some cases, businesses chose to end their business relations or activities;
e.g. Hewlett Packard (2010: 139) stopped buying minerals from the Democratic
Republic of Congo, and the Rapaport Group (2010) banned the trading of ‘blood
diamonds’ from conflict-prone countries. Although the voluntary principles of
the Global Compact could not close the governance gap that exists in those states
and areas, some interesting approaches were found regarding the challenges
in factories or in agriculture. Before they joined the Global Compact, some
businesses had already demanded from their supplier factories the introduction of social and environmental standards to improve the work situation in the
factories. Some of the COPs described positive examples in agriculture, e.g. the
marketing of cocoa beans from family-owned small-scale farms in Ghana (The
Omanhene Cocoa Bean Company 2009; see also Dean’s Beans Organic Coffee
2009) or the promotion of ecologically produced cotton from small-scale family
farms in Africa (see Otto Group 2009: 71; Levi Strauss 2009). In these cases,
the Global Compact played an important role in disseminating best practices.
Similarities and differences of the Global Compact networks
in the four countries
The increase in participating companies is linked with the network activities
In all four countries, the networks play a decisive role in establishing the Global
Compact; this is especially obvious in the case of Mozambique, where the network was active only for a certain period of time (2006–2007). During the active
phase, the number of Mozambican participants increased significantly, and the
businesses submitted informative, well-structured reports. With the end of the
network activities, no more businesses declared their participation in the Global
Compact, and only a few submitted their reports (UNGC 2011). In the USA,
the participation rates increased after the restructuring of the network and the
regularly organised symposiums. In the United Arab Emirates, the number of
the participants has also increased continuously since the launch of the network
in 2007. In Germany, the rapid foundation of the network after the launch of
the Global Compact, the involvement of the state-owned Deutsche Gesellschaft
für Internationale Zusammenarbeit (GIZ), and the regular network meetings
contributed to the high acceptance of the Global Compact and the increase in
German participation.
The different network structures in the four countries
Although the Bonn Annual Local Networks Forum (2008) elaborated the
requirements regarding the structure of a Global Compact local network, some
of the examined networks have not implemented these guidelines. For example,
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none of the networks submitted the required complete report of its activities to
the Global Compact.
In Germany, UAE, and Mozambique, businesses, business associations,
academic institutions, and some NGOs are represented. In the US network,
however, those that take part in the activities are mainly businesses; NGOs
rarely participate. Although at the global level, labour unions played an important role during the foundation of the Global Compact (see ICFTU 2000),
and some are part of the global board of directors today, there is no reference
indicating that labour unions are involved in any of the networks of the four
countries. The composition of the steering committees and the selection of
their members varied among the four countries. In the USA, the steering committee is a business forum in which only representatives of large companies
(PepsiCo, Symantec, Monsanto, and Levi Strauss) take part. In addition, due
to the initial difficulties in attracting US companies, the Deputy Director of
the Global Compact office initially attended the meetings of the steering committees. The steering committee nominates its members and is responsible
for the coordination of the network; the other participants of the US network
are not included in the decision-making process. Until the end of 2011, the
Fowler Center for Sustainable Value of the Case Western Reserve University
in Cleveland, Ohio, administered the network pro bono; at the moment, the
US network is being transformed into a 501(c)3 nonprofit (UNGC 2012a).
In Germany, the steering committee is a multi-stakeholder forum (however,
without labour unions) whose members are elected by all the participants.
The decisions need the approval of all the members of the steering committee. The GIZ coordinates the activities and supports the participants in
meeting the formal requirements of the Global Compact, such as writing the
COPs, which explains, in part, the high compliance of German businesses
(Deutsches Global Compact Netzwerk 2010). In the UAE, the network activities are coordinated by one of the nationally best-known NGOs, the Emirates
Environmental Group (EEG). No information was available regarding the
composition of the steering committee. In Mozambique, the steering committee is a multi-stakeholder forum composed of businesses, business associations, government organisations, NGOs, and the UNDP; however, no labour
unions participate. The reason for the inactivity of the Mozambican network
in the last few years is probably the absence of coordination (Desenvolvimento
2010). The networks have different access to international contacts. The German network regularly takes part in European network meetings, whereas
the US network does not coordinate with Latin American networks but has
direct contact with the Global Compact office. In the UAE, the network representative regularly took part in the board meeting of the Global Compact as a
board member. A representative of the Mozambican network participated in
the Ghana Learning Forum.
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Learning through the Global Compact
Publications
The numerous Global Compact publications offer a good overview of the
international discussions concerning different themes relevant to businesses.
Some of the interviewees, especially from SMEs, use these publications to get
current information and ideas for the implementation of the ten principles. For
the interviewed businesses, the fact that these publications are provided by the
United Nations is a guarantee of the relevance and credibility of the information they contain.
Network activities
Workshops at the local level contribute not only to the increase in participation
numbers but also, as some of the interviewees confirmed, to some changes in
business practices.6 These workshops, conducted in a nonpublic environment,
enable the participants to discuss, sometimes with other stakeholders, issues
adapted to the national context. Interviewees from the USA and Germany said
they received some concrete ideas for the implementation of the ten principles through the workshops, and they assessed very positively the access to
international discussions and the personal exchange between the workshop
participants. In the USA, during the symposium ‘Sustainable Cities’, the sustainability of the US consumption model, e.g. the strong reliance on individual
transportation was questioned by one of the leading car manufacturers, and
alternative collective forms of transportation were discussed. In Germany, the
network promoted the discussion of the up-to-now neglected issues of human
rights and the responsibility of businesses. Specifically, in Germany, where the
network is a multi-stakeholder forum with NGOs participating (Amnesty International and Germanwatch), it appears that besides the discussions of certain
themes, the personal conversations during the events were also very important.
They served to dismantle the cultural barriers between the participants, e.g.
between businesses and NGOs, and helped them to perceive the ‘other’ as a
partner without denying the differences that might exist between them. The
participants from Germany emphasised the fact that the network activities give
them access to different stakeholders, whereas one US business participant
criticised the absence of nonbusiness stakeholders during the meetings. In the
UAE, the network offered, beside the usual CSR issues, such as environment
6 None of networks conducts systematic evaluation of its activities to find out how the
obtained information led to changes in business practices. For this research, interviews,
protocols of meetings, and COPs and other sustainability reports were analysed to understand the learning processes that the Global Compact initiates; therefore, the description
of the learning process is not representative, however it shows a spectrum of opinions
and information.
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and anticorruption, a unique forum for the discussion of collective bargaining
and human rights. For businesses from the UAE and probably also for those
from Mozambique, the instructions on the COP were similarly very helpful.
In the case of Mozambique, in particular, after the workshops, the businesses
became compliant with the formal requirement of the Global Compact by submitting their COPs.
Due to personal and financial constraints, the majority of Global Compact
participants, especially SMEs, are unable to take part in the network activities
because the meetings are usually held in the capital. The exception is the USA,
where the meetings take place in different large cities, such as Chicago, New
York, or San Francisco.
Working Groups of the Global Compact7
Of the interviewed companies, only some large ones have participated in the
Working Groups. These participants emphasised the importance of the discussions with internationally acknowledged specialists, such as Mary Robinson,
the former UN Human Rights Commissioner.
Output: Introduction of rules and training
The fact that the Global Compact requires a commitment at the highest level
made directly to the Secretary-General of the United Nations is an important
milestone for a company that starts its journey towards becoming a sustainable business. In general, the commitment is communicated throughout the
company followed by the introduction of new rules and regulations, such as
codes of conduct.
In general, these codes of conduct deal with the question of how to avoid
corruption or discriminating behaviour. In Germany, 22 businesses explicitly
refer to the ten principles of the Global Compact; therefore, these codes also
include regulations with regard to human rights and the environment. Some
German businesses joined sector-specific initiatives at the national or the European level with codes of conduct that regulate all the four areas covered by the
Global Compact.8
7 At the international level, the Global Compact offers Working Groups in four areas:
human rights, labour standards, anticorruption, and environment (UNGC 2008).
8 The Business Social Compliance Initiative (BSCI) (2009: 2) and the Compliance-Initi-
ative des Bundesverbandes Materialwirtschaft Einkauf und Logistik e.V. (BME) (2008:
8) refer explicitly to the principles of the Global Compact. The European Committee
of Domestic Equipment Manufacturers (CECED) (2005) does not mention the Global
Compact, however addresses the four above-mentioned areas. In addition, the Bosch und
Siemens Hausgeraete (BSH) (2007: 6) reports that the Global Compact influenced the
CECED code of conduct. The German umbrella organisation of the electronic industry
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In the USA, two businesses (Fairmount Minerals 2010; Symantec 2010:
4) refer to the ten principles of the Global Compact in their codes of conduct.
In Mozambique, the container harbour of Maputo elaborated new guidelines
based on the Global Compact (MIPS 2008: 9). Many businesses do not refer
to the Global Compact in their codes of conduct but have organised trainings
or distributed information about the ten principles for the employees at their
headquarters and/or their subsidiaries, as well as for their suppliers.
Outcome: reporting, stocktaking, comparing
Most of the large multinational corporations (e.g. the Fortune 500 or the
Global 500) had already reported on their sustainability practices before committing to the Global Compact. Nevertheless, for the other companies and
SMEs, the most obvious change in their business practices consists in the
writing of the COPs. In their COPs, most of the companies describe activities that they had already started before committing to the Global Compact
and relate these to the ten principles. Therefore, the COPs allow those businesses to publish their nonfinancial activities for the first time and to consider
their own business practices in comparison to international standards. For
those businesses in all four countries that had already made reports, before
they participated in the Global Compact, the comparison with international
standards helped to uncover deficits and systematise their own CSR strategy.
For those operating exclusively in Germany or the USA, in which the law
prescribes compliance with the ten principles, some of the described activities go far beyond what the principles require and, therefore, not only shared
their best business practices but also contributed to setting higher standards.
Some portions of subsequent COPs have identical texts with previous reports.
In general, the style of the reports is more narrative and less analytical. The
description of problems regarding the implementation of the principles is
rare and, when provided, is limited to only a short paragraph. The exceptions
include the US company Golden Star Resources (2007: 19), which described
the problems at their mining sites in Ghana, and the German SME Helog
(2009: 3), a helicopter charter company that operates in conflict-prone areas.
If the COP is part of the general sustainability report, as is frequently the
case for larger companies, the GRI framework or a list in the annex indicates
which page of the report contains the specific activities for each principle. In
some cases, all principles seem to be covered, but the indicated pages do not
(Zentralverband Elektrotechnik- und Elektronikindustrie e.V., ZVEI) (2012) also does not
refer to the Global Compact, nevertheless covers all four areas and mentions all the UN
Declarations cited in the Global Compact principles.
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show the activities regarding the principles. Only a few COPs describe the
objectives and strategies based on the ten principles and/or the monitoring
mechanism. German, Mozambican, and Arabic COPs put commitment to the
ten principles at the highest level (e.g. CEO) in the foreword of their reports,
as required by the Global Compact, and they mention the Global Compact
frequently in different contexts. US companies often indicate their commitment in an enclosed letter and mention the Global Compact less frequently in
their COPs. German businesses, in particular, mention the Global Compact
as a milestone in their CSR history.
As Table 6 shows, the order of priority of the four areas of the Global Compact
differs considerably between the countries.
Table 6 Main themes and focal points within different countries (as of 31 May 2010)
Sources: Own data
USA
Mozambique
UAE
Germany
Human rights
Not relevant within
the USA
Economic,
social and
cultural rights,
good working
conditions and
salary
Economic, social
and cultural
rights, respecting
employees’ rights
Not relevant
within Germany
Labour rights
Diversity, health
and safety, work–life
balance, additional
health insurance
benefits and
retirement plans
HIV/AIDS, child Diversity, informal
labour, diversity meetings of
employees in
reaction to the
ban on collective
bargaining, control
of birth certificates
in order to exclude
child labour
Environment
Reduction of the
consumption of
energy & other
resources
Energy savings
in the area of
water, fuel &
environmental
projects
Green buildings,
leveraging the
savings potential
Climate change
agenda,
renewable
energy, public
transportation,
leveraging
the savings
potential
Anticorruption
Bribery & corruption;
campaign finance,
disclosure and/or
reform of lobbying
activities
Corruptness of
employees
Corruptness
of employees,
payment of taxes
Money
laundering,
conflict of
interests,
bribery,
corruption
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New impulses for business in the neglected human rights area
Although some of the participating businesses operate in countries with human
rights violations, the analysis of the COPs shows that the area of human rights
seems to be the least relevant for most of the businesses. Participation in the
Global Compact and in discussions on John Ruggie’s (2008) ‘Protect, Respect
and Remedy’ framework has led businesses to recognise their responsibility in
the area of human rights. Although only a few businesses regularly carry out the
Human Rights Impact Assessment suggested by the framework, there are some
forerunners in the USA and Germany whose experiences other businesses can
relate to. The COPs from Mozambique and the UAE also added new insights
into the area of human rights. Most of these businesses describe, under human
rights principles, issues related to economic and social rights, as many of the
jobs in these countries do not guarantee a dignified existence.
Many challenges regarding the implementation of labour standards
The issues that are relevant within the labour standards differ considerably and
show how different the life situations of the employees are between countries.
For example, in Mozambique, one employer offers financial assistance for the
purchase of cooking pots, whereas in Germany, to promote physical fitness,
some employees can participate in sports and take showers during lunch breaks,
and others get organic food from local farmers or receive psychological support
in life crises. For Mozambican businesses, it was important to guarantee a dignified livelihood, whereas for German businesses, work–life balance was a central
subject. Arabic businesses emphasise that they want to be employers by choice
and would issue release papers to any employee who wishes to resign, in contrast
to the forbidden practice of withholding workers’ papers and forcing them to
remain in the company. US businesses distinguish themselves through detailed
anti-discriminatory regulations and partly through their complex and transparent monitoring system, which includes all aspects of the labour standards.
The implementation of labour standards is particularly difficult for businesses that are active in non-OECD countries. In those countries in which
collective bargaining (principle 3) is forbidden, such as the UAE, alternative
meeting opportunities were created for the employees, which, however, do not
compensate for the disadvantages employees have experienced because of the
ban on collective bargaining. In the USA, individual state laws diminish collective bargaining rights. Some German Global Compact participants use these
loopholes to avoid collective bargaining in their US operations (Human Rights
Watch 2010). Even Microsoft (2010: 4) declared that its participation in the Global Compact does not expand the collective bargaining rights of its employees.
Only businesses in the UAE mentioned that there are challenges regarding
the ban on forced labour (principle 4). Although the use of forced labour is
forbidden in the UAE, some suppliers might deny their employees, especially
their low-qualified workforce from foreign countries, the right to quit work by
withholding their passports or payments. For Arab businesses, it is not difficult
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to comply with the labour standard principle in their own operations; however,
it is more difficult when it comes to their suppliers.
The child labour ban (principle 5) is embodied by law in all four countries
but insufficiently implemented in the two non-OECD countries. Businesses in
Mozambique describe how challenging it is to assess the implementation of this
principle in the operation of their business partners; in the UAE, businesses
try to avoid problems related to this principle by verifying the birth certificates
and passports of their employees. The reports of US and German businesses
contain few references to child labour. However, the fact that Bayer received a
complaint at the OECD National Contact Point because of the use of child labour
in India shows that the child labour issue can be relevant for all businesses that
are active in non-OECD countries (Germanwatch 2011).
In all four countries, the description of the sixth principle (anti-­discrimination)
takes a prominent part in the respective national context. In Germany, the focus
lies more on the dismantling of disadvantages based on sex or ethnic origin,
whereas in the USA, the focus is on diversity, which includes all possible
differences (sex, age, religion, race, ethnic group, political alignment, sexual
orientation, etc.). The reports of the Mozambican businesses focus on the discrimination against people with HIV or AIDS. In the UAE, the Emiratisation
laws require businesses to employ Emiratis over non-Emiratis. In Mozambique
and the UAE, some businesses try to avoid discrimination based on sexual
orientation, although homosexual acts are forbidden, and homosexuality is
not accepted by the society as a whole. Whereas the international standards on
which the Global Compact relies do not mention the avoidance of discrimination
based on sexual orientation, the Global Compact instructions regarding the sixth
principle specifically include sexual orientation. Therewith, the Global Compact
has an important role in promoting awareness of this kind of discrimination.
Businesses active in non-OECD countries can respect the principles within
their direct sphere of influence as long as these are not forbidden. The implementation of the labour standards is more difficult in the supply chain, where
the sphere of influence of a business is restricted and depends on future business relations. A supplier is more willing to implement social and/or environmental standards in an extensive, long-term collaboration than in a minor,
short-term business operation.
Vague definitions and few new activities regarding the environment
Some businesses from the USA, UAE, and Germany offer environmentally
friendly products and are therefore environmental model companies. Most of
the business participants had already started some environmental activities
before committing to the Global Compact, and most COPs include stocktaking
of the prevailing environmental activities. The interpretation of the environmental data proved to be difficult in many cases because of missing reference
points that could help to explain an increase or a decrease in the data. Many
COPs report on saving measures concerning energy, water, paper, and fuel.
Some businesses from the USA, UAE, and Germany mention the construction
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of new sites with green building standards, but it is only in Germany that the
increased use of public transport is a main subject. Some businesses started to
align their environmental activities after becoming part of the Global Compact.
In Germany, for instance, three businesses began to grasp systematically the
environmental effects and saving potentials of its business activity, and the
Frankfurt Airport Company (Fraport 2009: 30) arranged its environmental
policy according to the principles of the Global Compact. Two US software companies confirmed in interviews during this research that they started to evaluate
the ecological footprint of their products only after joining the Global Compact.
The definition of the environmental principles was the least specified,
allowing different interpretations, for example, concerning the precautionary
approach. Although the Global Compact, in cooperation with UNEP, developed
a detailed manual package on the environmental principles with case studies,
tool kits, and further resources (UNGC/UNEP 2005), none of the participants
referred to it or used it.
One dilemma of the Global Compact is the lack of clear guidelines as to which
business activities are harmful to the environment and contradict the precautionary approach. Some activities of Global Compact participants are regarded
publicly as environmentally damaging, such as those involving nuclear energy,
coal energy, oil, mining, arms production, the manufacturing of pesticides and
genetically modified organisms, and the marketing of water in plastic bottles.
The fact that those businesses participate in the Global Compact evokes the
accusation of ‘greenwashing’ by civil society organisations.
Responsible lobbying as an expansion of the anticorruption principles
The anticorruption principle is covered frequently through the codes of conduct. When the COP is integrated in the general sustainability report, this
principle is the least mentioned of the four subjects. In Mozambique and the
UAE, the reports focus more on the corruptibility of the employees. Some US
businesses describe the challenges that result from their activities in non-OECD
countries, such as the US oil company Hess Corporation (2009: 17), which
operates in Equatorial Guinea. Under the anticorruption principle, other US
companies include a description of the contents and target groups of their lobbying activities. Some of the German businesses started to produce codes of
conduct after they came under suspicion of corruption. Although some German
businesses are criticised because of their lobbying activities, only a few report
on the contents and target groups of these activities.
Monitoring as indispensable for the successful implementation
of the ten principles
The way monitoring is conducted varies between the countries and between
SMEs and large corporations. Most of the businesses inform their employees
and suppliers about the ten principles and expect them to comply. Other businesses generate questionnaires to determine the status of the implementation
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of the ten principles. Some businesses undergo external monitoring by accounting firms, which, besides looking at financial issues, check the social and
environmental standards, or by agencies or NGOs that specialise in social and
environmental standards. Those large corporations from the garment sector
that have direct consumer contact and a brand name, e.g. Nike (2005: 8), Gap
(2010: 21), Otto Group (2009: 40), and Puma (2009: 39f.), established the most
advanced monitoring system, with special teams for the intensive examination
of their suppliers; they also publish detailed investigation results and a list of
the addresses of all their suppliers.
A comprehensive monitoring system, especially of the supply chain, is timeconsuming and cost-intensive. Therefore, although it is necessary for every
business operating in non-OECD countries, only large corporations can afford
to finance such a system. One interesting cost-saving approach is the Business
Social Compliance Initiative (BSCI) (2009), whose code of conduct is based,
among others, on the Global Compact and which offers its members a database
on the audit results of different suppliers.
Deficiencies in the implementation of integrity measures
The introduction of integrity measures was an important step to assure the
Global Compact’s legitimacy. Nevertheless, the mechanisms for verification of
systematic or egregious abuse are insufficiently developed. The Global Compact board and office in New York, as well as the networks, can be involved in
the application of the integrity measures. In this research, the two examined
examples of complaints resolved by the board of the Global Compact showed
deficiencies in the implementation of the integrity measures. In the case of the
Chinese company CNPC and its involvement in Darfur, the Global Compact
argued that PetroChina, which is responsible for the Darfur operation, is a
company separate from CNPC. This view is highly questionable considering
that PetroChina’s operations are closely intertwined with CNPC (KLD Research
& Analytics 2007; Harvard announces 2005; Segal 2000). The second case
examined an accident in a Bayer factory in Institute, West Virginia (USA).
Although Bayer reported to the Global Compact that all the necessary security
standards were applied, the published results of the hearing of the Committee
on Energy and Commerce of the US Congress (2009) showed that Bayer not
only neglected crucial security standards but also tried to impede the investigation of the accident.
The networks are supposed to play a crucial role in the application of the
integrity measures. However, in the four countries of the study, the networks
are rarely involved in the application of the integrity measures despite several
cases of business participants violating the principles. Only in the German
network were two violations by Global Compact participants directed to the
National Contact Point of the OECD, which is based at the German Ministry of
Economics. In one of these cases, Bayer accepted its responsibility for the use
of child labour in its cottonseed supply chain and took some action to improve
the situation, which, according to OECD Watch (2010: 22), might not be enough
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to solve the problem. In the case of Volkswagen, the National Contact Point
rejected two claims, one regarding Volkswagen’s impact on climate change
and the other regarding its indirect involvement in human rights violations in
Tibet (OECD Watch 2010: 56). Ruggie (2008: 26) noticed that in general, the
National Contact Points lack the financial and technical resources to handle the
cases, and when they are based at the Ministry of Economics, as is the case in
Germany, a conflict of interest may arise.
The attitudes of the business interviewees with regard to the integrity measures are ambivalent. Some argue that businesses involved in certain activities
generally criticised by the public should not be allowed to participate; others believe that violation of the principles should lead to the delisting of the
business. Some maintain that the Global Compact should give violators the
opportunity to learn how to implement better the principles. For NGOs, both
participants and nonparticipants in the Global Compact, the consistent application of the integrity measures is an important standard for the credibility and
legitimacy of the Global Compact.
Some open topics relevant to business ethics
The Global Compact deals insufficiently with some subjects that are relevant
to business ethics, e.g. legal tax avoidance, excessive compensation for CEOs,
some forms of lobbyism, and unfair competition practices. In contrast to the
businesses in Mozambique and the UAE, the German and US businesses
generally did not comment on whether the salaries paid in the supply chain or
subsidiary sectors in non-OECD countries guaranteed a dignified livelihood.
In addition, the responsibility of the company for the employees in the supply
factories after the business contract has expired is barely mentioned. Nevertheless, if the business participants in the Global Compact want to be part of the
solution and not the problem regarding global challenges, they have to address
adequately these questions in their business operations.
Conclusion
The Global Compact is symptomatic of the paradigm shift within the United
Nations, which sees businesses no longer as part of the world’s problems but
as part of their solutions. Over the years, the initiative has incorporated all the
subsystems proposed by the Compliance System Design, although the practical
implementation is not satisfactory for all the different subsystems. The ten principles as voluntary guidelines are soft laws that contribute to keeping issues of
low politics, such as human rights, labour standards, environment, and anticorruption, on the international agenda. Through different initiatives, such as Caring for Climate, the Women’s Empowerment Principles, and the Human Rights
Dilemmas Forum, the Global Compact evokes learning processes and contributes to the specification of norms. Based on voluntary principles, however, the
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Global Compact is not a substitute for binding rules. It remains open whether
the Global Compact contributes to the transformation from soft laws to hard
laws or assigns issues of low politics into the sphere of influence of private
actors and therefore prevents the introduction of binding regulations (see the
‘privatisation of world politics’; Bruehl et al. 2001). However, some businesses,
especially those with direct consumer contact and a brand name, have implemented rules on a voluntary basis and are lobbying for binding regulations in
different areas.9 The call is upon NGOs to support these efforts by advocating
binding regulations, as well as upon governments to implement and enforce
laws to create a fair and balanced framework for the global economy.
The Global Compact follows the axiom of social constructivism, postulating
that norms only become effective when they are internationalised during a
socialisation process. For businesses, the Global Compact facilitates access to
scientific findings and epistemic communities that work on different issues,
such as climate change or water supply. The initiative brings different stakeholders together to discuss problems that result from collective action (e.g. the
tragedy of common goods or prisoner’s dilemma). By means of dialogues and
learning forums, the Global Compact gives businesses the opportunity to discuss, in a nonpublic environment and with recognised experts, the challenges
that result from their international business activities. Through its networks,
the Global Compact facilitates the discussion of international standards and
helps to identify country-specific challenges. These discussion processes lead,
in some cases, to a change in the logic of appropriateness that defines which
social acts are acceptable and which are not. For many businesses today, the
Global Compact is the reference point for appropriate behaviour on an international level. By participating in the Global Compact, businesses acknowledge
their social, environmental, and ethical responsibilities.
The Global Compact is the largest CSR initiative worldwide and the only one
with a global network. For businesses, the Global Compact has a low entry point
to CSR questions and does not require a huge financial and/or personnel effort.
The general criticism of CSR applies partly to the Global Compact as well; that
is, not all relevant stakeholders, especially those from labour unions, participate
in the networks. Similar to other CSR initiatives, the Global Compact avoids
some business-relevant topics and offers no solutions in certain situations, for
example, in failed states in which governmental regulation is missing. However,
in contrast to most other CSR initiatives, the Global Compact also considers
collective bargaining and freedom of association. Far beyond what other CSR
initiatives demand, the Global Compact also recognises the special life situation
of working mothers and condemns discrimination based on sexual orientation.
After joining the Global Compact, mainly businesses from Germany, as well
as from other countries, revised their internal—in some cases, sector-specific—
codes of conduct and included the ten Global Compact principles. Nevertheless,
9 For example, Hewlett-Packard (2005: 54, 2006: 50) supported the attempt to introduce
binding human rights regulations, and Nike (2005: 83, 2010: 158) is lobbying for stricter
climate protection regulations.
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some businesses not only changed their regulations in the area of human rights,
which businesses seem to have ignored so far, but also started to develop new
programmes. The Global Compact also facilitated the sharing of best practices
in supply factories and in agriculture. Although the challenges differ between
countries, the businesses—multinational corporations, companies, and SMEs—
face the same problems as most of them have business contacts with non-OECD
countries. Regarding the participants, the first businesses to join the Global
Compact were mostly model companies that had already started to adopt a CSR
strategy. Some of these companies initiated CSR programmes because they have a
brand name and direct consumer contact and/or because NGOs had campaigned
against them or their competitors. Some of the model businesses are privately
owned, and their owners consider it part of their role not only to increase profits
for the business but also to act in a socially responsible manner for their employees, consumers, as well as for the society and the environment. Even those businesses that already have a CSR strategy in place could benefit from the Global
Compact if they participate in the learning forums.
The Global Compact is a learning network, and not intended as a compliancebased organisation. Nevertheless, to preserve its legitimacy, several elements
were added to guarantee transparency and accountability. However, until now
some of these elements have not been applied satisfactorily. These include, for
example, those dealing with systematic or egregious abuse of the ten principles,
the avoidance of relevant themes, and the fact that not all relevant stakeholders
are engaged. Therefore, regardless of its above-mentioned positive aspects, the
Global Compact is at risk of being abused by some businesses looking to blueor greenwash their negative image.
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q
Appendix 1: Case Studies—Pfizer and Daimler
Pfizer implemented the Global Compact principles by creating a global crossdivisional team composed of more than 25 management-level employees from
all operating divisions, ranging from development and research to marketing
and investor relations. This team set up goals, collected data, and compared
Pfizer’s practices and policies to the ten principles of the Global Compact.
Furthermore, Pfizer created a plan to educate its employees and to improve its
performance according to the principles. Pfizer’s Summary of Policies on Business
Conduct includes information on the Global Compact and was translated into 35
languages. On a regular basis, Pfizer evaluates whether every employee knows
how to act in accordance with the Policies on Business Conduct. In China, Pfizer
was the first company that established an anti-discrimination policy toward
HIV-positive employees.
Pfizer started a stakeholder dialogue with NGOs, such as Oxfam and the Interfaith Centre on Corporate Responsibility, and conducted a survey among governments and NGOs from USA, China, UK, Japan, Mexico and South Africa on the
strengths and weakness of the pharmaceutical industry. This survey resulted in
new policies in the area of general access to medication. One of the outcomes
was Pfizer’s Investment and Health Platform that aims to strengthen healthcare
delivery for underserved populations around the world. A part of this platform
is Pfizer’s Global Health Fellows Program that places Pfizer employees for several
months in short-term assignments in poor communities to witness and learn
the challenges and needs of poor populations (Pfizer 2006: 2f, 2013: 8).
Daimler, with its World Employee Committee, created as a complement to its
internal Integrity Code, the DaimlerChrysler CSR Principles, based on the ten
principles of the Global Compact. To ensure its continuous implementation
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(including e.g. a whistle-blowing process), Daimler established a Business Practice Office. In every region worldwide, Daimler has a compliance officer reporting
to the Group Chief Compliance Officer who is directly accountable to the board.
Stakeholder dialogues are very important for Daimler to identify the most
prominent sustainability topics: Since 2008, Daimler organises the Daimler
Sustainability Dialogue not only in Stuttgart/Germany, but also in the US and
China. In response to the discussion on the UN Guiding Principles for Business
and Human Rights, Daimler and its Sustainability Board started a stakeholder
dialogue to identify the most salient human rights issues in its business operation worldwide. In 2012, Daimler conducted a survey of more than 700 stakeholders and the results were utilised in its materiality analysis (DaimlerChrysler
2006: 2, Daimler 2009: 3f., 2013: 52f).
Appendix 2: The ten principles of the United Nations
Global Compact
1.
Businesses should support and respect the protection of internationally
proclaimed human rights; and
2.
make sure that they are not complicit in human rights abuses.
3.
Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining;
4.
the elimination of all forms of forced and compulsory labour;
5.
the effective abolition of child labour; and
6.
the elimination of discrimination in respect of employment and occupation. 7.
Businesses should support a precautionary approach to environmental
challenges;
8.
undertake initiatives to promote greater environmental responsibility; and
9.
encourage the development and diffusion of environmentally friendly
technologies.
10.Businesses should work against all forms of corruption, including Extortion
and bribery.
Source: UNGC 2012b
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Responsible Lobbying
A Multidimensional Model
Theresa Bauer
Humboldt-University Berlin, Germany
Practitioners and scholars have long ignored the need to align CSR and lobbying,
although lobbying is a powerful corporate tool that arouses public criticism and risks
CSR credibility if it remains unconstrained. This conceptual paper integrates CSR and
lobbying research to develop an encompassing understanding of responsible lobbying, defined as lobbying in congruence with the corporate responsibilities towards
society. I present a multidimensional model constituting four principal requirements.
Three content-related pillars call for: 1) consistency between the firm’s own stated
CSR commitment and lobbying; 2) consideration of perspectives and needs of stakeholders; and 3) the alignment with the objectives and values of broader society. 4) An
ethical, democratic process is put forward as the basis of responsible lobbying. The
model allows firms to determine the degree of responsible lobbying and is of normative value, as it constitutes what ought to be done.
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OO Corporate
citizenship
OO Political CSR
OO Lobbying
OO Responsible
lobbying
uInstitute of Management, School of
Theresa Bauer is a PhD candidate at the Institute of Management at
Humboldt-University Berlin, Germany and has wide work experience as a
consultant in public relations and political communication. She holds degrees
in History and Multimedia from Karlsruhe University, Germany and degrees
in Economics and Business Administration from Hagen University,
Germany. Her current research focuses on CSR, responsible lobbying
and CSR communication.
JCC 53 March 2014 OO Corporate social
responsibility
Business and Economics,
Humboldt-University Berlin,
Rosenstr. 19, 10178 Berlin, Germany
[email protected]
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theresa bauer
F
irms have learnt to understand that business policies and strategies
should not only be profitable but also desirable in terms of the objectives
and values of society and have explicitly committed to corporate social
responsibility (CSR). Yet, they often fail to align CSR with lobbying, i.e.
planned attempts to influence decisions made by legislators. For instance, the
German car industry has combatted stricter EU regulation of CO2 emissions in
spite of commitments to environmental protection. On the other hand, some
firms have started to pave the way for responsible lobbying, i.e. lobbying in
congruence with their corporate responsibilities towards society.
So far, there has been little academic interest in the connection between
lobbying and CSR: lobbying literature has largely ignored the issue of responsibility, except a few studies dealing with ethical aspects (Ostas 2007; Grimaldi
1998; Oberman 2004; Weber 1996, 1997). CSR scholars have started to look
into the political role of firms (Moon et al. 2005; Scherer and Palazzo 2007,
2011), but have focused mainly on corporate participation in processes of global
governance, neglecting attempts by firms to directly influence policy-making.
Responsible lobbying has recently caught some scholarly attention, but the few
existing studies (Anastasiadis 2010; Slob and Weyzig 2010) are exploratory.
There are good reasons to link CSR and lobbying: First, CSR should be fully
integrated and embedded in every aspect of the firm, and is therefore deficient
and risks credibility if it fails to take lobbying into account. Second, lobbying
is principally a legitimate activity in a democratic setting, it reflects freedom of
opinion, enhances political participation and can contribute to well-informed,
balanced and feasible policy-making (Ostas 2007; Karr 2007: 9; Greenwood
2007). Yet, it has a rather poor reputation among the public due to concerns
about privileged access to policy-making and abusive, selfish use of corporate
power at the cost of society. Aligning CSR and lobbying helps not only to establish credibility among policy-makers, but contributes to the overall legitimacy
of the firm.
Recognising the necessity to integrate CSR and lobbying leads to the question of what responsible lobbying exactly entails and which requirements have
to be met. In practice, responsible lobbying is often equated with transparency.
For instance firms such as BASF, BAT, Marks & Spencer, Lafarge and GlaxoSmithKline have started to include lobbying activities in CSR reporting. These
measures are important, yet the emphasis on transparency reflects a too narrow
view: it captures the process, but not the content of lobbying and lacks consideration for the multi-layered nature of both CSR and lobbying.
This paper aims at developing an encompassing, theoretically substantiated
understanding that allows for determining whether and to what extent lobbying corresponds to corporate responsibilities towards society. First, the paper
provides a review of CSR and lobbying literature as the basis for an integrated
approach and considers possible objections to and prospects of responsible
lobbying. In the main part, a multidimensional model of responsible lobbying is presented by elaborating on three content-related pillars calling for: 1)
consistency between the firm’s own stated CSR commitment and lobbying; 2)
consideration of perspectives and needs of stakeholders; and 3) the alignment
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responsible lobbying
with the objectives and values of broader society. An ethical, democratic process is put forward as the basis of responsible lobbying. The paper concludes
by suggesting that even though the model constitutes high demands towards
firms, it provides a useful basis for determining what firms do and ought to do.
CSR and related concepts
CSR research is very diversified and there is no single definition of CSR agreed
upon (Carroll 1999; Valor 2005; Scherer and Palazzo 2007). Some widely
shared notions exist, most notably the assumptions that firms ought to consider
social issues besides striving for profit, that they ought to behave ethically, and
that philanthropy and community involvement is desirable (cf. Banerjee 2008:
62). Another commonality of most definitions is the understanding of CSR as
beginning ‘where the law ends’ (Davis 1973: 313). This characterisation is not
applicable in the context of responsible lobbying, because lobbying is precisely
about influencing policy-making. In addition, the beyond-the-law approach
implies the danger of limiting CSR to instrumental motives to enhance profits
and to forestall legislation (Sethi 2008: 94; Cragg 2005; Rowe 2005). A longstanding debate comes into play revolving around the justification of CSR: The
business case approach encourages socially responsible behaviour by arguing
that behaving responsibly will bring financial rewards (Kapoor and Sandhu
2010; Roman et al. 1999; critical: Margolis and Walsh 2001, 2003; Vogel 2005).
Ethical-normative approaches claim that firms should act in a socially responsible manner, because it is ‘the right thing to do’ (Garriga and Melé 2004: 60,
see also Quinn and Jones 1995). In practice, many CSR initiatives are based
on mixed motives of morality and profit, as firms hope to benefit from reduced
costs and risks, competitive advantage, enhanced reputation and legitimacy.
In this paper, CSR is understood as a broad umbrella term (cf. Matten and
Moon 2008: 405; Scherer and Palazzo 2007: 1096) that raises attention to
corporate responsibilities towards society. Several related concepts have been
developed that are useful in the context of responsible lobbying, particularly
stakeholder theory and sustainability. Stakeholder theory argues that not only
the interests of shareholders, but also the perspectives and needs of other key
groups that have a ‘stake’ in the firm should be taken into account in corporate
decision-making (Donaldson and Preston 1995; Freeman et al. 2010; Freeman
1984). A stakeholder is ‘any group or individual who can affect, or is affected by,
the achievement of a corporation’s purpose’ (Freeman 1984: vi), e.g. customers,
employees, suppliers, communities and policy-makers. Environmental issues
have resulted in growing attention to sustainable development, understood as
meeting ‘the needs of the present without compromising the ability of future
generations to meet their own needs’ (WCED 1987). While stakeholder theory
provides a framework for recognising and managing the demands of key groups
connected to the firm, the sustainability concept allows for incorporating the
objectives and values that are centred outside the firm.
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The political role of firms has received attention in CSR literature, alternatively under the headline ‘corporate citizenship’ (Crane et al. 2008; Matten and
Crane 2005; Moon et al. 2005) or ‘political CSR’ (Scherer and Palazzo 2007,
2011). Matten and Crane (2005) posit that firms increasingly play a role in enabling civil rights, providing social rights and channelling political rights due to
the growing difficulties of governments to provide citizenship rights (Matten
and Crane 2005: 174). Scherer and Palazzo (2007, 2011) present a political
CSR approach based on the Habermasian concept of deliberative democracy
(Habermas 1996) with the goal of embedding the firm in democratic processes
of defining rules and tackling global political challenges. Although this stream
in the literature does not take lobbying sufficiently into account, it is a useful
starting point for studying responsible lobbying by pointing to new corporate
responsibilities, to questions about legitimacy, accountability and potential
threats to democracy through increasing corporate power.
From lobbying to responsible lobbying
Before elaborating on responsible lobbying, it is helpful to take a look at traditional lobbying research. The subject has drawn academic interest from a variety
of disciplines such as political science, economics, organisation theory, management and communication studies. The range of approaches has led to some
terminological confusion, which is further aggravated by the inconsistent use
of related terms such as governmental relations or public affairs. Hillman and
Hitt (1999: 834) provide a widely used definition of lobbying as the ‘provision
of information to policy makers by individuals representing the firms interest’.
They see lobbying as one component of the firm’s overall political strategy. Other
related activities also include constituency building apart from financial contributions (Hillman and Hitt 1999). Lobbying is not merely a one-way provision
of information, but rather a communications process that involves interaction
and exchange (see Jaatinen 1997). Corporate attempts to shape legislation are
legitimate, but the drawbacks of lobbying, such as the risk of disproportionate
influence on law-making, are not to be neglected. Few scholars have argued for
the need to restrain lobbying by ethical standards (Grimaldi 1998; Hamilton
and Hoch 1997), and have discussed issues such as lobbying regulation (Hogan
et al. 2008; Holman 2009) and codes of ethics (Weber 1997; Susman 2008;
Barker 2008). Ethical issues are still marginal in the literature, but interest
in responsible lobbying is rising: NGOs and activists have started empirical
research on reporting practice (SustainAbility and WWF 2005) and the role
investors play in driving a more coherent approach between lobbying and CSR
(Blueprint Partners et al. 2007). The study by Anastasiadis (2010) investigates
the auto industry’s lobbying in the EU and provides conceptual and empirical
groundwork, particularly by dealing with institutionalised practices in Brussels
and company internal processes on lobbying.
Responsible lobbying scholars have to be prepared to deal with manifold
doubts over whether an alignment of CSR and lobbying is feasible, recommendable and/or desirable.
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responsible lobbying
On one side of the spectrum, critics might argue for the sole responsibility
of policy-makers to serve society’s interest and point out the needlessness of
ethical-normative lobbying guidelines with the argument that fair legislation
automatically results from the balancing influence of competing lobbyists. Such
a reasoning builds on the pluralist tradition of democratic theory (Truman 1958;
Dahl 1956) that idealises the involvement of interest groups in politics. Yet, this
perspective neglects moral responsibilities, corporate power and the possibly
unequal influence over policy-making that make constraints necessary in the
interest of society. On the other hand, some CSR experts might find responsible lobbying an oxymoron due to the alleged inherently selfish, irresponsible
nature of lobbying. Scholars such as Wilke and Wilke (2008: 555) argue that
‘the only legitimate guardians of the public interests are governments, which
are accountable to all their citizens’. Indeed, lobbying implies that wealthy firms
without any democratic mandate attempt to directly influence democratically
elected policy-makers. This fact constitutes a dilemma that cannot be easily
resolved. Nevertheless, many firms do lobby and will continue to influence
policy-making as long as influential political authorities exist. Hence, striving
for responsible lobbying seems preferable over ignoring the issue.
When accepting lobbying as a corporate reality, the ‘moral case’ of CSR can
and should be transferred to lobbying. Consequently, moving from irresponsible to responsible lobbying becomes a moral duty of firms. In practice several
trends facilitate the need for and prospect of responsible lobbying on instrumental grounds:
tt Firms
engage in CSR to protect their reputation (e.g. Fombrun 2005) and
legitimacy (e.g. Aguilera et al. 2007: 845) and these efforts call for responsible lobbying to remain credible. Besides, reputation and legitimacy are
vital resources for lobbying (e.g. Wagner 2011)
t
Public scrutiny of lobbying is increasing and firms are recognising the
necessity of ethical restraints and incorporation of broader interests in lobbying in order to build understanding and trust
tt While the relation between self-seeking lobbying and societal interest can be
conflict-prone, in other cases both harmonise, e.g. when firms profit from
environmental legislation due to their own green business concept
tt The
nature of lobbying is changing to a certain extent: Due to the potential
of NGOs to influence policy-making in combination with enhanced transparency and mobilisation potential through the Internet, new tactics are
becoming common, namely coalition-building with NGOs and grass-roots
lobbying, i.e. advocating through mass mobilisation. These new tactics
facilitate responsible lobbying by reinforcing the need to take into account
the interests of stakeholders and broader society. Yet, these new tactics also
imply the risk of a contrary development, particularly when large firms
apply ‘astroturf’ lobbying, i.e. create fake grass-roots organisations (see e.g.
Cho et al. 2011).
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A multidimensional model of responsible lobbying
A template of responsible lobbying that grasps the complexity of the issue
has not been achieved so far. AccountAbility and the Global Compact (2005:
14) describe responsible lobbying as ‘being consistent with an organisation’s
stated policies, commitments to stakeholders, and core strategy and actions’
and ‘advancing the implementation of universal principles and values (such as
those embodied in the UN Global Compact)’. This definition provides a useful
starting point in the search for a comprehensive understanding of responsible
lobbying, but needs substantiation and elaboration, as the reminder of the paper
endeavours to accomplish.
In the following, a multidimensional model of responsible lobbying is introduced that covers both the content and process of lobbying. The development of
the four parts of the model (three content-related pillars and an ethical, democratic dialogue as the basis) builds on the following considerations:
tt Pillar
(1) refers to CSR that ‘empirically consists of clearly articulated and
communicated policies and practices of corporations that reflect business
responsibility for some of the wider societal good’ (Matten and Moon 2008:
405)
tt Pillar
(2) builds on stakeholder theory that helps to recognise and manage
the demands of key groups that have a stake in the firm
tt Pillar
(3) is based on the assumption that firms need to consider the objectives and values that are centred outside the firm, e.g. sustainability helps
to build ‘a bridge to important global societal issues’ (Wheeler et al. 2003)
t
The requirements regarding the basis of the model are developed with
reference to discourse ethics that deliver moral principles for the process
of responsible lobbying
Figure 1 Responsible lobbying model
Responsible Lobbying
Pillar (1):
Commitment
to CSR and
coherence
with
lobbying
Pillar (2):
Consideration of
stakeholders’
perspectives
and needs
Pillar (3):
Alignment
with the
objectives
and values
of society as
a whole
The basis: an ethical, democratic process
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responsible lobbying
Pillar (1): Commitment to CSR and coherence with lobbying
Pillar (1) considers whether the firm has recognised its responsibilities towards
society and if so, whether it lobbies in line with its own standards. Many firms
have a stated CSR policy and tools and techniques that help to manage social
and environmental impacts and to ensure morally sound decisions and actions.
There are huge differences regarding CSR practice among firms, industries
and regions. Firms such as Starbucks, Timberland and The Body Shop have
long cultivated a CSR compatible business model; others have embraced CSR
recently and in a less strategic way. The degree to which CSR is part of the
business model and organisational culture impacts the content of lobbying.
For instance, firms that are known for their environment-friendly products
will rather lobby for environmental regulation and green taxes both out of
self-interest and with conviction. For those that take a less strategic, integrated
approach to CSR it will be more difficult to achieve responsible lobbying.
Lobbyists need to be aware of the firm’s CSR commitment and act accordingly. A ‘test of coherence’ between CSR policy and lobbying content is feasible
when CSR principles are concrete and clearly communicated. Often there is
leeway for interpretation and in that case the ‘spirit’ behind CSR principles is the
relevant reference point. Codes of ethics and ethical training programmes for
both in-house lobbyists and consultants help to raise awareness of ethical matters. Monitoring lobbying by CSR experts can facilitate responsible lobbying: for
example, the British tobacco manufacturer BAT has regional CSR committees
that screen the regulatory engagement of subsidiaries. A more comprehensive
approach is to ensure collaboration between the CSR and lobbying function
instead of one-way monitoring. Ideally, lobbyists and CSR managers/departments are aware of each other’s decisions and actions and engage in a constant
dialogue. Issue management can become the basis for collaboration since
identifying, analysing and prioritising external developments and thus helping
the firm to ‘anticipate and respond to changes’ is likewise relevant for strategic
management, CSR and lobbying. CSR practitioners benefit from collaboration:
lobbyists constantly communicate with policy-makers and have the knowledge
and capability to help to identify issues that affect and challenge the firm and
to contribute to meeting responsibilities towards society.
Pillar (2): Consideration of stakeholders’ perspectives and needs
Pillar (2) requires going beyond the firm’s own standards by taking into account
the views and needs of stakeholders with respect to advocated policy positions.
The identification and categorisation of stakeholders is ideally a firm-specific,
continuous process that includes further specifying stakeholders touched by
lobbying issues. Policy-makers are powerful stakeholders in the lobbying process and paying attention to their ideas and needs is simply requisite for influencing policy-making. Additionally, responsible lobbying implies accepting and
considering the interests of other stakeholder groups such as employees, consumers and NGOs. In some cases, the interests of the firm and stakeholders go
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hand in hand, e.g. if excessive regulation implies decreasing profit for the firm,
higher prices for consumers and loss of workplaces for employees as potential
consequences. In other cases, the interests of stakeholders do not coincide with
the immediate goals of the firm, but still deserve consideration.
Approaches to incorporate the interests of stakeholders in lobbying efforts
range from learning to understand their behaviours, values, and backgrounds
to dialogue and collaboration. Morsing and Schultz (2006) distinguish three
types of communication strategies towards stakeholders (cf. Grunig and Hunt
1984). First, the information strategy aims at informing objectively through
one-way communication. Second, the response strategy is two-way asymmetric communication enabling stakeholders to respond to corporate actions, e.g.
through opinion polls or market surveys. Third, the involvement strategy allows
for symmetric two-way-communication: stakeholders are involved, participate
and suggest corporate actions. In the lobbying context, the information strategy
has gained relevance, especially since the widely used GRI reporting guidelines
include a set of indicators pertaining to lobbying. This approach enhances the
widely demanded lobbying transparency and allows for a critical assessment by
stakeholders. The response strategy is rarely applied, although it is suitable to
help determine the views of stakeholders on policy issues and to demonstrate
that their perspectives are considered. The involvement strategy implies consulting with stakeholders, reflecting the dialogue and determining the lobbying
strategy in line with the firm’s and stakeholders’ interests. A few firms have
started to move in this direction by installing stakeholder advisory groups on
policy issues. This course of action gains moral quality, helps to reduce the risk
of public criticism and reputation loss and facilitates dealing with contradicting
demands by various stakeholder groups. Yet, it fundamentally challenges the
traditional approach to lobbying, and moving policy issues to the open public
sphere is not always possible (see Pillar 4, below).
NGOs are a relevant stakeholder group in the lobbying context: they are an
organised voice to transmit societal interests and have potential to influence
public opinion and policy-makers alike. Interacting and cooperating with NGOs
enhances responsible lobbying by contributing to the alignment of the firm’s
policy goals with the interests of society. Besides moral considerations the
firm’s self-interest is a driver for cooperation: NGO criticism, e.g. of inconsistencies between CSR policy and lobbying, endangers corporate reputation and
legitimacy and diminishes the chances to lobby successfully. Although NGOs
often possess fewer financial resources than business organisations, they have
become important players in the political sphere (Baur 2011; Joachim 2011;
Betsill et al. 2007). Issue-specific lobbying coalitions with NGOs enhance the
chances to impact legislation through amassed resources and augmented credibility. Collaboration can become institutionalised: business–NGO alliances
such as the Canadian Clean Air Renewable Energy Coalition, the UK Aldersgate
Group and the US Climate Action Partnership (USCAP) have been lobbying for
more comprehensive climate legislation.
Employees also deserve attention in the lobbying process. In some countries, the legislative framework does not support a strong participatory role of
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employees, in others employees have a codified right to be involved in decision
making. Regardless of the institutional setting, the effects of a proposed policy
on employees need to be considered. An active involvement of employees
beyond the lobbying and CSR department helps to ensure responsible lobbying,
e.g. by developing a corporate code of conduct for lobbying based on a broad
internal dialogue (Anastasiadis 2010: 215-216).
Pillar (3): Alignment with the objectives and values of society as a whole
While policy-makers have the primary obligation to serve the public interest,
firms ought to consider the consequences of their decisions and activities for
society as well. Consequently, Pillar (3) requires firms to align lobbying with the
objectives and values of society. Defining irrevocable objectives and values as
guidelines is hardly possible because they are socially constructed and are subject to change over time and region. Especially globally operating firms are confronted with pluralism from the outside and within. Yet, some widely accepted
points of reference exist, such as prosperity, justice, human rights and sustainable development, that are relevant for firms that strive for responsible lobbying.
Economic well-being is a societal objective that is directly influenced through
everyday business operations (through the satisfaction of consumer needs, provision of employment, payment of taxes, etc.), but lobbying efforts can also impact
economic development and the chances to achieve collective prosperity. For
example, antitrust law is designed to help ensure efficient markets and protect
the interests of consumers. When individual firms try to soften it in order to be
able to dominate the market and achieve higher prices, they undermine collective
economic well-being and thus disqualify for responsible lobbying. However, economic growth and social prosperity sometimes come into conflict with another
widely accepted objective of society: justice. CSR scholars have grounded calls for
incorporating justice in the business context based on ethical and philosophical
theories such as Rawls’s Theory of Justice (Rawls 1971; cf. Hsieh 2004; Cohen
2010; Phillips 1997). In line with that thinking one can argue for an obligation of
firms to consider how business activities impact justice, i.e. equality, the allocation of resources and disparities within the organisation and in broader society.
Lobbying on issues such as social security, gender equality, employees’ rights,
compensation and tax policy touches upon justice and requires balancing the
firm’s self-interest with the possibly contradicting impacts on prosperity and
justice—a highly challenging task. When it comes to trade policy, foreign aid and
international agreements, lobbying can even impact global wealth distribution.
For instance, several US commodity and maritime organisations wanted the
state programme, Food Aid, to purchase and deliver US farm products instead
of buying commodities on the world market with implications for the efficiency
of development aid and dependence of poor countries (Grossman-Cohen 2012).
Environmental quality and inter-generational justice have become major public concerns, pointing to sustainability as a relevant reference point for lobbying.
Firms have repeatedly resisted environmental legislation, or have steered policymakers toward soft, market-based solutions (Kolk and Pinkse 2007), mostly with
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the argument that otherwise competitiveness is in danger. Others have started
efforts to internalise environmental externalities. Some have not only sought
compliance with laws, but have actively promoted sustainability policies on
the part of governments, for example the Corporate Leaders Group on Climate
Change founded by chief executives of several large firms in the UK that have
lobbied for clearer policies for carbon emissions (Visser and Adey 2007).
The protection of human rights has been increasingly accepted, not solely
as the responsibility of states, but as a complementary corporate duty (Kobrin
2009; Wettstein 2012; Arnold 2010; Cragg 2010). Human rights are global,
‘inalienable rights of all members of the human family’ (UN General Assembly
1948). They are moral rights and have gained a legal basis through international
covenants such as the Universal Declaration of Human Rights. The human
rights concept is not without ambiguity due to its non-binding, vague character and the primarily Western origin of the idea (Pollis and Schwab 1979). Yet,
firms are called upon to guarantee that human rights are not violated through
business decisions and activities and to ensure coherency of policy positions
and human rights. Particularly multinational corporations (MNCs) that operate
across various legal, ethical and cultural systems will find human rights helpful
to guide lobbying activities. At the same time these firms are likely to encounter dilemmas, e.g. when human rights obligations clash with host country
traditions. Some firms lobby proactively to promote human rights policies. For
instance, information and communication technology firms such as Google,
Microsoft and Yahoo founded the Global Network Initiative in 2008 to urge
governments to abstain from human rights infringements especially regarding
freedom of expression and privacy.
Pillar (3) struggles with several difficulties: First, societal values and objectives have a highly abstract nature, what they precisely entail leaves leeway for
interpretation and needs to be concretised in any given situation. Second, consequences of any proposed policy have to be weighed ex ante and can be hard
to predict. Third, contradictory impacts on various values and objectives are
possible. For example, high employment rates and environmental protection
are considered to be desirable, nevertheless both may come into conflict when
strict environmental regulation threatens the competiveness of the economy.
The basis: an ethical, democratic process
This part of the model posits that a responsible firm ensures the process of
lobbying follows ethical criteria and democratic values. A number of countries
provide legal frameworks that aim at making lobbying more transparent and
compliant to ethical rules by requiring measures such as the registration of
lobbyists or the disclosure of political donations. Yet, these rules often leave
considerable loopholes, e.g. by excluding the lobbying activities of individual
firms or setting high thresholds regarding notifiable donations. Firms need to
follow these legal requirements, but it is essential to go beyond by establishing
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an ethical, democratic dialogue on policy issues. Only if firms provide balanced,
reliable information and eschew ethically doubtful methods such as manipulation and deception will they be recognised by policy-makers as credible players
in the lobbying field. Besides instrumental considerations, the need for an ethical, dialogue-oriented process of lobbying is normatively justified by discourse
ethics, as developed among others by the German philosopher Jürgen Habermas. His ideas have not only influenced political CSR, they have been suggested
to guide firms when engaging with stakeholders (Zakhem 2008; Scherer and
Palazzo 2007, 2011; Gilbert and Rasche 2007; Foster and Jonker 2005; Smith
2004) and may be applied to lobbying as well (Anastasiadis 2010).
In extension of the ideas developed by ethical lobbying scholars (Grimaldi
1998; Hamilton and Hoch 1997), discourse ethics deliver moral principles
that help to design the responsible lobbying process, constituting the following
criteria:
tt Providing
accurate information in a balanced perspective and eschewing
problematic means such as deception, coercion or threats. Lobbyists often
have an informational advantage over policy-makers which may not be
abused by misrepresenting or selectively providing information. Sometimes firms try to hinder legislation by adverting policy-makers to the possibilities of relocating production and pointing to probable job losses in case
of stricter regulation. While the firm must be allowed to point out real risks,
arguments that take the form of threats are unacceptable
tt Seeking
mutual understanding with policy-makers. Habermas propagates
communicative action, i.e. an exchange of communicative acts aiming at
mutual understanding, rational agreement, or consent, as opposed to strategic action designed to achieve private ends without seeking mutual understanding (Habermas 1985). This can be achieved in the lobbying process by
explaining the firm’s position, listening and considering alternative arguments, giving earnest responses and convincing with the aim of facilitating
broadly accepted decisions. Prerequisite for mutual understanding is accepting policy-makers as legitimate actors. However, mutual understanding is
not always possible e.g. when policy-makers refuse to interact with firms
tt Considering
the ideal of a free discussion among all affected. Habermas
propagates the ideal of a power-free dialogue among all affected where only
the better argument prevails (Habermas 1990). This approach contradicts
the traditional view on lobbying completely, but is in line with Pillar (2) that
suggests the involvement strategy/symmetric two-way communication as
one possible way to incorporate stakeholder interests. Hitherto, firms tend
to avoid public policy debates, often based on the argument that an issue is
too complicated to be understood by non-experts. Complex issues do not
release the firm from its responsibility to seek understanding, but rather call
for explaining the matter in a balanced, comprehensible way to stakeholders.
Yet, a free discussion is not always possible, e.g. when confidential information is involved. A broad dialogue is also hampered when stakeholders refuse
a constructive debate, e.g. confrontationalist NGOs who prefer to exploit
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scandals and exercise protest. Moreover, power relations are present in the
policy-making process and impact the leverage of an argument. The power of
firms, especially large MNCs, has heavily increased in the wake of globalisation, deregulation and privatisation and is reflected in immense resources
and revenues. Although increased power goes along with increased responsibilities, firms are tempted to abuse their power in the lobbying process,
e.g. by providing financial incentives in order to gain better access to policymakers and thus curbing democratic participation opportunities.
tt Ensuring lobbying transparency as far as possible. The public debate on respon-
sible lobbying is often limited to transparency aspects. Yet, past research has
shown that compromise becomes less likely in a public setting, since lobbyists
and policy-makers fear to be accused of giving in too early (Naurin 2007). Opacity allows for greater flexibility, honesty and trust in the interactions between
policy-makers and business (Anastasiadis 2010: 55-57), and facilitates effective
problem solving. On the other hand, a free discussion among all affected necessitates publicly available information which can be achieved e.g. by publicising
position papers and explaining policy positions in CSR reports. There is no
general rule for the appropriate level of transparency: firms have to balance the
necessity to involve affected parties and to keep specific information private on
a case-by-case basis. When a certain degree of opacity is inevitable, a sense of
responsibility is particularly crucial. The New York Times rule might provide
guidance, i.e. considering what the reaction would be if the firm’s lobbying
activities were publicised (cf. Hamilton and Hoch 1997).
Conclusion
The above presented multidimensional model of responsible lobbying provides
an encompassing understanding of the subject with due regard to its highly
complex nature. All parts are interdependent, yet none is redundant. Pillar (1)
offers a concrete reference point by focusing on the firm’s CSR commitment
and alignment with lobbying. However, this part has its downsides: Although
a firm’s CSR policy should incorporate stakeholders’ and broader society’s
interests, it often takes a narrow firm perspective. Moreover, some firms lack a
clearly articulated CSR commitment, but still act responsibly due to internalised
values or institutional conditions. Pillar (2) complements the model by pointing
to the needs and perspectives of stakeholders. Nonetheless, some stakeholders
are more likely to be heard than others and non-humans and future generations
cannot raise a voice at all. Pillar (3) balances this caveat and allows for departing from a firm-centric view by incorporating society’s objectives and values.
Further, the requirement of an ethical, democratic dialogue ensures that the
lobbying process is responsible.
The presented model lays the basis for determining the degree of responsible
lobbying and is of normative value, as it constitutes what firms ought to do. It
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provides an important contribution to the newly emerging field of research that
integrates CSR and lobbying literature with benefits for both fields. Nevertheless, the model comes with caveats. It leaves unavoidable leeway for interpretation in concrete situations. Various parts can constitute conflicting criteria and
there are inherent dilemmas even within each of the four parts of the model,
e.g. the possibly conflicting societal objectives and values of Pillar (3). For
practitioners, fulfilling all the requirements might appear very challenging,
if not unreachable. Responsible lobbying is not likely to happen easily and at
times may be a self-contradictory concept. There is no definite separation line
between responsible and irresponsible lobbying: the parts of the model are not
to be tested in a dualistic yes/no approach, but rather on a continuum scale with
various degrees of fulfilment. The model helps to raise awareness and enables
firms to identify weaknesses and strengths and detect areas that necessitate
further learning and development. Further studies are required to investigate
empirically awareness and practice of responsible lobbying. The paper may also
trigger research on internal and external factors that facilitate responsible lobbying such as the institutional setting, issue and firm characteristics.
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ISO 26000
Three CSR Messages for Management Education*
Lars Moratis
Open University, the Netherlands
Corporate social responsibility (CSR) has rooted firmly both as an academic discourse
and as part of modern business strategy. Many business schools worldwide have
consequently integrated CSR and sustainability-related topics into their management
programmes. Accreditation schemes and initiatives such as the United Nations Principles for Responsible Management Education aim to further this integration. ISO
26000, a guidance standard for organisations wanting to implement CSR that was
launched in 2010, offers some valuable additional CSR messages for management
educators, even though it is not primarily focused on business schools or management education. This article identifies three key CSR messages that can be derived
from ISO 26000, related to the revived role of morality in business, the importance
of idiosyncratic CSR, and the enhancement of the credibility of CSR claims.
OO Management
education
OO Business
schools
OO Corporate social
responsibility
OO Sustainability
OO Standards
OO ISO 26000
[email protected]
<www.ou.nl
Lars Moratis is affiliated with the Open University in the Netherlands. He has
published several books and articles on CSR and is finishing his PhD
dissertation. Among his current research interests are the credibility of
corporate CSR claims, the adoption of and competition between CSR
standards, multi-stakeholder governance and responsible management
education.
* The author wishes to express his thanks to an anonymous reviewer for the suggestions
that helped to improve this article.
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C
orporate social responsibility (CSR) has rooted firmly both as an
academic discourse and as part of modern business strategy (e.g. Carroll 1999; Lee 2008; Porter and Kramer 2006, 2011; Orlitzky et al.
2011). According to the recent surveys of The Aspen Institute (2012),
many business schools have consequently integrated CSR and sustainabilityrelated topics into their management programmes in a variety of ways. The
global business school community has expressed interest in and ambition with
CSR through their adherence to the United Nations Principles for Responsible
Management Education (PRME). Accreditation schemes and initiatives such as
the PRME aim to further the uptake of CSR and function as institutionalising
forces making it a key focus area for the development of current and future
generations’ corporate managers and leaders (Waddock et al. 2011).
One of the most recent and perhaps most ambitious projects in the realm of
institutionalising CSR has been the development of the ISO 26000 standard.1
This global guidance standard, launched in 2010, provides organisations with
a set of widely agreed-upon CSR principles and topics to offer them guidance
in the process of implementation. While ISO 26000 is neither specifically
focused on business schools nor relates particularly to management education,
it holds several valuable CSR messages for management educators. This article
identifies three such messages that can be derived from ISO 26000, which find
their roots in the dominantly moral conception of CSR by the standard, the
importance of idiosyncratic CSR approaches by firms and the enhancement of
the credibility of corporate CSR claims.
The article first addresses CSR in the context of management education and
focuses on some recent academic contributions on this intersection. Next, the
article briefly introduces the ISO 26000 standard and its most salient characteristics in order to acquaint the reader with this comprehensive CSR standard.
Third, it presents the three messages for management educators that can be
derived from the standard. The article ends with a conclusion and a brief discussion of implications for management educators.
CSR in management education: current patterns
Although its roots can be traced back to well into the 20th century (Dodd 1932;
see Avi-Yonah 2005), CSR has especially become a major topic in management
literature over the past two decades. Defined by Carroll (1991) as the conduct of
1 It should be noted that the ISO 26000 standard uses the abbreviation SR, indicating social
responsibility, instead of the widely used CSR. In doing so, the standard aims to convey
the message that the standard applies to organisations of all sorts and sizes (including
business schools) and not just to companies alone. The use of the abbreviation CSR has
however been accepted in a variety of contexts including public and civil society organisations. This article therefore uses the term CSR, thereby not implying that it refers only to
companies nor suggesting that only companies have social responsibilities.
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a business in a way that it is economically profitable, law-abiding, ethical and
socially supportive, CSR is nowadays viewed as a legitimate academic domain
on its own with an extensive and diverse discourse (Lockett et al. 2006;
Banerjee 2008). Within this discourse various interpretations and approaches
of CSR have come into existence, including instrumental, political, integrative
and ethical approaches (Garriga and Mele 2004). Modern-day interpretations
of CSR, such as Elkington’s (1999) triple-bottom-line approach and Porter and
Kramer’s (2011) shared value concept, however, tend to emphasise instrumental or strategic approaches in which corporate responsibilities are conditioned
by profit motivations (Cochran 2007; Dahlsrud 2008; Lee 2008). Many corporations have now adopted a wide range of CSR practices, have started CSR
projects, subscribe to international and intergovernmental CSR initiatives such
as the United Nations Global Compact (12,065 as from December 2013, www
.unglobalcompact.org), and publish sustainability reports in conformance with
the guidelines of the Global Reporting Initiative (5,789 as from December 2013,
www.globalreporting.org).2
The ever-growing attention to CSR in the business and academic context, also
as a result of various corporate fraud scandals, the role of the finance sector in
causing the current economic crisis, the role of industry in accelerating climate
change and human tragedies such as the 2013 Bangladeshi factory collapse,
has led management programmes at business schools to incorporate CSR and
sustainability-related topics into their curricula in order to equip managers
effectively for the new business environment (cf. Doyle et al. 2011). Notably,
business schools themselves have also been scrutinised for their role in the
societal effects of irresponsible and unsustainable behaviour, the resulting crisis
of public confidence in corporations and even the current economic crisis (Frederick and Swanson 2002; Gioia 2002; Podolny 2009; Rasche and Escudero
2010). Business schools have hence been challenged with a credibility issue
and their legitimacy as institutions that educate a new generation of corporate
leaders has been compromised.
The business school community has responded to this scrutiny by integrating CSR and sustainability into management programmes (Raufflet 2013). In
a survey of European business schools, Matten and Moon (2004) found that
almost half of the institutions offered optional courses in CSR or related fields
such as citizenship, governance, and business ethics, while nearly 40% of
business schools had embedded these concepts in existing courses. Research
by Christensen et al. (2007) into sustainability education among leading global
MBA programmes showed more than 70% of these programmes offering at
least one module on sustainability-related topics. Current figures on the attention to CSR in management education appear to somewhat conflict. While Doh
and Tashman (2012) recently reported on a relative absence of corporate social
responsibility, sustainability, and sustainable development in business school
faculty teaching and coursework, The Aspen Institute’s Beyond Grey Pinstripes
2 www.unglobalcompact.org; www.globalreporting.org (both accessed 21 May 2013).
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2011–2012 report, based on a global survey among MBA programmes, paints
another picture. The latter report shows a 38% increase in the number of
mandatory courses in finance departments that include CSR content. Also, the
percentage of schools that require students to take courses dedicated to business and society issues has been steadily increasing from 34% in 2001 to 79%
in 2011 (The Aspen Institute 2012).
Realising responsible business schools
Although transferring and creating knowledge through management education
and research are core mechanisms for business schools to express their commitment to CSR and contribute to responsible and successful business and,
ultimately, sustainable development, their social responsibilities extend well
beyond this. Burgoyne (1972) has in this respect pointed at the important tasks
of developing managerial attitudes and socialising managers within the roles
of business schools. From a CSR perspective, business schools should hence
confront their students with balanced and critical views regarding the role of
business in society rather than merely business case approaches towards CSR
and include ethical approaches to understanding corporate behaviour rather
than just reproducing or miming reality (Cornuel 2005). As Doyle et al. (2011:
9) write:
A responsible business school makes social progress its central purpose, through
enabling students and staff to contribute significantly to that goal. It involves the
integration of social, environmental and ethical considerations into the core strategy
and operations of the school, and collaboration to create a supportive context for
such integration to be sustainable in the long term.
In the context of other responsibilities of business schools the authors suggest that business schools should, among other things, upgrade admissions
procedures, fee structures, scholarships, advertising and outreach, to improve
diversity of students and their ability to do progressive work upon graduating;
incorporate considerations of social, environmental, and ethical issues into the
operations of the organisation (i.e. practices at work), including core issues such
as executive compensation or student welfare; develop policies and procedures
for private donations or consulting fees to be received transparently and in line
with the mission of the organisation and without threatening the success of the
organisation’s other activities; and encourage and support staff to engage helpfully with issues affecting the local community, using their particular talents,
either as volunteers or in their work for the school. When business schools take
into account these issues their purpose extends from a narrow focus comprising education and research from a classical view on management towards a
broad, integrated focus that additionally comprises the socialisation of (future)
managers, contributing to the development of the management profession,
critical views on business–society relations, ethical attachment rather than
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merely business case approaches to CSR and considering their own business
operations and social embeddedness (cf. Morsing and Rovira 2011).
Standards may play an important role in realising this integrated view of
business schools and management education. Accreditation standards in the
field of management education, such as those of the AACSB, EFMD and AMBA
have contributed to the institutionalisation of CSR in management education
(Schlegelmilch and Thomas 2011; Forray and Leigh 2012).3 Although a survey of
the then European Academy of Business in Society showed that the inclusion of
CSR criteria in programme accreditation as well as in business school rankings
are major drivers for integrating CSR in management education (Gardiner and
Lacy 2005), Crane (2004) highlighted that the ethical content in the management education curriculum has been diminishing to minimum requirements
by accreditation agencies. In 2007, the Principles for Responsible Management
Education (PRME), an initiative from the United Nations Global Compact, were
launched. The PRME is an aspirational set of six principles through which
business schools can voluntarily express their commitment to the design and
delivery of responsible management education. While the principles do not
offer a CSR management framework for business schools, they may serve as a
standard for the development and implementation of responsible management
education. Three years after its inception, 323 business schools worldwide had
signed the PRME. To date (December 2013), 521 organisations have subscribed
to them (www.unprme.org), making the PRME an important and widely supported standard for CSR in management education.4
The PRME however does not provide a CSR management framework for
business schools and arguably falls short of addressing all issues related to
truly integrated views of responsible business schools such as expressed by
Doyle et al. (2011). Being the most recent and perhaps most ambitious project
in CSR standardisation, the ISO 26000 standard may complement the PRME
in important ways. While it was not the main purpose of this standard to contribute to discussions on developing management education for CSR nor is
the standard specifically focused at business schools, ISO 26000 does contain
several valuable messages for management educators in the field of CSR which
can complement the insights offered by the PRME. Before addressing these
lessons, the next section provides background information on ISO 26000 and
introduces its contents and structure.
3 AACSB, Association to Advance Collegiate Schools of Business; EFMD, European Foun-
dation for Management Development; AMBA, Association of MBAs.
4 www.unprme.org (accessed 21 May 2013).
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ISO 26000 in a nutshell
The ISO 26000 standard is a CSR guidance standard for organisations which
was launched in November 2010 after a lengthy development process in a
global multi-stakeholder approach led by the International Organization for
Standardization (ISO). The development process included representatives from
over 90 countries, 40 international or broadly based regional organisations and
more than 400 nominated experts from both academia and practice, making
it an example of a transnational norm-building network that comprises a new
nexus of voice and entitlement beyond the level of nation-states (Mueckenberger and Jastram 2010).
The standard provides international consensus on the meaning of CSR and
on the CSR issues organisations should address and can be viewed as how the
world views CSR in this day and age. ISO 26000 ‘provides guidance on the
underlying principles of social responsibility, recognising social responsibility
and engaging stakeholders, the core subjects and issues pertaining to social
responsibility and on ways to integrate socially responsible behaviour into the
organisation’ (ISO 2010: vi). Although Hahn (2012) concludes that the application in practice of ISO 26000 is particularly relevant for companies that are
in an early stage of CSR development, the objective of the standard is to assist
all types of organisations, irrespective of size, sector and phase of development
of their CSR initiatives, with operationalising and implementing CSR. It does
so by translating CSR principles (including accountability, transparency, and
respect for international norms of behaviour), CSR core subjects (including
organisational governance, consumer issues, and community involvement and
development) and CSR issues (including due diligence, sustainable resource
use, and fair competition) into suggestions for actions and by providing guidance and best practices in the field of CSR on various topics. ISO 26000 furthermore addresses several issues related to the CSR implementation process and
communicating CSR and provides a comprehensive reference to CSR-related
standards, guidelines and other relevant documents that were used in the development of the standard.5 As opposed to other well-known ISO management
standards such as ISO 14001 for environmental management and ISO 9001 for
quality management, ISO 26000 does not include requirements for a management system and is not intended for certification. The values-led standard has
been viewed as an evolutionary step in standards innovation, as it focuses on
‘doing the right things’ next to ‘doing things right’ (Hahn 2012).
In 2012, the standard had already been translated into 24 languages and had
been adopted by 64 countries, not including 15 countries that are in the process
of adopting the standard, and the demand in these countries for ISO 26000 is
increasing (ISO 2012).
Notably, ISO 26000 encourages organisations to determine jointly with stakeholders their social responsibilities by taking into account their organisation
5 This reference does not include the PRME.
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type, their context, sphere of influence and their ambitions. As such, it recognises the contingent and essentially contested nature of CSR (Okoye 2009) and
the societal embeddedness of organisations. In addition, the standard seems
to differ from most other contemporary conceptions of CSR. While most modern conceptions of CSR model the business–society relationship through an
instrumental strategic frame and emphasise the business opportunity for yielding economic returns by addressing social responsibilities (see e.g. Lee 2008),
ISO 26000 adopts a more normative approach to the social responsibilities of
organisations (Moratis 2013).
Three CSR lessons from ISO 26000
Bearing the aforementioned observations on ISO 26000 in mind, the standard
not only provides practical guidance to businesses, but may house several lessons for management educators and business schools as well. The three lessons
or messages from ISO 26000 for management educators and business schools
addressed here, respectively, pertain to a philosophical stance on CSR, the process of determining social responsibilities and substantiating a company’s CSR
commitments. They are:
1.
The revived role of morality in business
2.
The importance of idiosyncratic CSR
3.
Enhancing the credibility of CSR claims
The revived role of morality in business
As noted earlier, the current instrumental or strategic view on CSR dominates
both business practice and academic discourse. Despite growing attention for
‘more benign’ or ‘conscious’ forms of capitalism that are based on a recognition
of societal values, morality and even spirituality rather than a focus on profit
maximisation alone (e.g. Karns 2011; O’Toole and Vogel 2011), the vast majority
of CSR literature assumes and emphasises the convergence of business interests and societal concerns. Dahlsrud (2008) showed the economic dimension to
be an integral part of almost all CSR definitions. Illustrative is the revised definition propagated by the European Commission as ‘the responsibility of enterprises for their impacts on society…with the aim of maximising the creation
of shared value for their owners/shareholders and for their other stakeholders
and society at large’ (European Commission 2011: 6). Recently, Marais (2012)
showed that normative CSR rhetoric indeed is rarely used by CEOs.
Interestingly, the ISO 26000 definition of CSR does not include a direct
relationship between the ecological and social dimensions of business on the
one hand and the economic dimension on the other and thus marks a deviation
from a trend. Its definition of CSR reads:
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[T]he willingness of an organization to incorporate social and environmental considerations in its decision making and be accountable for the impacts of its decisions
and activities on society and the environment. This implies both transparent and
ethical behaviour that contributes to sustainable development, is in compliance
with applicable law and is consistent with international norms of behaviour. It
also implies that social responsibility is integrated throughout the organization, is
practised in its relationships and takes into account the interests of stakeholders
(ISO 2010: 6).
This is often overlooked in literature on ISO 26000, perhaps as it may seem
a rather trivial thing, which it actually is not (Moratis 2013). ISO 26000 also
does not explicitly state that making or maximising profits is part of a company’s
responsibility to society, in contrast to Friedman more than 40 years ago, who
said it was business’s only responsibility (Friedman 1970). ISO 26000 hence
places morality back in the heart of CSR discourse and emphasises business ethics as a normative framework for understanding and guiding business behaviour. In fact, the standard almost views economic effects of social responsibility
as a second order objective—not something a company should consciously
strive for per se and certainly not as a precondition for an organisation to engage
in CSR activities in the first place.
The importance of idiosyncratic CSR
By providing conceptual and semantic common ground as well as systematic approaches towards CSR, CSR standards may offer organisations clear
benefits, as CSR has been regularly viewed as a rather vague and amorphous
concept (Fombrun 2005; Ingenbleek et al. 2007; Castka and Balzarova 2008;
Mueller et al. 2009; Moratis and Tatang 2013). However, for organisations to
be successful with CSR, several scholars have argued that they should engage
in a sensemaking process in order to formulate organisation-specific interpretations of CSR that take into account an organisation’s unique characteristics
and that balance business pressures (Cramer et al. 2006; Murillo and Lozano
2006; Eccles et al. 2012).
One could expect that any effort aimed at standardising CSR in general and
ISO 26000 in particular would not be able to do justice to this starting point
as such initiatives may advocate a one-size-fits-all approach. This is, however,
a salient aspect of ISO 26000, as the standard does encourage and allow any
organisation using the standard to formulate an organisation-specific approach
to CSR while the standard itself is the result of a standardisation process. ISO
26000 recognises the importance of formulating idiosyncratic approaches to
CSR (Van Marrewijk 2003; Okoye 2009) and the standards caters for this. The
text of the standard bears witness to this:
To provide an informed basis for integrating social responsibility throughout the
organization, it is useful for the organization to determine how its key characteristics relate to social responsibility. This review will also help in determining the
relevant issues of social responsibility within each core subject and in identifying
the organization’s stakeholders (ISO 2010: 69).
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In addition, ISO 26000 clearly denotes that ‘(e)very core subject, but not
necessarily each issue, has some relevance for every organisation’ (ISO 2010:
15), making the notion of materiality (see e.g. Zadek and Merme 2003; Manetti
and Becatti 2009) central to its interpretation of CSR. Through its emphasis
on organisation-specific impacts on the environment and society the standard
encourages every organisation applying the standard to its own operations to
conscientiously analyse its own activities, impacts and stakeholder network in
which it is embedded in order to formulate an approach to CSR that fits well with
organisational characteristics, rather than using the contents of the standard
for a tick box exercise. ISO 26000 hence stimulates contextual interpretation
of CSR rather than standardised CSR strategy formulation, requiring organisations to achieve an idiosyncratic fit between the nature of their operations and
their societal context.
Enhancing the credibility of CSR claims
Surging public interest in CSR and the consequent business benefits that
companies can achieve by communicating their commitments to CSR have
led overly opportunistic companies to pursue CSR as merely a marketing or
public relations tool (Dawkins 2005; Jones et al. 2008; Gallego-Alvarez et al.
2010; Minor and Morgan 2011). Claiming a concern is very different from actually exhibiting that concern through actions taken (Crowther 2004). Increased
transparency and visibility of business behaviour (e.g. through media coverage and social media) poses companies with the risk of reputational damage
through exposed greenwashing that may lead to declined trustworthiness,
cynicism and scepticism towards the company and, consequently, a lack of
credibility (Fombrun 1996; Bae and Cameron 2006; Jahdi and Acikdilli 2009;
Elving 2012).
ISO 26000 indeed recognises the importance of substantiating CSR claims
in order to enhance an organisation’s CSR commitments at several points in
the standard’s text. The standard dedicates a separate section to this topic and
says in this respect:
There are various ways in which an organization establishes its credibility. One
is stakeholder engagement, which involves dialogue with stakeholders and is an
important means of increasing confidence that the interests and intentions of all
participants are understood. This dialogue can build trust and enhance credibility…
Organizations may enhance their credibility by making relevant commitments
regarding their impacts, taking appropriate action and assessing performance and
reporting on progress and shortcomings (ISO 2010: 78-79).
ISO 26000 suggests that organisations can also enhance the credibility of
their CSR claims by participating in specific certification schemes, by creating
(stakeholder) advisory or review committees, and joining associations or peer
organisations, including sector initiatives. The standard notes that CSR claims
‘can be verified through internal review and assurance. For enhanced credibility, these claims may be verified by external assurance. Where appropriate,
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communications should provide opportunities for stakeholder feedback’ (ibid.,
p. 77). Of course, not only communicating an organisation’s commitment to
CSR is subject to considerations of credibility, but also characteristics of the
method (type of communication and communication channels used) and characteristics of this communication, such as its timeliness, the reliability of its
contents and its accuracy, are of importance in this respect.
Conclusion and implications
This article has argued that the global CSR standard ISO 26000 contains
several important messages for management educators and business schools.
Management educators in the field of CSR should reckon with these messages
in order to effectively contribute to the development of managers who are able
to succeed in the modern business environment that is increasingly characterised by societal demands that are placed on business. In addition to the
practical guidance that the standard offers to organisations (including for business schools that have subscribed to the PRME), it sheds light on several more
fundamental CSR-related topics that management educators for CSR should
take to heart when educating (future) managers on CSR and broader views on
the importance of CSR to the operations of business schools. These include the
importance of morality in CSR discourse and practice, the idiosyncrasy of CSR
strategy formulation and the enhancement of the credibility of organisational
CSR claims.
The predominantly normatively oriented contents of ISO 26000 reflect a current stream in thinking about the business–society relationship that propagates
stewardship approaches to CSR, conscious capitalism and business spirituality
over the strategic approaches to CSR that are dominant in CSR discourse. The
standard hence not only offers a reference document for management educators to teach about CSR implementation, but also to engage in dialogue and
discussion on corporate purpose (cf. Handy 2002). It may consequently also
challenge the taken-for-granted roles and responsibilities of business schools
in society and make a case for more moral approaches to management education.6 The standard may thus serve as a useful source of practical and academic
inspiration and reflection for management (education) professionals and help
inform sustainability-oriented frameworks to teach MBA students (Stubbs
and Cocklin 2007). Also, the standard may be used by business schools as a
guidance for the implementation of CSR beyond the integration in educational
and research programmes and contribute to a broader understanding of the
importance of business schools in achieving sustainable society. This may
include extending the roles and responsibilities of business schools towards the
6 See the book by Morsing and Rovira (2011) for perspectives on the roles of business schools
in society.
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development of the management profession and the involvement of business
schools in actively contributing to find solutions to local sustainability problems
with the knowledge, skills and experiences they have available through their
faculty, staff and students. The social responsibility of management educators
and business schools is arguably not confined to education and research and,
as Doyle et al. (2011: 24) have noted, ‘the challenge of transforming management education is…highly systemic, broadly institutional, and deeply personal’.
Hence, business schools that have adopted the PRME or have subscribed to
other aspirational principles may benefit from adopting ISO 26000 as a complementary standard as well.
Another implication of the messages addressed by ISO 26000 is that it may
lead management educators to contemplate and inspire action on their own
credibility. The standard raises a perhaps inconvenient question: Can one credibly teach management education in an educational institution that itself has
no solid commitment to CSR? It may not be the primary responsibility of management educators per se to forge the alignment of the broader institutional
commitment and the contents and delivery of its educational programmes, but
clearly there is a credibility issue at stake here for management educators. Some
business schools have integrated CSR into their offerings from an identity or
religious perspective (More and Todarello 2013), but many are doing so from a
more strategic orientation to educate managers for the new business realm and
as a response to corporate scandals. Integrating CSR in management education,
it can be argued, also requires an institution-wide integration of CSR in order
not to compromise the credibility of either form of implementation. It should
be noted that for business schools, as well as for other organisations aspiring
to the effective integration of CSR, an idiosyncratic approach to CSR is key.
Hopefully, the messages conveyed by ISO 26000 may contribute to inspiring
management education and business schools alike into developing into forces
for transformation towards a more sustainable society.
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About the Journal of Corporate Citizenship
The Journal of Corporate Citizenship ( JCC ) is a multidisciplinary peer-reviewed journal that focuses on
integrating theory about corporate citi­zen­ship with management practice. It provides a forum in which the
tensions and practical realities of making corporate citizenship real can be addressed in a reader-friendly, yet
conceptually and empirically rigorous format.
JCC aims to publish the best ideas integrating the theory and practice of corporate citizenship in a format that is
readable, accessible, engaging, interesting and useful for readers in its already wide audience in business, consul­
tancy, government, NGOs and academia. It encourages practi­cal, theoretically sound, and (when relevant)
empirically rigorous manuscripts that address real-world implications of corporate citizenship in global and
local contexts. Topics related to corpo­rate citizenship can include (but are not limited to): corporate respon­
sibility, stakeholder relationships, public policy, sustainability and environment, human and labour rights/
issues, governance, account­abil­ity and transparency, globalisation, small and medium-sized enter­prises
(SMEs) as well as multinational firms, ethics, measurement, and specific issues related to corporate citizen­
ship, such as diversity, poverty, education, information, trust, supply chain management, and prob­lematic or
constructive corporate/human behaviours and practices.
In addition to articles linking the theory and practice of corporate citizenship, JCC also encour­ages innova­
tive or creative submissions (for peer review). Innovative submissions can highlight issues of corporate
citizenship from a critical perspective, enhance practical or conceptual understanding of corporate citizenship,
or provide new insights or alternative perspectives on the realities of corporate citizenship in today’s world.
Innovative submissions might include: critical perspectives and controversies, photography, essays, poetry,
drama, reflections, and other innovations that help bring corporate citizenship to life for management prac­
titioners and academics alike.
JCC welcomes contributions from researchers and practi­tioners involved in any of the areas mentioned
above. Manuscripts should be written so that they are comprehensible to an intel­ligent reader, avoiding jargon,
formulas and extensive methodological treatises wherever possible. They should use examples and illustra­
tions to highlight the ideas, concepts and practical implications of the ideas being presented. Theory is
important and necessary; but theory—with the empirical research and conceptual work that supports
theory—needs to be balanced by integration into practices to stand the tests of time and usefulness. JCC aims
to be the premier journal to publish articles on corporate citizenship that accomplish this integration of theory
and practice. We want the journal to be read as much by executives leading corporate citizenship as it is by
aca­demics seeking sound research and scholarship.
JCC appears quarterly and includes peer-reviewed papers by leading writers, with occasional reviews, case
studies and think-pieces. A key feature is the ‘Turning Points’ section. Turning Points are commentaries,
controversies, new ideas, essays and insights that aim to be provoca­tive and engaging, raise the important
issues of the day and provide observations on what is too new yet to be the subject of empirical and theoretical
studies. JCC continues to produce occasional issues dedicated to a single theme. These have included ‘Textiles,
Fashion and Sustainability’, ‘Designing Management Education’, ‘Managing by Design’, ‘Innovative Stake­
holder Engagement’, ‘Landmarks in the History of Corporate Citizenship’, ‘Is Corporate Citizenship Making
a Difference?’, ‘The Corporate Contribution to One Planet Living in Global Peace and Security’, ‘Corporate
Social Responsibility in Emerging Economies’, ‘Corporate Citizenship in Latin America’ and ‘Corporate
Citizenship in Africa’.
Editors
General Editor:
Malcolm McIntosh, Asia-Pacific Centre for Sustainable Enterprise, Griffith Business School, Australia; email: [email protected].
Regional Editor:
North American Editor: Sandra Waddock, Professor of Management, Boston College, Carroll School of Management, Senior
Research Fellow, Center for Corporate Citizenship, Chestnut Hill, MA 02467 USA; tel: +1 617 552 0477; fax: +1 617 552 0433;
email: [email protected]
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Notes for Contributors
Submissions
All content should be submitted via online submission. For more information see the journal homepage at www.greenleafpublishing.com/jcc.
The form gives prompts for the required information and asks authors to submit the full text of the paper, including the title,
author name and author affiliation, as a Word attachment. Abstract and keywords will be completed via the online submission
and are not necessary on the attachment.
As part of the online submission authors will be asked to tick a box to state they have read and adhere to the Greenleaf–GSE
Copyright Guidelines and have permission to publish the paper, including all figures, images, etc which have been taken from
other sources. It is the author’s responsibility to ensure this is correct.
In order to be able to distribute papers published in Greenleaf journals, we need signed transfer of copyright from the authors.
We are committed to a liberal and fair approach to copyright and accessibility, and do not restrict authors’ rights to reuse their
own work for personal use or in an institutional repository.
A brief autobiographical note should be supplied at the end of the paper including:
• Full name
• Affiliation
• Email address
• Full international contact details
Please supply (via online submission) an abstract outlining the title, purpose, methodology and main findings. It’s worth
considering that, as your paper will be located and read online, the quality of your abstract will determine whether readers go on
to access your full paper. We recommend you place particular focus on the impact of your research on further research, practice
or society. What does your paper contribute?
In addition, please provide up to six descriptive keywords.
Formatting your paper
Headings should be short and in bold text, with a clear and consistent hierarchy.
Please identify Notes or Endnotes with consecutive numbers, enclosed in square brackets and listed at the end of the article.
Figures and other images should be submitted as .jpeg (.jpg) or .tif files and be of a high quality. Please number consecutively
with Arabic numerals and mark clearly within the body of the text where they should be placed.
If images are not the original work of the author, it is the author's responsibility to obtain written consent from the copyright
holder to them being used. Authors will be asked to confirm this is the case by ticking the box on the online submission to say
they have read and understood the Greenleaf–GSE copyright policy. Images which are neither the authors’ own work, nor are
accompanied by such permission will not be published.
Tables should be included as part of the manuscript, with relevant captions.
Supplementary data can be appended to the article, using the form and should follow the same formatting rules as the main
text.
References to other publications should be complete and in Harvard style, e.g. (Jones, 2011) for one author, (Jones and Smith,
2011) for two authors and (Jones et al., 2011) for more than two authors. A full reference list should appear at the end of the
paper.
• For books: Surname, Initials (year), Title of Book, Publisher, Place of publication.
e.g. Author, J. (2011), This is my book, Publisher, New York, NY.
• For book chapters: Surname, Initials (year), “Chapter title”, Editor’s Surname, Initials, Title of Book, Publisher, Place of
publication, pages (if known).
• For journals: Surname, Initials (year), “Title of article”, Title of Journal, volume, number, pages.
• For conference proceedings: Surname, Initials (year), “Title of paper”, in Surname, Initials (Ed.), Title of published
proceeding which may include place and date(s) held, Publisher, Place of publication, Page numbers.
• For newspaper articles: Surname, Initials (year) (if an author is named), “Article title”, Newspaper, date, pages.
• For images:
Where image is from a printed source—as for books but with the page number on which the image appears.
Where image is from an online source—Surname, Initials (year), Title, Available at, Date accessed.
Other images—Surname, Initials (year), Title, Name of owner (person or institution) and location for viewing.
t To discuss ideas for contributions, please contact the General Editor: Malcolm McIntosh, Asia-Pacific Centre for Sustainable
Enterprise, Griffith Business School, Australia; email: [email protected].
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Issue 53 March 2014
Editorial
Malcolm McIntosh
Professor and Director, Asia Pacific Centre for Sustainable Enterprise,
Griffith University, Queensland, Australia
Turning Point
Large Systems Change: Producing the Change We Want
Steve Waddell with Joe Hsueh, Anna Birney, Amir Khorsani and Wen Feng
GOLDEN for Sustainability Energy Ecosystem Labs, USA
CSR: Will it Change the World?
Hope for the Future: An Emerging Logic in Business Practice
Oliver F. Williams
University of Notre Dame, USA
The Contribution of the UN Global Compact towards
the Compliance of International Regimes: A Comparative
Study of Businesses from the USA, Mozambique,
United Arab Emirates and Germany
Ulrike Hoessle
Walla Walla Solutions, Inc, USA
3-4
5-8
9-26
27-60
Responsible Lobbying: A Multidimensional Model
Theresa Bauer
Humboldt-University Berlin, Germany
61-76
ISO 26000: Three CSR Messages for Management Education
Lars Moratis
Open University, the Netherlands
77-90
The Journal of Corporate Citizenship Issue 53 March 2014
The Journal of Corporate Citizenship
the journal of
Corporate
Citizenship
Issue 53
March 2014
Greenleaf
PUBLISHING
Cover images: © PhotoDisc, Inc. 1997
print ISSN 1470-5001 online ISSN 2051-4700
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