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6 Rutgers J. L. & Pub. Pol'y 334

Rutgers Journal of Law & Public Policy
Spring, 2009


CORPORATE SOCIAL RESPONSIBILITY: CURRENT STATUS AND FUTURE EVOLUTION [FNa1]


Joe W. (Chip) Pitts III [FNd1]

Copyright © 2009 Rutgers Journal of Law & Public Policy; Joe W. (Chip) Pitts III

“The peoples of the earth have thus entered in varying degrees into a universal community, and it has developed to the point where a violation of [laws] in one part of the world is felt everywhere.” - Immanuel Kant, Perpetual Peace (1795) [FN1]

INTRODUCTION

Whether or not those words were true when Kant penned them over two centuries ago, they are truer today than ever before in human history, and will resonate even more profoundly in the future. The current interrelated financial, economic, climate, energy, food, water, political, and security crises affecting the globe only highlight the historically unprecedented degree of interconnectivity and interdependence. Last year alone, the potent combination of social networking, [FN2] mobile internet devices, [FN3] location mapping, [FN4] text messaging, [FN5] video, [FN6] and collaboration [FN7] technologies more integrated with users' lives have merged online and offline advocacy to inspire millions of people across the globe to protest against the Colombian revolutionaries, [FN8] map the genocide in Darfur [FN9] as well as the violence in Kenya, [FN10] and organize strikes and civil disobedience in Egypt. [FN11] The billions of cell phones in the world will increasingly be used to record, upload, forward, and display corporate and other abuses, whether of sweatshops employing child labor, pipeline leaks, trafficking of women and children, or corporate resources used to support crimes against humanity or genocide. [FN12] People everywhere - even in the slums of Brazil or the jungles of Peru - can immediately see disparities in living and environmental conditions via smart phones, satellite television and internet. These new, powerful, ubiquitous, and interactive communications technologies help make possible efficient cross-border financial flows, just-in-time production, and economic globalization, to be sure; but they also empower rapid, bottom-up [FN13] democratic “WikiAdvocacy” [FN14] by individuals, “citizen journalist” bloggers, and self-organizing coalitions, while simultaneously allowing greater scrutiny and pressure from investors, consumers, communities, established NGOs, and other market monitors. [FN15] WikiAdvocacy generally supports and works to extend existing corporate social responsibility (CSR) principles, monitoring and accountability mechanisms, and amounts to a powerful independent force on its own.
This historically unprecedented degree of technology-driven transparency, scrutiny, and accountability is likely the most important and enduring of all the drivers for CSR. [FN16] A “super-driver” underlying most of the other CSR drivers (such as brand/reputation assurance, business productivity, risk management, employee recruitment and retention), it makes this new global iteration of CSR different in kind and degree from the old nineteenth and twentieth century “shareholder versus stakeholder” debates, and different as well from previous CSR phases that, generally speaking, have evolved toward more strategic, socially valuable and enduring forms, such as: [FN17]
• ‘compliance’ with legal minimums and creating compliance systems (often prompted by company or industry scandals and viewed as a cost vs. an investment);
• robber-baron type corporate philanthropy (given in an attempt to offset questionable or harmful practices);
• selective stakeholder consideration and the beginnings of integrated decision-making that incorporates some nonfinancial, i.e. social and environmental considerations, but serves mainly short-term business interests (e.g. more efficient energy use and waste disposal);
• “corporate statesmanship” (both in its good form of promoting attention to broader policy issues and its bad form of misguided ideology that in the 20th century sometimes involved overthrowing democratic governments); [FN18]
• Basic risk management and brand/reputation assurance - i.e. to stop losses and preserve/reinforce assets; beginning to apply integrated decision-making that more fully incorporates social and environmental with economic analysis;
• Broader stakeholder consultation, learning, and engagement, and greater transparency and reporting on corporate activities; undertaken also mainly to prevent losses and preserve benefits but perhaps to identify mutual gains as well;
• Strategic philanthropy (philanthropic investment aligned with profit goals and the core business mission, vision, and strategy); [FN19]
• Strategic CSR deploying consistent best practices, more sophisticated risk management and reputation assurance in keeping with a sensible version of the precautionary principle, [FN20] alignment of internal and external accountability systems and internal corporate goals with external social goals, and community investment to achieve the long-term business vision, mission, and goals; [FN21]
• Opportunity creation based on CSR principles, including serving bottom-of-pyramid markets [FN22] and perhaps involving further extensions of related community investment; [FN23] and
• A system perspective that aligns the corporation and its activities with society and the goals of sustainable development, applies the major CSR principles effectively, and supports a higher level playing field that addresses collective action problems while allowing for continuous improvement.
It is indeed ironic that the same information flows and tools that drive this CSR evolution also enable today's ruthlessly competitive and truly global markets. Perhaps they have not made the world “flat,” as Tom Friedman famously argues, [FN24] but the new information and communications technologies and “Wikinomics” [FN25] have certainly made the world “flatter” in the sense of empowering companies, groups and individuals to quickly create, spread, and collaborate on digital content. The increased reliance on contracting and reduced transaction costs from today's collaborative technologies are in fact changing the nature of the firm into a leaner, more networked entity. [FN26] In fact, the authors of Wikinomics argue that Coase's Law [FN27] has now, in effect, reversed in direction so that it counsels shrinking the formal firm [FN28] (if not necessarily its power and influence). Rather than reducing the firm's power, the outsourcing of previously in-house firm capabilities can actually have the effect of expanding the firm's “sphere of influence” to all those competing for firm business and affected by decisions that ripple through the network. [FN29] Such outsourcing may simultaneously reduce the ability to constrain externalities imposed by the firm's mediating hierarchy (its board of directors and managers).
Barring catastrophe, the two sides of the information and communications revolution - Wikinomics and WikiAdvocacy - will only continue and accelerate. Such drivers arguably have produced at least seven CSR principles that underpin existing law and voluntary initiatives, which now, in turn, influence their future direction. [FN30] A new book I have co-authored and edited, Corporate Social Responsibility: A Legal Analysis, describes these principles as (i) integrated decision-making (to incorporate environmental and social as well as economic factors), (ii) stakeholder engagement, (iii) transparency and triple-bottom-line reporting, (iv) respect for and consistent implementation of the highest global environmental and social norms and best practices, (v) the precautionary principle, (vi) accountability, and (vii) community investment. While the occasional tension or contradiction can be found in the specific instantiations of these CSR principles, this is the exception rather than the rule. In the main, the law and voluntary initiatives are largely consistent and complementary in substance, promoting the overall strategic imperative of being more inclusive, socially and environmentally aware, stakeholder-engaged, transparent, and accountable. Taken as a whole, they present an edifice with easily seen outlines and reasonably hard edges that still leave room for experimentation and innovation.
This article begins by describing the “new lex mercatoria” of global commerce. [FN31] This body of law contributes to the “new global governance” but nevertheless leaves significant gaps needing to be filled if business and social aspirations for a more stable and sustainable system are to be realized. Strengthened CSR principles can contribute significantly to filling those gaps. Next the article confronts the powerful critique of CSR that remains. Then, the article turns toward providing a bird's eye view of the status of the CSR principles by geographical region - including in China and India as examples of the BRIC countries [FN32] and “Second World” [FN33] countries that are increasingly influencing the global economy. The article then considers the implications of the recent interconnected financial, economic, political, security, climate, and related crises for the future of CSR. Finally, the article highlights proposals for continued legal reforms and examines the prospects that these principles may be embodied in even stronger global frameworks in the future.
This article is written from the perspective of the jurist seeking to discern trends in the law's development. Despite the increased complexity and pace of change that characterize business, economics, technology, and politics in this newly interdependent and networked world, [FN34] some generalizations can be ventured about how the principles identified are beginning to unfold.
The principle of integrated decision-making represents a body of knowledge, skills, and an attitude or frame of mind that sets the stage for effective implementation of all the other principles. It represents a system perspective that sees business value not merely from a truncated financial point of view, but from the more holistic “triple bottom line” that takes nonfinancial, social, and environmental results into account. Stakeholder engagement, the second principle, provides an important pathway and methodology for strengthening those triple-bottom-line results. The principle of transparency is both a key expectation forming a prominent feature of the new global business landscape, and an enabler for all the other principles. The principle of consistent best practices emerges as a result of the first three principles (integration, stakeholder engagement, and transparency), forming a substantive core of standards that insists that businesses consistently apply the highest environmental and social standards throughout their business operations, regardless of location. These principles in turn will continue to evolve along with the other CSR principles. Like the other principles, the precautionary principle puts a healthy check on what could otherwise be imprudent action, but if it and the others fail, the accountability principle steps in as the final incentive for the business to “walk its talk.” Community investment is the final principle, and it is perhaps the principle most subject to future evolution, prompting businesses not just to avoid harm but to invest resources in helping to address pressing social and environmental challenges.

I. THE LEGAL CONTEXT OF THE ONCE AND FUTURE CORPORATION


A. The Legal Environment Facing the “Flattened” Corporation

Today's corporations derive from ancient predecessors and have a long pedigree as instruments for collective social purpose, with CSR “in their DNA.” This was the case with the Roman societates that developed as a way for nobles to share the burden of guaranteeing taxes collected for public purposes, as well as the collegia or corporate guilds formed by merchants and craftsmen lower on the social scale. These latter organizations were similarly supposed to be licensed and anticipated the medieval guilds, towns, universities, and other corporate bodies formed with an eye toward Roman law and which provided “security and fellowship in an otherwise forbidding world.” [FN35] Despite a self-oriented and thus private aspect to early trading and business ventures, the very act of reaching out to cooperate with others to manage risk engaged public values of trust and community. Early companies were often based in trusted relationships of friends and family brought to bear on public works projects like roads, bridges, and ensuring water supply. Therefore, businesses would pool investments using limited liability for large infrastructure projects that were considered by the state to be in the public interest. [FN36]
Enterprises are inherently and have historically been collective enterprises that transcend the self. The very name “company” derives from the 12th-century term “compagnia” (a Latin compound meaning “breaking bread together”), which points to the origins in trusted, cooperative relationships. [FN37] Public purposes certainly characterized the companies chartered by the early American states, with incorporation granted primarily for public purposes such as schools, roads, canals, banks, and churches. [FN38] And the purposes of some companies became practically indistinguishable from public purposes. For example, the Virginia Company introduced a relatively democratic General Assembly whose members elected the company officers; the Massachusetts Company became the Commonwealth of Massachusetts (with the “freeman” stockholders transformed into citizens). [FN39] Throughout history, the state generally reserved to itself the power to determine what kinds of entity it would permit to come into existence, vetting both the identity of the promoters and the nature of the venture. Corporate social responsibility was thus encoded into the DNA of the firm, since the firm could not come into existence unless it could withstand a valid public purpose test.
The bonds of trust and principles of good faith and fair dealing used by medieval merchants, guilds, and bodies corporate in the medieval lex mercatoria (“law of merchant”) reflected that cooperative and beneficial public purpose and sense of mutual responsibility. Corporate leaders continue to affirm today that corporations also serve public purposes intended to benefit society as a whole. [FN40]
Yet today's corporation is different in power and, some say, purpose, from its predecessors. As the corporation evolved, law in a sense “looked the other way.” Global business flourished - sometimes with horrific consequences including those associated with the often violent chartered companies such as the British and Dutch East Indies companies, the slave trade, and colonialism. Those abuses preceded today's information technology revolution, and thus were generally shielded from scrutiny, with only the most egregious atrocities (such as slavery) slowly generating enough public awareness and opposition to be reformed. [FN41] Socially productive business flourished as well, with transnational corporations (TNCs) expanding dramatically in number, geographical reach, and power throughout the 20th century. The spread of rapid information technologies has added to competitive pressures but also empowered competitive businesses and businesspeople, driving corporate form and function globally to replicate in many ways the less hierarchical, more networked technological structures themselves. [FN42] Corporations have become flattened - that is, less vertically integrated and more reliant on flexible and adaptive open-source contracting and collaboration for both internal and external business models. The benefits to business of this ability to quickly adapt are clear. When businesses adapt to competitive pressures by externalizing costs, however, the detriments to various stakeholders and vulnerable populations can also be clear.
As the corporation becomes flat and “virtual,” relying increasingly on a web of outsourced contracts, the legal instruments and remedies that stakeholders have begun to acquire with respect to the corporation threaten to become virtual as well. Can CSR, like ancient property rights that “ran with title,” run with brand and follow the corporation throughout its supply chain? Indeed, there is a potential disjuncture between the flattening process and the growing legal protections that the corporation has achieved for itself. Two such legal protections are the enhanced legal status the corporation has gained in international law and the emergence of a new lex mercatoria. These two developments are discussed in turn and related to the emergence of CSR principles.

1. Corporations Achieve Rights Including to Sue Internationally

At the same time as the corporation is changing its character as an entity, corporations have lobbied successfully for important legal rights ranging from intellectual property rights to free speech to due process of law. [FN43] Among the achievements was extension of the protective and empowering cloak of strong and favorable public international law trade and investment rules to their private arrangements, by means of the detailed General Agreement on Tariffs and Trade [GATT - now administered by the World Trade Organization (WTO)] and various regional and bilateral trade agreements. These are the most effective international legal arrangements today and contain the most robust dispute resolution mechanisms, such as that of the WTO, pertaining to international trade; [FN44] regional trade and investment agreements such as the North American Free Trade Agreement (NAFTA); and the thousands of bilateral trade and investment treaties. [FN45] But, unlike most human rights victims or environmental damage claimants, [FN46] private foreign investors can appear directly against sovereign nations in international tribunals (bilateral investment treaty arbitral tribunals), [FN47] bypass normal procedural obstacles such as foreign sovereign immunity and the act of state doctrine, make treaty-based claims, and obtain damages for any treaty violations found.
There are now stronger signs at every enforcement level - global, regional, national, and local - of enhanced business accountability for human rights and environmental matters. [FN48] Those remedies still generally pale in comparison to the strong remedies available to investors, however. These real instances of corporations being subjects under global law, with “international personality,” confirm that corporations can be subjects of international law for CSR principles like accountability as well. [FN49]

2. Private Law Unification as New Commercial Lex Mercatoria

Less visibly, corporations worked hard behind the scenes to achieve a remarkable and growing degree of private law unification - a sort of commercial “lex mercatoria” (“law of merchant”) presaging the more environmentally sensitive and rights-based CSR lex mercatoria that also emerged during the 20th century. Milestones in this achievement, rivaled only by the global revolution in human rights law, included such items as the U.N. Convention on the International Sale of Goods, [FN50] INCOTERMS, [FN51] and various UNIDROIT [FN52] principles and rules of international commercial contracts, [FN53] transnational civil procedure, [FN54] and insolvency [FN55] - not to mention the entrenchment of various convenient arbitral regimes [FN56] as the preferred mode of resolving commercial disputes. This achievement again indicates the extent to which corporations are subjects (and not mere objects) of international trade, investment, and other laws in many contexts, and how corporations actively contribute to forming international law and to such private law unification efforts, both directly via participating in drafting and negotiations and indirectly via lobbying states and leading officials. The pharmaceutical companies, entertainment, and software companies, for example, had a major role in drafting the TRIPS (Trade Related Intellectual Property Rights Agreement) [FN57] as Pfizer's President loudly trumpeted. [FN58]
Accordingly, the 20th century saw a great degree of corporate, securities, and administrative legal harmonization occur, with previously isolated common and civil law regimes intermixing to a notable extent under the influence of easing communication, transportation, and trade. While this is a subject of passionate scholarly debate, it does seem that the overall trend is toward some form of convergence, along with persistence of variation in business practice (and other practices) based, among other things, on local culture and path dependency. [FN59] Yet while such gradual convergence is discernible, it is not focusing on the U.S. model of corporate governance and shareholder primacy to the degree that most Anglo-American corporate finance and corporate law practitioners seem to think. [FN60] Douglas Branson put it this way:
The self-anointed corporate governance experts, elite as they may be in the United States corporate law academy, are not cognizant of the real issues of the twenty first century. Their advocacy of “global” convergence, and that along the lines of United States style corporate governance, is not based upon “global” developments, is culturally chauvinistic, and is anachronistic. [FN61]
The trend does not emphasize shareholder primacy as much as it does the place of business in society. The seven principles described are in fact part of a converging corporate law lex mercatoria that, far from erecting shareholder primacy as a standalone concept, situates corporate responsibilities to shareholders within the broader social context in which corporations operate.

B. Countervailing Public Values Balance Private Commercial Values

Thus, to complement the new private commercial lex mercatoria, seeds of a lex mercatoria more sensitive to public values of human rights, peace, and environmental sensitivity were also being planted throughout the 20th century, including the CSR principles described in this article. Such values properly understood are just as critical to providing an enabling environment for business as the values underlying global trade, investment, protection of intellectual property and other economic rights of business. Following the first wave of pre-WWI globalization, the successful ban upon slavery and the slave trade inspired further calls to temper unconstrained commerce and resulted in the birth of the International Labour Organization (ILO) in 1919, as well as nascent nongovernmental lobbying for greater institutionalization of public values in law through organizations such as the League of Nations.
After the failure of the League and the atrocities of WWII, the United Nations was founded to promote peace, development, and human rights, agreeing on its Universal Declaration of Human Rights (UDHR) [FN62] in 1948. This historically notable expression of universal human values was intended in part to complement the growing trade and investment relations and emerging universal business culture and to provide an overarching framework for a peaceful global regime. The labor rights previously identified could now be seen (for those who wanted to see) as instances of broader human rights, and the stage was set for corporate social responsibility to move beyond the labor rights (that the ILO had been identifying) to the broader human rights and environmental concerns that characterize CSR today. The various international efforts to legislate such values in international instruments may be thought of as resembling prior responses on the local or state level as societies took larger steps toward an untrammeled market - such as the 19th century social welfare and child labor laws in Britain responding to the excesses of the Industrial Revolution, or the Progressive-era regulation in the United States - only much weaker, given the absence of a global sovereign and robust enforcement mechanisms.
Concerns about persistent human rights abuse and environmental degradation prompted not only more comprehensive environmental regulation in the developed countries, [FN63] but also a proliferating series of other international law declarations and treaties relevant to the obligations of business and depending in part on corporations for their success. Among these were the Stockholm Declaration, [FN64] the Rio Declaration, [FN65] and Agenda 21. [FN66] The Rio Declaration, addressed to “all states and all people,” proclaims in Principle 1 that “human beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature.” [FN67] Agenda 21's blueprint acknowledged the need for a mix of legal and market incentives and cooperative action between government, business, and citizens in order to achieve sustainable development. The UN Millennium Declaration similarly looks to business for help in meeting development goals including poverty eradication and in expanding affordable access to essential medicines. [FN68] The Johannesburg World Summit on Sustainable Development two years later called at several points for active implementation of corporate responsibility and accountability and “continuous improvement in corporate practice.” [FN69]
A number of other treaties and declarations, while formally between and to be enforced by states, reference businesses, “enterprises,” “organizations,” and “private organs of society.” These include the ILO conventions that proliferated throughout the century, the UN General Assembly resolutions in the 1980s calling on businesses to respect sanctions against apartheid, and other specific environmental and human rights treaties (such as the Convention on the Elimination of Racial Discrimination (CERD) [FN70] and the Convention on the Elimination of Discrimination Against Women (CEDAW)), [FN71] and of course the UDHR itself. [FN72] Many of these provisions are now considered customary international law [FN73] and some are deemed jus cogens norms binding on states and non-state actors even in the absence of a treaty. In the course of their work monitoring implementation of the treaties, several of the UN Treaty Bodies, Special Rapporteurs, and other mechanisms have had occasion to comment on the need to prevent violations by private actors including businesses, in areas ranging from privacy, [FN74] to food, [FN75] to water, [FN76] to health. [FN77] Other instruments emphasizing the state duty to protect from violations by corporations include the Maastricht Guidelines on violations of economic, social, and cultural rights. [FN78] Around the world, a number of cases have held states responsible for failing in their duty to protect against infringements by private corporate actors. These include cases addressed by UN Treaty Bodies [FN79] and regional human rights mechanisms. [FN80] Corporate executives may also be liable for the crimes within the purview of the International Criminal Court, and indeed some have already been threatened with prosecution by the prosecutor, Luis Moreno Ocampo. [FN81]
The Cold War sidelined the proposed 1948 Havana Charter for an International Trade Organization (ITO). But the draft Charter was not oblivious to social values, referencing the need for members to eliminate unfair labor conditions. Even the more modest GATT that was then substituted for the failed ITO provided (in what persists as Article XX) that:
[N]othing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures ... necessary to protect public morals[,] ... human ... life or health[,] ... conservation of exhaustible natural resources[,] ... [and measures] essential to the ... distribution of products in ... short supply, ... [or] relating to the products of prison labor. [FN82]
The end of the Cold War not only opened up space to revisit the idea of a truly global trade organization; it revealed the artificial nature of the ideological divide between the civil and political rights preferred by the United States, the United Kingdom, and their allies, on the one hand, and the economic, social, and cultural rights preferred by the Soviet Union and its allies, on the other. This offered new possibilities for creative global corporate action with respect to the latter sets of rights, and for supporting all human rights as universal, interrelated, and indivisible. Corporations such as the Body Shop began thinking about how they could support fair trade via ethical sourcing and promoting ethical consumerism. Enhanced concerns and related protests about globalization gave new impetus to the growing “human rights” prong of CSR, as labor rights and environmental side agreements had to be attached to NAFTA to gain congressional approval, and growing scrutiny of corporate labor and human rights practices started receiving higher level board and top executive attention.
Recognized in the preamble to the Agreement Establishing the World Trade Organization [FN83] are human and environmental values underlying and justifying trade. Among the chief purposes of trade are elevating standards of living and ensuring “full employment and a large and steady volume of real income” while using world resources optimally “in accordance with sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so.” [FN84] The Generalized System of Preferences by which developed economies (for example, the European Union and the United States) grant trade access and benefits are at least in theory conditioned on respect for internationally recognized workers' rights, [FN85] and such labor, human rights, environmental, and CSR provisions are increasingly finding their way into regional as well as bilateral trade and investment agreements [FN86] in more prominent and often more enforceable ways than in NAFTA. [FN87]

C. A Pluralistic New Lex Mercatoria

The “corporate rise to power” accelerated during the trade liberalization era of the 1990s to eclipse that of even some nation states, and inspired a strong backlash from NGOs, consumers, academics, and the community at large. This CSR driver, along with the other drivers such as the benefits to reputation, employee recruiting and retention, risk management, and seizing opportunities, resulted in momentum toward an ever more notable CSR-inspired lex mercatoria. This new lex mercatoria overtook the purely commercial lex mercatoria that had preceded it, resulting in the mixed hard law, soft law, and “voluntary” initiatives containing core CSR principles. UN initiatives such as the Global Compact, [FN88] the Principles on Responsible Investment, [FN89] and the activities of the UN Special Representative of the Secretary General for Transnational Business and Human Rights, John Ruggie, [FN90] reinforce these trends toward legal and ethical harmonization, clarification, and expansion of the field of public values, as do the other prominent global standards [FN91] and national, regional, and global legal reforms both existing and pending. [FN92] One cannot underestimate the global social signaling value of having the UN imprimatur on serious efforts aimed at improving business conduct affecting human rights and sustainable development. The resulting new lex mercatoria, like customary international law, applies as a practical matter whether a given company subscribes to a particular voluntary initiative or not. Beyond states themselves, through institutions such as the Office of Financial Review in the United Kingdom, among those enforcing initiatives such as the UN Principles on Responsible Investment and the Equator Principles are SRI and mainstream investors, fair trade and ethical consumer organizations, and major stock exchanges in Europe and North America. The UN Principles now cover approximately fourteen trillion dollars in assets, [FN93] and the Equator Principles now cover nearly all (approximately ninety percent) of the world's project finance, [FN94] and are influencing mainstream commercial finance as well. Practical tools such as the UNEP Human Rights and Finance Guidance Tool [FN95] support the finance industry's activities. Although subject to recent critical scrutiny based on resistance to the U.S. Sarbanes-Oxley Law among some foreign issuers, the so-called “bonding hypothesis” (that companies tend to elevate corporate governance standards by opting-in to more rigorous disclosure and compliance rules) has been noted by eminent scholars. [FN96] Cross-listing on key stock exchanges that require ethics codes and favor sustainable practices certainly reinforces classic self-regulation based on powerful social norms (again, one of the forms of the new lex mercatoria) and thereby helps drive CSR forward.
In other words, a variety of pluralistic legal, ethical, and market enforcement mechanisms exists at every level, again making it a serious question whether many of the legally imbued so-called “voluntary” initiatives are truly voluntary, or whether they amount to a form of “supra-governmental regulation.” [FN97] These initiatives usually include and respond to state regulatory law but transcend it - in the “shadow of the law” - and can complement and enhance often limited state enforcement capacity, made more limited by the speed of business today and regulators' difficulties “keeping up.” While current coordination remains limited and incomplete, there is nevertheless a discernible convergence of capital and other market pressures, social, environmental, and legal requirements toward substantively similar global standards that form the parameters and quid pro quo of the new, more competitive global business stage. Some significant substantive differences certainly remain, but mostly at the margin. These include, for example, the exact age of child labor to be banned or addressed, the exact form and application of the precautionary principle, and how a living wage is calculated as well as how it can be implemented broadly enough (e.g. on an industry basis) to avoid competitive disadvantage to any one company. As state authority and enforcement have fragmented, the pluralistic alternative enforcement mechanisms remain inconsistent and of variable quality - some might say that they themselves are as fragmented as the state.
Yet cumulatively, the CSR legal and ethical principles that are clearly discernible dispel the myths that corporations are wholly private actors, subject only to local and national law, with rights but no duties under what might be termed emergent customary global law. [FN98] It may seem to some that corporations are uniquely powerful actors, neither capable of nor suited to being subjected to international law or serving as subjects of international law, but although there is tremendous room for ongoing legal development, the multiplicity of convergent norms and enforcement mechanisms even today is striking. The “law of nations” envisioned by the founders and most influential thinkers in the discipline - such as Grotius, de Vitoria, Vattel and Blackstone - applied to non-state actors (including individual merchants, guilds, pirates and ambassadors) as well as states, and this is the version that influenced, for example, the framers of the U.S. Constitution and the drafters of the Alien Tort Claims Act when they used the phrase “law of nations.” [FN99] The more truncated view of “inter-national law” as merely public and between nations dates from the late 18th and 19th centuries, under the influence of Jeremy Bentham (who coined the phrase “international law”) and his disciple John Austin. [FN100] Although largely forgotten today, at a time when most people date international human rights to the end of World War II, there were also international courts established to suppress the slave trade pursuant to treaties concluded between Britain and other countries (ultimately even the United States) between 1817 and 1871. [FN101] These courts, the first international human rights courts, heard over 600 cases and applied international law against both state and non-state actors to free over 80,000 slaves. [FN102]
In summary, the growing body of public international law and private law unification created an environment very favorable to business, but also resulted in governance gaps whereby newly powerful private corporations were granted significant rights and constrained by few duties, with the market increasingly outpacing global public institutions aimed at protecting social and environmental values. Even corporations that were well-regulated domestically (at least in developed countries with significant resources and capacity) were left relatively unconstrained by regulation globally, while their global power and impact grew around the world and often surpassed that of the nations in which they invested and operated. Into the breach flowed the notion of CSR and the seven principles identified here, offering at least the beginnings of a more sensible equilibrium between private and public values. Nevertheless, despite this significant progress, the initial governance gaps have not closed completely, and are joined now by one of even greater concern both to global business and society: the gap between today's tremendous, persistent, and interrelated global problems (such as climate change, food, water, and energy shortages, intractable poverty and growing inequality, disease, illiteracy and other educational deficits, war, internal conflict including genocide, refugee flows, terrorism, nuclear proliferation, and financial volatility) and a global governance system whose design and ability to adequately address such issues remains highly dubious. This article now turns to a more detailed examination of the current governance system and the prospects for its evolution toward a more effective model.

II. “NEW GLOBAL GOVERNANCE” ARISING FROM THE “MACRO” BUSINESS CASE


A. Transgovernmental Networks Accommodating Private Actors

The transformation of the prior state-centered governance regime (often overstated as “the end of sovereignty”) has been widely noted, including by scholars such as Anne-Marie Slaughter. Slaughter has described “a new world order” of disaggregated government agencies using information networks to coordinate policy issues across borders and thus enhance global governance to try to solve otherwise intractable global problems. [FN103] This reveals the relative, partial capacity of even powerful states and the need for greater coordination. Yet there are uncontestable public trust [FN104] and democratic legitimacy issues involved with a greater role for corporations in global governance. In the search for “world governance without world government,” it is therefore tempting to emphasize governmental networks instead of the global “public policy networks” first noted in the 90s, [FN105] “epistemic communities,” [FN106] or the more commonly touted “public-private partnerships.” [FN107] Slaughter's account mentions, but does not further analyze, the significance of the many ways private actors already “can and do perform government functions, from providing expertise to monitoring compliance with regulations to negotiating the substance of those regulations, both domestically and internationally.” [FN108] Influential corporate actors and the notion of corporate social responsibility play no significant role in her account. Why? As she says, the problem is one of “ensuring that these private actors uphold the public trust.” [FN109]
The democratic deficit is indeed an issue for public policy networks or public-private partnerships that involve corporations, NGOs and others in the new, decentralized, networked global governance. But it is also an issue for many governments, including nominally democratic governments, as democracy has been reconfigured and arguably vitiated by various pressures including moves from local to more distant federal or quasi-federal structures in the United States or even more dramatically in the European Union. Moreover, a democratic deficit is also a problem with Slaughter's transnational governmental networks. Ironically, this leads Slaughter later in the book to redefine the concept of democracy in a way that acknowledges “the empirical fact of mushrooming private governance regimes in which individuals, groups, and corporate entities in domestic and transnational society generate the rules, norms, and principles they are prepared to live by.” [FN110]
While this is by no means direct Athenian democracy, the new global governance does have novel attributes of representative and deliberative process. Stakeholder engagement aimed at seeking consensus between companies and workers, unions, NGOs, faith-based groups, and affected communities has a democratic cast to it. [FN111] And the Forest Stewardship Council's “general assembly,” bicameral chambers, representative aspects, voting, and procedural rules demonstrate that at least some initiatives clearly take elaborate steps in the direction of trying to enhance quasi-democratic legitimacy. [FN112] Meidinger has gone so far as to argue that if stakeholder engagement is effectively undertaken and properly managed to achieve broad-based representation, competition between various initiatives can successfully bring various stakeholders together to dialogue and achieve consensus on processes and outcomes as or more democratic and legitimate than governmental or intergovernmental alternatives. [FN113] In keeping with the theme that the new governance realities often require meta-regulation (of overall standards and desired goals but not specific implementation paths), [FN114] Slaughter notes that the state is thus to “manage these processes, rather than regulate behavior directly.” [FN115] And that is happening to a notable extent - although much activity is wholly outside of government's purview.
Many of the CSR principles identified have relevance for new global governance and even for the sub-portion managed by states. States too are increasingly seeking to apply integrated decision-making and a stakeholder perspective that ensures participatory engagement with all those affected. In addition to national identity and the norms coming from the state, there are multiple and overlapping identities, loyalties, and normative associations - now including transnational advocacy, religious, political, or other networks [FN116] - that require or at least would benefit from mediation and coordination in order to avoid the fractured and limited approaches that could otherwise naturally result. Generous and transparent information flows among the networked actors are, as Slaughter notes, fundamental to enhanced understanding, negotiation, and the achievement of effective outcomes. [FN117] Consistent best practices with a commitment to learning and continuous improvement enhance these outcomes. The precautionary principle adds a “prudent pause” prior to implementation. And if the problem with corporate participation in global governance is, as she says, one of “ensuring that these private actors uphold the public trust,” these legal principles - reinforced notably by the accountability principle - assure that the values served, in deed as well as in word, are not only private but truly are public.

B. The “Macro” Business Case Spurs Corporate Involvement


1. Relation between the “Micro” and the “Macro” Business Case

Corporations are increasingly making verifiable public commitments and playing documented positive roles for a variety of reasons, including to enhance their brand (usually by far their most valuable asset) by demonstrating their social value. [FN118] They thereby derive a set of benefits, which parallel the basic drivers for CSR: greater access to investment capital; managing risks and liabilities; employee recruitment, retention, and productivity/motivation; improved stakeholder relations; innovation; and increased business opportunities. But in addition to this “micro” business case appealing to the enlightened self-interest of individual corporations, there is what might be termed the “macro” business case relevant to all firms taken together: ensuring that business generally continues to have a “license to operate,” and that the global market system as a whole continues to survive, prosper, and be seen as stable, reliable, legitimate, socially worthwhile and, in a word, sustainable. This macro need undoubtedly explains in part why initiatives are expanding from the individual company level, to the industry sector level and beyond to the diverse but increasingly universal efforts at global harmonization on these issues - a trend that will likely continue. CSR principles have gone global, and appear likely to garner even more normative and democratic legitimacy in the future.
This “macro” business case differs from the usual “micro” or firm-level business case in that it is more visionary in space and time: seeing entire enterprise value and supply chains across boundaries, and also seeing what is in the long-term interests of shareholders, stakeholders generally, and future generations. As indicated by the examples examined below relating to the fight against HIV/AIDS and attempts to meet the other challenges identified in the Millennium Development Goals, businesses are increasingly taking this view.

2. The Examples of Coca-Cola and ExxonMobil in Africa

As illustrated by the CSR principle of community investment, CSR goes beyond merely “doing no harm” to embrace “doing what good you can.” At the turn of the century, the then UN Secretary General Kofi Annan made explicit pleas for businesses to get more involved in the global fight against HIV/AIDS [FN119] and other global problems. He stressed the bottom-line business case benefits of doing so: failing such action, customers and employees of businesses would die and the stable environment depended upon by business would be threatened.
In response, Coca-Cola partnered with UNAIDS to offer its formidable distribution and logistics network, skills, and warehouses to store and distribute condoms and antiretroviral drugs, and its advertising and design capabilities for AIDS educational billboards and pamphlets. [FN120] This was not pure philanthropy - a fifth of its consumers and workers in Southern Africa were dying and its market was shrinking. But, as with many companies, Coke thought it essential to go beyond the workplace to engage in community outreach in order to reach the families, consumers, and youth affected by the disease and to intervene where attitudes were shaped. [FN121] ExxonMobil has engaged in similar programs in Africa for similar reasons: keeping its workforce and contractors healthy and productive. [FN122]
Of course, ExxonMobil has been severely criticized on a number of CSR fronts, ranging from oil spills like the Exxon Valdez, to discrimination against employees, to complicity in repression in Aceh, Indonesia [FN123] -- so the old caveat applies that good actions in one arena do not compensate for bad actions in another arena. Coke has also been implicated in various CSR-related scandals, including collaboration with the apartheid regime, repression against union members in Colombia, and creating water pollution and water shortages in India. [FN124] Still, the proactive and networked activities of Exxon and Coca-Cola in partnering with the community to combat HIV/AIDS have been greeted as innovative and commendable. [FN125] Moreover, such business actions can potentially transform the attitudes of the company and its leaders with respect to issues such as the HIV/AIDS crisis, [FN126] perhaps in turn influencing other leaders in business and government.
Corporations have long given both cash and in-kind donations to communities, especially in proximity to their headquarters and home-country operational facilities. There is also a distinctive tradition of some companies getting involved in public policy issues, again especially affecting their “home” jurisdictions, including minority rights, urbanization, and the environment. [FN127] The close connections between those in power in business and government are of course nothing new, and corporate executives and lawyers have also been active as “statesmen” in global affairs, sometimes with responsible and sometimes with irresponsible results. Now, however, those traditions are being extended on the global scale as never before, in host as well as home countries. Since it has become more difficult to say whether a company with distributed management and production activities is based in or aligned with any particular country, this is only to be expected. Indeed, it is often welcome, as businesses can have competitive advantages over governments, as regards resources, and in particular as regards skills, competencies, technology, results-oriented strategic thinking and prospects for developing and implementing practical solutions. Microsoft, IBM, and other high-tech companies have assisted agencies like the UN High Commissioner for Refugees with managing refugee registrations, and more recently, Google has worked with UN agencies, using technologies like Google Earth's satellite mapping to show villages burnt during the genocide in Darfur. [FN128]
The growing expectations for corporations to play a greater role in global governance generally relate to their everyday business. In response to these expectations, core business capabilities and competencies are deployed more toward the periphery of the corporation's sphere of influence and with more of an express public, rather than merely private, purpose. That is, the goal shifts more toward helping society at large, or helping to protect the environment. Sometimes this will accord with short- or long-term market opportunities, as for example with the Google.org renewable energy project, [FN129] or most of the instances associated with the Millennium Development Goals “Call to Action.” [FN130]

C. Systemic Challenges

Not only is our world more tightly and complexly bound now than at any point in human history; so are the top issues facing the world, all of which are inevitably cross-border in their implications (such as economic volatility/instability, increasing inequality, persistent poverty, access to energy, climate change, disease, food and water shortages, natural disasters, education, refugees, war, conflict, and terrorism). Global terrorist incidents in recent years in the United States, London, Madrid, Bali, Algeria, Egypt, Israel, Pakistan, Jordan, and elsewhere vividly remind all of us that what happens abroad, even in remote and lesser developed countries like Afghanistan and Sudan, can have life or death consequences at home. Many analysts assign as key, root-causes of terrorism the lack of economic opportunity and outrage at perceived injustice in the Muslim world. Rising oil prices in 2008 that benefited wealthy elites in oil-producing nations also influenced the energy inputs into the rising food prices that put an estimated 100 million more people in poverty, hurt children's educational prospects as they could no longer receive adequate nutrition, and set back anti-poverty efforts “seven years,” according to World Bank President Robert Zoellick. [FN131] Political instability and deaths (in countries including Cameroon) also resulted, with riots in over thirty-five countries and at least one change of government (in Haiti), [FN132] as opposed to the social stability needed by most (e.g. non-defense or security-related) businesses. Amnesty International condemned the often repressive responses to the riots, but also noted the underlying human rights violations contributing to the crisis. [FN133]
The Intergovernmental Panel on Climate Change predicted in 2007 that global warming would lead to extreme weather events, conflict over water shortages, and food security concerns. Notably, the global drivers for the food crisis starting in 2008 were considered to include climate change (including drought in Australia), globalization (as nations like China and India join the global economy and demand for meats, feed grains, and better food increases), urbanization (as mega-cities resembling the old city states as new sources of global power replace agricultural fields with parking lots), and increased use of corn ethanol biofuels for energy. [FN134] Ironically, corn ethanol was promoted as part of the solution to energy scarcity, climate change, and also a way to help address the national security implications both of the direct “threat multiplier” effects of climate change [FN135] and the continued dependence on finite and increasingly scarce and expensive fossil fuels. Those implications included military actions and occupations that in turn produced new cycles of resistance and terrorism, with counterproductive systemic effects. The interrelationships between issues such as climate change, human rights, energy, and national security are now increasingly appreciated, [FN136] as are the risks, for example, from unsafe and toxic products produced abroad without adhering to global standards. Such Chinese-manufactured products imported into North America in 2007 and 2008 began to raise awareness of the impact at “home” of low quality, environmental, or labor standards a rich country's TNC may impose in host countries abroad. A systemic perspective reveals the connections between seemingly disconnected events and has already prompted corporations involved in various sectors (e.g. energy, agribusiness, automotive, technology, construction, national security) to consider those connections.

D. Systemic Opportunities

For instance, regarding issues as interrelated as the environment and the rights to food, water, and an adequate standard of living, in addition to paying their workers enough to buy food, corporations selling food or food inputs will sometimes consider the impact of their pricing policies (as the pharmaceutical companies did). [FN137] Or, more generally, companies may consider their role in urbanization, and attempt to mitigate the impact of their contribution to activities that are knowingly or unknowingly harmful or unsustainable.
After being criticized for depleting the watershed on which Indian farmers and communities depend, Coca-Cola woke up to the reality that water was a strategic global issue for the company. Like many TNCs, Coca-Cola uses an immense amount of water in its business (especially if one considers the extended value chain including upstream inputs like sugarcane as well as the product itself and downstream activities - a gallon of milk takes 800 to 1000 gallons of water to produce). So, in a version of the CSR investment principle, Coca-Cola partnered with an NGO, WWF, to consider for the first time where the water in its plants came from, and how best to work with communities globally to ensure a sustainable supply. [FN138]
Another example of a company seizing the opportunity to do good is BP's targeting the market of an estimated 2.5 billion people who burn so-called regressive biomass fuels (including wood and dung), an estimated 1.6 million of whom die each year from inhaling the fumes generated. [FN139] Defining its mission as eliminating indoor pollution for 30 million customers over fifteen years, BP has already sold “Oorja” stoves using pelletized agricultural waste (from used sugarcane, coffee, or corn cobs) to over a million households in India (expanding now to South Africa and China). [FN140] BP also uses a distribution network that includes joint ventures with NGOs which hold an equity interest and so participate in the wealth generated and provide the women who are compensated at a living wage for selling the products and services. [FN141] That some businesses seek to take paths that have the dual goal of mitigating harms and seizing new opportunities presents us with an early indicator of what might lie ahead for CSR in the future. [FN142]

III. CSR CRITICS REMAIN

Although some might argue that the debate about whether to adopt CSR is largely over, there is a persistent question confronting CSR as it continues on its evolutionary journey: is CSR mere public relations? This section briefly re-examines this question as it has a bearing on whether CSR will remain an integral part of the business and regulatory environment into the future.
Although CSR has longstanding universal roots in global ethical, religious, and practical traditions of human solidarity and prudent ecology, its present form began to emerge in the United Kingdom with calls for accountability occurring from practically the moment the modern limited liability corporation was proposed. [FN143] Proto-concepts of CSR then influenced the varieties of corporate form in different jurisdictions, such as those in Europe including stakeholders in the board structure, and the various proposals by legal academics and others in the 20th century to temper corporate power. [FN144] The contemporary notion of CSR truly emerged, however, only after the flourishing globalization of the past several decades gradually exposed the governance gaps referenced herein.
Now the most vociferous critics of CSR come not from the right, but from those typically more associated with the left. They charge that CSR is mere “window-dressing”, or empty rhetoric that exists mainly for public relations or marketing purposes, [FN145] allowing companies to reap the rewards and some business benefits of having a good CSR reputation without keeping CSR promises or bearing the investment costs of doing so. [FN146] The negative view of CSR as public relations accelerated especially after July 2001 when U.S. and European companies, many of which had been and remain CSR leaders, got jitters about whether CSR would hurt business competitiveness. Such companies successfully lobbied the European Union to issue its least common denominator Green Paper, which misleadingly redefines all of CSR as voluntary when, as has become apparent, on the contrary, CSR begins with legal compliance, but does not end there. [FN147] CSR is thoroughly imbued and intermixed with legal as well as voluntary principles. [FN148] One can understand how from a wealthy nation, European Union perspective, CSR might be viewed as relevant mainly to corporate actions over and above the already extensive and well-resourced realm of laws that protect consumers, investors, workers, and the environment. In the developing world, however, where an increasing proportion of global production occurs, these assumptions do not apply. It is in CSR's application there, especially, that the “mere PR” criticism has picked up steam, because both market monitors and activists have increasingly perceived CSR as having been tried and found wanting. The fact that CSR went “viral,” with everyone from Walmart to ExxonMobil suddenly trumpeting their corporate citizenship and supposed interest in sustainable development, also seemed to devalue its currency.
The criticism of CSR as merely, or excessively, a public relations activity represents the frustration some critics have with the pace of progress on the ground and insufficient or counterproductive implementation of the concept. [FN149] It is also raised in response to occasional deceptiveness and hypocrisy of CSR commitments formally made but not honored, and claims in essence either that voluntary efforts must be seriously reformed to enhance actual accountability, [FN150] or that voluntary efforts alone are inadequate and even counterproductive because they distract from the necessary work of strengthening legal mandates domestically and globally to require (and not merely suggest) that companies be accountable and “walk the talk.” The same criticism often condemns company CSR actions for bad faith: whitewashing dirty laundry, or “green-washing” if it covers up environmental sins, or “blue-washing” if it does so using the mandate of the United Nations, known for its blue logo and blue-helmeted peacekeepers. Thus, Amnesty International, Human Rights Watch, Friends of the Earth, Greenpeace International, and others, while remaining affiliated with the U.N. Global Compact, regularly criticize it for being too relaxed with respect to the demands placed on its members. [FN151] Corporate accountability litigator Terry Collingsworth, Executive Director of the International Labor Rights Fund, found it “ridiculous” and “incredible” to believe that companies are sincere in their CSR codes and voluntary initiatives when those same companies lobby against corporate accountability under law and claim that it subjects them to a competitive disadvantage. [FN152] Similarly, former U.S. Labor Secretary Robert Reich dedicates an entire chapter in his recent book Supercapitalism to condemning CSR, using many of the arguments usually leveled by the right - that it is asking companies to go against their profit-seeking nature and demanding from them competencies they do not have. [FN153] His conclusion, reverting to the argument typically more associated with the left, is that stronger regulation is the only thing that will work to address the underlying social and environmental problems. [FN154]
This critique considers CSR as, at best, toothless and marketing-oriented, and at worst a malevolent strategy to co-opt or render powerless the critical forces hoping to tame corporations with the more meaningful constraints of law. There's truth to this critique, although the malevolence is perhaps overstated. Public-relations considerations always drive CSR efforts to some degree, whether businesses admit it or not. In fact, a dismaying number of CSR initiatives are still run by or report to the corporate public relations, communications, or marketing functions, which is unlikely to be a good sign of authentic commitment and seriousness of purpose, though there are exceptions. Smart businesses want the public to think well of them. But the smartest businesses know that there must be substance behind the claims or the result is greater, rather than less, risk of distrust and even of liability.
What really upsets Reich and other such critics is not so much CSR's content as it is the perceived voluntary, weak, optional and incomplete nature of the accountability and enforcement mechanisms, as opposed to mandatory rules. To which one might reply: CSR is already far less “voluntary” and far more “legal,” substantive, and sanctionable than they realize. It has a tangible impact even if originally seen mainly as PR and rhetoric, and is evolving toward even more meaningful and actionable regimes, even if those new regimes blur the voluntary/mandatory distinction and make it far less relevant than usually appreciated. There may be an illegitimate effort by some companies and commentators to fight a rearguard action and suggest that all CSR is voluntary. But that is both inaccurate as an empirical matter and increasingly beside the point given the evolution toward stronger normative regimes. As important as hard law can be in motivating human behavior, it works in tandem with market incentives as well as affirmations of one's particular social or cultural ethos. Sometimes the latter two sources of motivation have more significant impact than the coercive force of law. Relying as they do on markets and culture, a number of the so-called voluntary initiatives are flexibly responding to fast-paced business activities much more quickly and effectively than is the hard-law legislative process domestically, or certainly, globally. [FN155] Furthermore, it is arguably a virtue of CSR that it seeks to coordinate all three sources of human motivation.
Notwithstanding the sentiment of Shakespeare's Troilus to the contrary, even mere words - rhetoric itself - can drive normative and behavioral change. [FN156] And rhetorical benchmarks such as policy statements or codes are usually more than mere rhetoric, accompanied as they are in responsible corporations by implementation processes, procedures, metrics, and review mechanisms. These can take on a life of their own, even extending to supply chains of large and powerful companies. They are also increasingly the subject of stronger formal and informal enforcement measures including boycotts, divestment, and even litigation if they are violated. [FN157] The growing practice of independent third-party verification and assurance tends to counter the argument that CSR is mere public relations, although like any form of auditing, it is dependent upon how truly independent and searching the process proves to be and how much is learned from it. Quite often, although not always, multi-stakeholder fora can also facilitate major improvements in mutual understanding among previously antagonistic diverse stakeholders and spur virtuous cycles of continuous improvement. Such mutual learning is also driving improvements in the admittedly imperfect CSR mechanisms themselves, including those recently seen in the Global Compact's reporting and accountability mechanisms, in implementation of the U.N. Voluntary Principles on Security, and in the reforms aimed at making the OECD National Contact Points more substantive and effective.
Admittedly, CSR laws and voluntary initiatives remain pluralistic, which can be viewed positively as inclusive or negatively as fragmented, so it is worthwhile to perform a reality check. Do they individually or collectively make a helpful difference for the stakeholders - i.e. the people - affected by corporate, social, and environmental externalities, both positive and negative? Put another way, are the new standards and accountability mechanisms “privatizing” and manipulating social good, or are they legitimately advancing social good? [FN158] While the answer depends on the individual law, standard or initiative, when norms are accompanied by attention to the other mutually reinforcing CSR principles as well as by strong state action when necessary, they can and do represent progress toward achieving public purposes.
Terry Collingsworth rightly counsels watching what companies “do, not what they say,” but could be accused of exaggerating when he says “any progress made in ‘corporate social responsibility’ is simply on paper.” [FN159] Even some of the companies most vilified in the original scandals giving impetus to global CSR - such as Shell, Nike, and Reebok - are now well-recognized as having made substantial progress in their own approaches. There is a new appreciation for the complexity of some issues, like child labor, which cannot be addressed merely by firing the children without affirmative action on underlying issues such as poverty and education. [FN160] It should also be acknowledged that progress is being made at least within the supply chains of some multinationals in reducing such abuses as child labor and forced labor, and providing grievance procedures for workers in places like Cambodia and Bangladesh that did not previously exist. [FN161] The problems are that not enough companies are involved and the progress to date is inadequate. So while the CSR leaders are reaping the business case benefits from their activities, competing rogues and laggards may still undercut them by externalizing the social and environmental “costs” of pollution, labor rights violations, and other abuse. Since TNCs are the most visible and high-impact actors involved in such environmental or social “dumping,” [FN162] the focus has primarily been on their activities abroad where double standards are far too common. At the same time, however, it must be said that since a relatively small number of TNCs represents a large proportion of global economic activity, successful efforts to influence their behavior can have a significant general impact.
Given the mature legal regimes and relatively greater enforcement resources available in the wealthiest countries - most of which already have extensive laws on the books preventing pollution, the endangerment of consumers, or such egregious behavior as slavery, forced labor, child labor, discrimination, or torture - some corporate executives readily assume that the CSR problem is one that arises only when doing business abroad, especially in poor countries or those with a poor human rights record. This is why large TNCs and even small-to medium-sized enterprises in the richest countries often automatically assume that a baseline level of compliance with CSR principles already exists at home. Yet there is a regular stream of incidents, sometimes involving among the largest TNCs operating at home in the wealthiest countries (or in their special processing zones, like the U.S.-controlled territory of Saipan), [FN163] concerning such things as slave and child labor in the agricultural, textile, or oil industries, [FN164] illegal and abusive sweatshops, [FN165] abuse of immigrants, [FN166] and sexual trafficking of women and children. [FN167] So it is a myth that CSR principles are meant to apply only abroad.
No complex set of norms - be it a criminal justice regime, a body of religious doctrine, the compendium of academic standards, or the principles of CSR - can ever pretend or truly aspire to result in perfect adherence. The measure of success for CSR as a body of norms is thus not so much whether one can no longer point to outliers or to abuse, but whether CSR can succeed not only in channeling behavior but also in gathering for itself social and institutional reinforcement and deepening legitimacy. While this article cannot assert that such legitimacy has already been fully achieved for CSR, the gathering momentum behind its principles and their institutional anchoring in the law should at the very least give pause before the contrary is dogmatically asserted.

IV. CSR TOUR D'HORIZON

Now that this article has sketched the outlines of CSR's emergence as a new lex mercatoria, linked it to its “macro” business case, and responded to the key legitimate CSR criticism that remains, it is worthwhile taking a rapid geographical tour. This tour will make some observations about the status of the CSR principles using illustrative countries and regions - with the caveats that these are rough generalizations from which individual instances will vary, and that this is only a snapshot of a rapidly evolving process.

A. CSR in the OECD Countries


1. European Union

There have been various proclamations, often with defeatism but occasionally with triumphalism, that “the stakeholder ideal is in gradual retreat” in its European “stronghold.” [FN168] Nevertheless, Europe retains a strong and even growing commitment to CSR principles including to the stakeholder engagement principle, although the ambivalence expressed in the 2001 Green Paper occasionally rears its head. [FN169]
Several factors explain this, including the deep tradition of solidarity in Europe, especially since the horrors of World Wars I and II, as compared to the more individualistic United States. Other factors include the nature of European capitalism and approach to economic matters, and Europe's position taken toward international law in the last several decades. The continental European economies are more “mixed” than in, say, the United States or its E.U. cousin, the United Kingdom, with Germany having a significantly corporatist history and tendencies and France, having a more statist history and tendencies. European capitalism tracks the stakeholder approach to the corporation more closely, with the board serving as a mediating hierarchy for various competing social interests and stakeholder constituencies, [FN170] and having formal obligations to society. [FN171] This approximates Berle and Means' vision of “a purely neutral technocracy, balancing a variety of claims by various groups in the community and assigning to each a portion of the income stream on the basis of public policy rather than private cupidity.” [FN172] The U.K. and U.S. perspectives may also owe something to the more diverse and widespread share ownership there, as compared to continental Europe, where as recently as 2002 only 1 in 5 German adults reportedly owned shares, [FN173] as compared to half of adults in the United States. This latter distinction is even more striking in parts of Asia, Latin America, and Africa.
Also, since the European Union is a regional body composed of various nations, with domestic judges able to directly apply European law, recourse to international law is necessarily more developed in Europe than in the United States or many other countries - although the U.S. Supreme Court has shown a marked receptivity in recent years to taking international law into account. [FN174] The stronger and more longstanding tradition of ethical consumerism in Europe undoubtedly plays a role as well.
The European Union's commitment to CSR is globally significant. As the largest market in the world, with correspondingly greater powers to dictate rules, [FN175] the source of most of the world's foreign investment, and a community built explicitly on a blend of market and social values, the European Union's standards, requirements, and expectations influence companies and suppliers from every region. That can be affirmed even before considering the European Union's role as the largest source of development assistance globally, including significant aid and technical assistance specifically aimed at promoting CSR and sustainable development. At least with regard to CSR, the European Union has more influence and “soft power” than the United States.
The next frontier in Europe is enhancing accountability for corporations in light of the detour taken by the Green Paper's 2001 emphasis on voluntary aspects of CSR. However, substantial pressure is being exerted both within the official European bodies and by the European Parliament, [FN176] and by civil society organizations, such as the European Coalition for Corporate Justice, to enhance the ability now existing in theory under the Brussels Convention to hold European companies accountable for harms caused abroad. Some existing legal rules and practices, such as the “loser pays” rule in lawsuits and the fact that contingency fees are disfavored outside of the United Kingdom, serve to temper litigation in Europe. Yet other pressures combined with the continental reluctance to block lawsuits using procedural rules such as forum non conveniens [FN177] make it likely that the future will bring more lawsuits in the European Union to enforce notions of corporate accountability.

2. Canada, The United Kingdom, and Australia

The common law jurisdictions of the United Kingdom, Canada, and Australia are very much “three peas in a pod,” when it comes to the future of CSR from a legal perspective. At least as regards corporate law, all three jurisdictions share closely linked common law heritages and those ties - although they are not as strong as they used to be - are likely to continue well into the future, particularly in the area of progressive corporate law reform. Canada may have a touch of continental European influence as evidenced by the significance of family-held companies and perhaps even by the special prominence of its oppression remedy. Nevertheless, as an example of the influence the three jurisdictions can have on each other, one only needs to look at the U.K government's decision to introduce pension fund disclosure laws in 1999, [FN178] the move of the Australian government to follow suit no less than three years later, [FN179] and now the increasing pressure being placed on the Canadian government to do likewise. [FN180] In keeping with this trend, Australian and Canadian lawmakers are likely to closely watch the implementation of the new U.K. directors' duties mandating consideration of environmental and social issues according to section 172 of the 2006 U.K. Companies Act, [FN181] weighing whether to move in the same direction. The Canadian decision of Peoples v. Wise, takes a “permissive” approach to integrated decision-making. [FN182] This has already taken Canada one step closer to the U.K model, and it is not unreasonable to speculate that Canada might one day formally adopt the principles set out in Peoples under the legislative provisions of the Canadian Business Corporations Act and parallel provincial legislation. [FN183] The recent tabling of a bill in Canada to enhance CSR among Canadian mining companies by ensuring that they comply with international law and the International Bill of Rights is still further evidence of CSR's advance. [FN184]
Australian courts at the time of this writing have not yet had a case come before them that would give them the opportunity to adopt an interpretation of directors' duties under Australian corporate law, mirroring that provided in Peoples v. Wise. However, the government-led committee heading the 2005/2006 Australian parliamentary inquiry into corporate responsibility took it upon itself to declare that Australian corporate law already “permits directors to have regard for the interests of stakeholders, other than shareholders.” [FN185] A recent change in government in Australia, from the conservative liberals to the more centre/left Labor government, might also have implications for corporate law reform, and CSR more generally, in Australia. In the course of the Australian parliamentary inquiry just mentioned, Labor members of the committee called for a strategic direction and engagement from government with the primary objective of “encouraging more companies to integrate sustainable, responsible business practices into their operations.” [FN186] To further this goal, they recommended, among other things, the establishment of a corporate responsibility unit within a government department and the introduction of mandatory reporting of sustainability risks for large private and public companies. [FN187]
Proponents of progressive corporate law reform in the United Kingdom, Canada, and Australia, particularly the NGOs, are also following parallel agendas that are likely to align the legislative response to CSR in the three jurisdictions. This is not surprising given the global reach of many of today's largest NGOs. For example, members of the Corporate Responsibility (CORE) Coalition in the United Kingdom (a strong proponent of progressive corporate law reform) include, among others, Amnesty International, Friends of the Earth and Oxfam, all of which have a strong presence in Australia and Canada; and when the opportunity arises these NGOs do not hesitate to promote their law reform agenda in their Canadian and Australian advocacy. [FN188]
Yet even if differences remain in how the law might mandate or interact with CSR in these three jurisdictions, it is something of a moot point when it comes to the many multinational companies operating within and between them. Put simply, the jurisdiction with the highest benchmark for behavior can become the default for standard-setting. Take, for example, the mining sector, where recent acquisitions and dual listings have created mining giants that are simultaneously subject to U.K., Australian and Canadian corporate law and governance regimes. For instance, BHP Billiton has dual listing on the Australian and London stock exchanges with subsidiaries based in Canada. Likewise, Rio Tinto has a dual listing and recently acquired Canadian-based aluminum producer, Alcan. In such situations, the corporate decision makers of these multinational corporate groups are subject to myriad jurisdictional duties and to reduce transaction costs will likely follow the tougher standards (e.g. the U.K directors' duties) throughout their global operations.

3. France

The French stakeholder view of the corporation, its expansive laws on workers' rights, its provision for employee representation on corporate boards, its significant amount of socially responsible investors which continues to grow, and its mandatory CSR disclosure under the 2001 Loi relative aux nouvelles régulations économiques, [FN189] make France more amenable to CSR principles than most. The French securities regulator, L'autorité des marchés financiers (AMF), already looks to the same Committee of Sponsoring Organizations (COSO) internal control framework as the United Kingdom and other jurisdictions. Furthermore, as a monist jurisdiction, France allows its treaties to be directly applicable in domestic proceedings - unlike the United States, for example, which has a mixed monist/dualist approach that generally requires implementing legislation for the treaty to take effect. So as in many other European jurisdictions, international law claims are easier to bring in France.
The current French challenge turns on implementing and extending the CSR principles and improving corporate accountability. Currently, French companies are sharing best practices through peer-to-peer learning networks including Entreprises pour les Droits de l'Homme (EDH), the French initiative related to the Business Leaders Initiative on Human Rights. Both France and its TNCs also have significant influence in francophone Africa, reinforcing CSR principles in those emerging markets. In France and other civil law jurisdictions, criminal procedure is available to private citizens to bring actions before an investigating magistrate, somewhat akin to the “private attorney general” statutes and causes of action in the United States. [FN190] Unfortunately, the French criminal case of this nature against Total Oil Company, arising from facts akin to those in the Unocal/Burma case, ended before judgment could be reached, as did a parallel politically charged case in Belgium. After the case had stalled on evidentiary issues and choice of law, the French claimants settled with Total. [FN191] Nevertheless, more of such cases are likely to be brought in France on CSR grounds.

4. United States

Traditionally, U.S. executives favored “leadership and vision, knowledge, and quality” over the triple-bottom-line attention to environmental, financial, and social credibility given higher significance by their European counterparts. [FN192] Accordingly, in Europe, “CSR has focused on the environmental and social impact of companies' business functions,” whereas in the United States, CSR historically was seen as mainly “donations to social and artistic causes and other such acts of corporate philanthropy.” [FN193] As regards codes of conduct, the United States shows considerable leadership. But as for legal developments underpinning the CSR principles, it has lagged behind the European Union and its member states, undoubtedly due in part to the more individualist form of liberal capitalism practiced in the United States. [FN194]
This situation is evolving. When a company the size and complexity of General Electric, with over 300,000 employees and a vast range of businesses that in many ways reflect the global economy, commits itself to the Universal Declaration of Human Rights, and decides to audit and verify that commitment in conformity with its own world-class operational reviews and metrics, that decision ripples throughout the U.S. and global economies. [FN195]
GE is one of hundreds of U.S. companies to have adopted CSR policies and codes of conduct since the 1990s, building on the legal foundation of ethics and compliance required by such decisions as Caremark. [FN196] Whereas once the United States was a relative CSR laggard vis-à-vis Europe, today it is rapidly catching up and the trend is likely to continue. The U.S. Climate Action Partnership (USCAP) is an interesting example of how voluntary initiatives can seek to enhance the law, committing as it does many of the nation's leading companies to seek urgent legislative action against climate change. [FN197] Even the resistance of the business lobby to stronger forms of CSR in the United States seems to be relaxing somewhat in light of the new information realities emphasized throughout this article. This shifting approach seems to have arisen from various market drivers for CSR - both carrots (such as the new markets opening up when CSR principles are deployed) and sticks (such as the availability of the Alien Tort Claims Act (ATCA) [FN198] and similar litigation remedies). The ATCA action available for especially egregious violations that implicate the law of nations and meet ATCA's standards is unique, although growing recognition and use of foreign analogues is proceeding apace. Successful settlements like Unocal “[signal] to corporations that this law is applicable to them, and that they are going to face major litigation.” [FN199]
A note of realism, however: although the notion of CSR is spreading widely and endorsed to one degree or another by the major U.S. companies and a surprising number of small to medium-sized firms, it is understood in very different ways at this point, with the lowest common denominator being simple philanthropy. U.S. businesses as a whole still have a long way to go to truly understand and effectively apply CSR principles. Still, the longest journey begins with a first step, and more and more companies have taken it.

5. Japan

The Japanese word for “business” is made up of the elements “kei,” meaning “governing the world in harmony while bringing about the well-being of the people,” and “ci,” meaning making “ceaseless efforts to achieve.” [FN200] With its traditions of interrelated corporate “keiretsu” and state-supported capitalism, Japan has traditionally favored more of a civil law, relationship-based stakeholder view as opposed to the more classic common law, bargained-for exchange, shareholder view. Inroads into this were made during the recent ascendance of neoliberal “market fundamentalism,” [FN201] and in the face of the relative economic success and influence of Japan's close ally, the United States. Among other things, this trend has seen the erosion of some Japanese corporate traditions including lifetime employment, and those consequences are likely to continue. Yet CSR's popularity “provided the greatest obstacle to the deregulation that recently began to accelerate in Japan” in the late 1990s. [FN202] The classic Japanese preference for the stakeholder view, opposed to the view that the corporation exists primarily for shareholder profit, has been confirmed empirically. [FN203] Thus, experts continue to advise that when implementing CSR in countries such as Japan, “explanations of motivations should be couched in terms of doing the right thing for its own sake, as opposed to explaining that CR and CR reporting ultimately benefits the firm and its owners.” [FN204]
The result is that Japan still falls closer to the same “stakeholder” side of the spectrum as does the E.U., in contrast to the relatively greater emphasis in the United States on shareholders - although in light of constituency statutes in most of the states and precedents such as A.P. Smith Manufacturing Co. v. Barlow (1953) [FN205] and Theodora Holding Corp. v. Henderson (1969) [FN206] (confirming the board's right to make charitable donations), the U.S. model also includes stakeholders more than commonly assumed. [FN207] The vast majority of Japan's leading companies publishes social reports and accounts for carbon emissions. The stronger historical support in Japan for CSR [FN208] as compared with jurisdictions like the United States, however, has simultaneously been narrowing in some respects, as traditional Japanese influences wane, while resurging in other respects as Japanese companies no less than others find adherence to CSR principles increasingly required in law and as a “basic competitive requirement” of global business. Codes of conduct, for instance, have proliferated in Japan as elsewhere, including for Japanese production abroad. But these codes are more “Japanese” in that they arise primarily out of quality control concerns and only gradually began to reference labor rights and then human rights. Their tone is also different, emphasizing, for example, respect and cooperation between the parties. [FN209] There is judicial precedent in Japan, as in other jurisdictions, confirming the need for corporations to have internal controls and risk management systems to avoid the recurring corporate scandals seen there, as elsewhere. [FN210]
Another interesting example of distinctive Japanese CSR evolution pertains to the greater willingness of Japanese judges to entertain forced labor, “comfort woman,” or other war crime victim compensation claims against Japanese companies from citizens of China, Korea, or other countries. This development, which has enhanced the prospect of settlements and other relief for the victims, is attributed by some commentators to Japan's perceived need to take into account the new, more networked geopolitical and economic realities in Asia. [FN211] Generally, however, Japan remains much less litigious and a much less favorable venue for foreign plaintiffs than, say, the United States, although a director could be sued for breach of fiduciary duty for an incident abroad that damaged the Japanese company. [FN212]
In the future, Japan can be expected to continue to refine and endorse its distinctive approach to the CSR principles at home and abroad.

6. South Korea

The culture of South Korea, like that of China and Japan, [FN213] is heavily influenced by Confucian values. Unsurprisingly, South Korean business holds stakeholder values similar to those in Japan, although a bit less fervently than in Japan, as confirmed by recent surveys. [FN214] Such cultural values do make a difference. But there have been serious gaps in practice in Korean business' understanding of CSR principles. Failure to achieve internalized values of the rule of law and an ethical, accountable “legal culture” [FN215] has been identified as the cause not only of the corporate scandals in the United States and Europe at the turn of the century, [FN216] but also those in the Asian Crisis shortly before. The sidestepping of corporate governance controls by certain banks and companies in South Korea, and also in Japan, Indonesia, Thailand, and Malaysia -- but not Hong Kong, Singapore, or Australia -- seems to have made a significant difference in the unfolding of that crisis. [FN217]
Like other Asian countries, Korea has in recent years upgraded its corporate governance laws and practices. Korean businesses have even started taking the human rights prong of CSR quite seriously, with several major seminars involving the top Korean business associations and companies. Korea recognizes that to compete, CSR principles are now expected in the global marketplace.

B. The BRICs and the “Second World”


There is a growing consensus that the BRIC countries (Brazil, Russia, India, and China) and the “Second World” countries generally represent a coming historic shift in relative wealth and power away from the current “First World” [FN218] - so the rules and standards that these countries and their companies adopt will influence the future of global business, and indeed geopolitics for generations to come. At this point, relatively few of the world's largest TNCs come from the “Second World,” but this will continue to evolve rapidly. In the meantime, “Second World” emerging markets are tremendous growth markets for established TNCs.
This power shift to the “Second World” countries and their companies, with the corresponding and predictable impact on global values, norms, and the global system itself, causes legitimate concern to many. The historical record of China, Russia, or Saudi Arabia [FN219] with regard to CSR, human rights, and environmental issues is, to say the least, not exemplary. The insatiable quest for energy on behalf of newly globalizing countries (global energy demand is projected to increase at least 50% by 2030), and the new geopolitical dimensions of that global quest, do not help the prospects for CSR. For example, China's state-owned enterprises roam the globe to lock up new fossil fuels in Africa and Latin America and are prepared to go where CSR has deterred others from going, including Sudan. Organizations such as the Shanghai Cooperation Organization, in which China, Russia, and the Central Asian Republics have partnered on not only energy but also security matters, are a reminder that there is even an implicit military dimension to resource quests. Nevertheless, China is not alone. The recent U.S. assistance to Nigeria in quelling “unrest” in the Niger Delta is yet another example, to say nothing of Iraq.
Yet three out of the four BRIC countries actually have extensive activities aimed at implementing CSR and those three seem amenable to the idea of responsible competitiveness. [FN220] Russian industry, by contrast, is, in the main, notoriously oblivious to CSR principles, [FN221] which creates difficulties for the many businesses in the country undoubtedly trying hard to be more responsible.
As for CSR's future progress, it seems likely, again with the exception of Russia, that the position of the BRICs, lying as it does between the two extremes in the global economy - understanding the benefits of markets but also the acute predicament of those not benefiting from globalization - will in the long-run spur rather than retard the momentum toward sustainable development. Indeed, a number of “Second World” corporate executives from countries such as China, India, and South Africa have demonstrated a strong desire to deploy corporate power in the interest of helping their compatriots achieve sustainable development. [FN222] To illustrate the opportunities and challenges involved, this article now turns to the important examples of China, India, Singapore and Malaysia before addressing CSR's relevance for Africa and the least developed countries.

1. China

After a two-century hiatus, China - self-described in the first article of its 1994 Company Law as a “social market economy,” - is again moving toward having the biggest economy in the world (as it did in the 18th century). Now (and with apologies to Mao) there is a new Chinese middle class of 100 million to 150 million people with a household income of USD$10,000/yr. [FN223] As the equilibrium of the global economic and political system is shifting from the West in an eastern and southerly direction, China deserves special consideration, both because of its size and influence and because it is already so integrated with production in other countries including the West.
Although the European Union is presently the largest market in the world, ahead of the United States, China and India have their sights set on overtaking the leaders, with all the implications this has for the socioeconomic and political models offered by these competing powers. While Chinese rhetoric and many actions in the field of CSR are quite encouraging, China still has a very nascent rule of law and of course remains an authoritarian country with major environmental and human rights issues. At a time of increasing Chinese and Second World power, the entry into the global economy of corporations from jurisdictions without the same traditions of law and human rights again reminds us of the need for a wider perspective. China highly values “sovereignty” and “noninterference in domestic affairs.” [FN224] By joining the WTO, China was committing itself and its companies to global rules and a level playing field in the realm of economics and trade, although the opportunity to condition accession on CSR principles pertaining to human rights and the environment was lost. In a very real signal of how standards could be lowered in the absence of global CSR principles, leading Western companies such as Yahoo, Microsoft, Google, and Cisco have already been implicated in alleged human rights abuse complicity. Several of their highest executives testified before the U.S. Congress in defense of the corporate actions. After the adverse publicity and stakeholder pressure, the companies recently concluded lengthy negotiations with NGOs on a new multi-stakeholder voluntary initiative on the internet and censorship launched in Paris in December 2008 - the Global Network Initiative (GNI) [FN225] -- in lieu of proposed U.S. legislation on the issues. [FN226] While Amnesty International and Reporters without Borders decided to refrain from joining the GNI in part because of the generality and malleability of its commitments, it is hoped that the effort will gain in substance and credibility over time, and be a vehicle for effective collective action to ensure free expression in new media globally and indeed broader respect for CSR principles in general.
Even though Chinese formal law and corporate governance (gongsi zhili) have made great strides in recent years in incorporating the CSR principles, enforcement makes the difference as to whether the laws have any meaning, and like many Second World countries China still lags dramatically in that regard. Codes of conduct are nominally accepted, but double-bookkeeping, fraud, and audit manipulation and evasion are common. [FN227] This means in practice that external verification, enhanced state capacity, and multi-stakeholder partnerships take on even greater significance, as is true in many other Asian countries. Personal relationships (guanxi) remain important in China as throughout Asia generally, for good (e.g. stakeholder perspectives) or bad (e.g. corruption), although progress is being made toward transparency and more objective rules. [FN228] China's system at present, emphasizing economic over political reform, also partakes of a form of “corporatism” that conjoins a strong state with some calibrated autonomy for certain private actors, all in a still hierarchical if now more chaotic relationship, in part deriving from the persistent influence of Confucianism and the communist legacy. Pursuant to the Confucian ideal of harmonious social relations, arbitration is still preferred over litigation, although human rights and environmental litigation is on the rise. [FN229]
CSR is also on the rise in China, at both the national and the provincial levels of government and among Chinese businesses. Why? Chinese elites are not oblivious to the trends affecting their cosmopolitan counterparts around the globe or to the fact that markets are demanding CSR. U.N. Special Representative for Business and Human Rights, John Ruggie, studied this and discovered that the only predictor of whether Chinese corporations had a CSR policy embracing human rights at the time of his 2007 study was whether they were in the Fortune 500. [FN230] Many Chinese leaders recognize that the growing global prevalence of CSR standards means that they may face sanctions of various sorts, such as consumer boycotts, divestment actions from SRI funds, and future trade sanctions, if they fail to progress on this front.
In addition to attributes of the rule of law such as property rights and due process of law with an independent judiciary, China needs to make progress both on standards and enforcement with respect to protecting minority rights, human rights in general, and the environment. The Chinese do, however, seem to be moving in the direction of a “meta-regulatory” approach, in the sense of setting standards and allowing complaint mechanisms to develop that will engender dialogue and problem solving consistent with the CSR principle of stakeholder engagement. [FN231] This accords with the continued deep Chinese attachment to Confucian values of moral, harmonious relations in society as the key to effective governance (as opposed to the reliance on detailed legal rules promoted by the Legalists in Chinese history - although the force of law has always been seen in practice as a necessary backstop and the law of force remains quite apparent in China). [FN232]
Thus, China does indeed have a local Global Compact network (as do many of the countries in Asia, ranging from, India, Indonesia, Malaysia, the Philippines, and Sri Lanka, to Thailand), [FN233] and also has enshrined social responsibility and the stakeholder perspective in law in various remarkable ways. [FN234] Also noteworthy is the new labor law which has, since January 2008, enhanced workers' rights, including by requiring that companies give them written contracts. [FN235] Disturbingly, many U.S. and some European companies strongly lobbied against these new workers rights in China through local trade associations and their chambers of commerce. Nevertheless, these progressive Chinese developments - applying not just to export industries (where CSR has formerly been concentrated) but to all Chinese companies and workers - should give pause to all those who predicted that the stakeholder ideal is in retreat in China. [FN236] China's Academy of Social Sciences recently established a new Corporate Social Responsibility Research Center, aimed at “exploring a [CSR system] with Chinese characteristics, establishing and improving effective CSR external mechanisms, and assisting Chinese enterprises to find a practical path for CSR.” [FN237] The new head of the center, Chen Jiagui, stated that “[f]ulfilling CSR is the fundamental point for corporate sustainable development, the global trend of accelerating economic development and social progress, and motive force for harmonious society.” [FN238]
The “business case” for Chinese CSR includes both domestic and foreign policy aspects. An article in the San Francisco Chronicle [FN239] recently predicted that “China just might surprise the U.S. on climate change” in order to avoid otherwise grave repercussions in the form of pollution, droughts, flooding, and other environmental harm. China is already a locus of growing clean-tech energy investment. The stakeholder engagement principle similarly acts as a safety valve and signal that an issue needs to be addressed before it undermines system stability, as suggested by China's tolerance of the more than 85,000 protests during 2007 [FN240] surrounding CSR-related issues like labor conditions, [FN241] displacement caused by large infrastructure projects (usually involving Western corporate partners), environmental degradation, and the absence of healthcare for those not receiving it either through a state-owned enterprise or a company providing benefits. Former U.S. Trade Representative and current World Bank President Robert Zoellick called on China to be a “responsible stakeholder” in the global system, [FN242] and China and many of its companies - including some that remain state-owned [FN243] - have taken notable steps in that direction (although the horrendous environmental problems, [FN244] the continuing sweatshop abuses, [FN245] discrimination against migrant workers, recurring crackdowns on Tibetan protesters and other dissenters, [FN246] entrenched censorship, [FN247] and support for genocide abroad [FN248] demonstrate the long path ahead). [FN249] Just as successful global businesses today must have a Chinese strategy, so it can be hoped that China will embrace CSR principles, and CSR will embrace China.
If the European Union is the most mature CSR region these days, and the United States is showing significant progress, Asia may - contrary to conventional wisdom - be a “dark horse” of sorts. Throughout the region, the excitement about CSR is palpable, with constant conferences, enthusiastic embrace of the terminology, and an appreciation among elites of CSR's potential practical significance to the point that it is being “localized” into cultural containers (such as “the harmonious society” in China) that can help carry the freight of the CSR concepts. The fear, and it remains a very real one, is that if the BRICs, the Second World nations, and their companies don't become “responsible stakeholders” they will dilute the substance of the CSR principles. This fear takes on new significance after the most recent global financial and economic crises, which in the eyes of many in the South and East call into question the continuing viability of the “Western” model and give new credence to the more autocratic, if fast-changing, “Chinese” model of development, to date less sensitive to human rights and the environment. [FN250]

2. India

Companies in India also show increasing enthusiasm for CSR. Precedents such as the long-standing mandatory environmental reporting [FN251] and the support for the precautionary principle by the Supreme Court of India undoubtedly prepare the ground. But the Indian concept of CSR nevertheless remains somewhat thin, being associated mainly with corporate philanthropy and voluntary community investment, including such activities as digging wells, planting trees, health clinics in partnership with the government, and training youth. This is the usual starting point in most countries. One recent estimate is that many large businesses in India dedicate about a half-percent of profits to charity and consider it to meet their CSR commitment. [FN252] Some industries, such as the publicly owned steel companies, reportedly earmark 2% to CSR, focusing in areas such as “environment, family welfare, education, health, cultural development as well as building social infrastructure, water supply and sanitation activities.” [FN253] The “CSR as charity” approach is changing as Indian businesses include new world-class competitors. A University of Nottingham study found that Indian businesses were the most likely in Asia to engage in CSR reporting on their websites, with globally active companies being the most likely to report, [FN254] despite India's economy being driven more by domestic demand than, say, China's economy. The increasing share of global manufacturing being taken up by Indian suppliers also drives CSR in India, as they cooperate with the Indian government, home country governments, such as the U.S. State Department (which invests in “social compliance” in Indian supply chains), and major TNCs to receive training on codes of conduct and more sophisticated understandings of the human rights and environmental requirements. Of course, there are also countervailing pressures on suppliers from TNCs and domestic companies to cut corners, and in keeping with the CSR principles these should be viewed critically.
The top Indian government officials now support CSR as a “basic competitive requirement” for successful participation in the global economy, and Indian chambers of commerce and industry associations show similar enthusiasm (spurred on by the burgeoning number of Indian and foreign consultants offering CSR services of various sorts). [FN255] Indian Prime Minister Dr. Manmohan Singh publicly endorsed CSR in a speech before the Confederation of Indian Industry annual meeting in 2007, including calling for business, among other things, to share the benefits of economic growth, factor in community needs, engage in affirmative action for women and minorities, adopt more caring policies for workers, engage in environmental sustainability, and avoid corruption. [FN256] The Prime Minister, Finance Minister, and business leaders continue to carry this message forward. [FN257] At the time of writing, nearly 200 Indian companies, trade associations, and civil society organizations participate in the U.N. Global Compact. [FN258]
Nevertheless, serious child labor, other labor, environmental, health and safety violations persist in India, especially among the less globally integrated small- to medium-sized businesses and in the informal sector. [FN259] The deeply entrenched caste system remains influential despite the affirmative action rhetoric and initiatives. As in many countries, good laws on the books are not always enforced in practice, so issues regularly arise regarding payment of minimum wages, workers subjected to excessive overtime, industrial accidents and the like. Government enforcement capacity remains low and is the subject of several programs of international cooperation with developed country agencies.

3. Singapore

As a high-income non-OECD country, Singapore is in the top-tier of “Second World” countries. Singapore has a relatively new “Singapore Compact” for CSR that is affiliated with the U.N. Global Compact. [FN260] CSR concepts are spreading within the Singapore business community although there remains a heavy public relations and philanthropic emphasis to the activities at this point. [FN261] Violations of human rights also continue to be attributed to certain businesses' activities in Singapore. [FN262]

4. Malaysia

As in India, China, Singapore and other Asian countries, CSR is on the upswing in Malaysia and has received support from the highest levels of government. Under European Union influence, CSR is seen as “usually on a voluntary basis” [FN263] and still associated primarily with philanthropy, although disclosure of CSR activities by publicly listed companies (PLCs) has been required for the last several years. The Prime Minister called for CSR reporting in his 2005 budget speech, and the budgets since then have reiterated government support for CSR.
In 2006 the Bursa Malaysia (formerly the Kuala Lumpur Stock Exchange) launched a CSR Framework for PLC reporting and implementation. The Framework includes four focal areas: the environment, workplace, community, and marketplace. [FN264] Regarding the marketplace, for example, the Malaysian CSR Framework echoes the stakeholder engagement principle and the notion of sphere of influence: “The Marketplace is where we find important stakeholders - our shareholders, suppliers, and customers. Companies can interact responsibly with this group in a number of ways, such as supporting green products or engaging in only ethical procurement practices.” [FN265] Regarding “the Workplace,” the CSR Framework states “We draw our employees from society and so everything we do with our staff needs to be socially responsible, whether we are dealing with basic human rights or gender issues.” [FN266] Starting in the 2008 financial year, PLCs must also disclose their employment makeup by race and gender, in addition to programs undertaken to cultivate domestic and Bumiputera (ethnic Malay) vendors.
As Islam is the official religion of the country, Malaysia is also seeking Islamic modes of CSR. Among other ways, it does this by cooperating with Saudi Arabia and other Islamic countries to emphasize the importance of CSR from an Islamic perspective and by helping to develop a governance standard for Islamic financial institutions. [FN267] Such efforts by Malaysia, and those in its predominantly Islamic neighbor Indonesia, highlight CSR's increasingly universal legal and ethical appeal.

C. Sub-Saharan Africa and the Least Developed Countries

At first blush, CSR might seem irrelevant to Sub-Saharan Africa and the least developed countries. These are, after all, by definition some of the most blighted areas of the world, subject to corrupt governments and exploitative TNCs. Despite gains in literacy, it can be forgotten that many of the world's “bottom billion” are completely illiterate, [FN268] that gender and other forms of discrimination remain rampant - two-thirds of the world's illiterate are female - and that education and literacy rates correlate quite closely to poverty rates. [FN269] The “market for virtue” [FN270] is even less developed with respect to the poorest countries than it is in richer countries. The sphere of influence for powerful companies operating in such countries may be proportionately larger and matched by correspondingly greater expectations, which the company in turn may feel must be addressed in order to serve the long-term interests of its shareholders and other stakeholders. For example, expectations to provide basic necessities for workers and their families, such as food, water, housing, clothing, health clinics, and schools, are often much higher for certain businesses in countries without extensive or effective public sectors. Yet as in India, China, and many of the Second World countries, the legacy of colonialism remains in the popular mind. Continued patterns of inequitable power and wealth cause resentment and sometimes even violence [FN271] (companies and their executives will also want to ensure that they avoid perpetuating conflict and the allegations and legal remedies that could be associated with doing so). [FN272]
A frequent criticism of CSR from or on behalf of the developing world is that it serves as a mask for globalization, economic and political hegemony, “cultural imperialism,” domination, and homogenization by both wealthy states and their TNCs. [FN273] On this view, CSR is nothing more than saccharine offered before swallowing a bitter pill. If, however, businesses in fact take the CSR principles seriously - listen to and learn from stakeholders, explain the impact of their plans and show willingness to amend them based on input, test those plans using the precautionary principle when appropriate, and apply consistent and demanding best practices instead of damaging double standards - this could be a powerful antidote to the neo-imperialistic criticism.
The prospects for CSR playing a positive role in the least developed countries are better than one might think. Many of the world's poorest nations are beginning to embrace responsible competitiveness as a development strategy and are actively seeking partnerships with corporations, unions, and NGOs in doing so.
In Africa, charity remains an important thrust of many CSR functions, with large companies often using foundations to make community investmen

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