By Takahisa Juba
Situated in the one of the largest business districts in the U.S.—Midtown Manhattan—the Leitner Center for International Law and Justice at Fordham Law School hosted their second annual Corporate Social Responsibility Leadership Course on June 11-12, 2015. The large number of participants and their diversity denotes the growing importance of corporate social responsibility (CSR) and demand for education on the topic. As the world continues to become more interdependent and integrated because of globalization, businesses have been the primary driver of this inevitable trend as they seek new markets and resources. Acknowledging their vital role in development and poverty alleviation, businesses’ growing power and presence have also raised concerns about the negative impact they may have on society. Since the 1960s, CSR has garnered attention and spurred action, evolving from a public relations catch phrase to an issue that is of growing focus and legitimate concern to companies both from a business and legal perspective. With panelists ranging from business executives to general counsels, attorneys, accountants, financiers, academics and a UN representative, the CSR Leadership Course explored some of the most pressing questions and issues in the field.
GROWING IMPORTANCE AND ROLE OF CSR
Despite the importance of CSR, companies face challenges in implementing CSR initiatives both internally and externally because the financial impact of CSR may not be immediately evident or quantifiable. However, investors are growing more concerned with a company’s CSR performance and this trend will likely continue. Moreover, the Rana Plaza building collapse in Bangladesh, which killed over a thousand garment workers, was a game changer. Businesses can no longer ignore such risks, and integrating CSR into their business approach is one way for companies to minimize reputational risk and conform to millenials’ demands for companies to become more socially responsible.
A key part of practicing CSR is making ethical commitments and choices, such as pledging to end human trafficking in a company’s supply chain, which can be a lengthy and conflicted process. What seems to distinguish ethical companies is the atmosphere established from the top down. However, the economic realities of slowing revenue can put pressure on maintaining ethical commitments. In many cases ethical choices may give way to economic considerations. For example, the nature of multinationals (companies based in one home country but manufacturing in a range of countries along their supply chain, and selling in many more) may pose ethical problems as a company may choose to abide by regulations that establish high ethical standards in one country but lower their standards in another as the regulations are less restrictive allowing for less ethical or more predatory practices.
AFFECTING SOCIAL CHANGE
Businesses, undoubtedly, influence a broad variety of social issues. How they impact these issues depends on the company’s policies and priorities. With regard to the environment, some financial institutions have adopted project financing guidelines to regulate environmental and social impacts of financed projects such as the Equator Principles, which establish requirements for environmental and social assessment, performance and reporting. Companies can hold themselves accountable for their environmental impact by voluntarily reporting their impact through the Global Reporting Initiative or the Carbon Disclosure Project. In general, however, sustainability reporting is still evolving as stakeholders determine what issues are important and how impacts are measured, the panel on sustainability reporting pointed out.
Companies also play a major role in women’s empowerment. In general, women have been underrepresented in positions of power in companies and certain industries like tech. But innovative initiatives, like scholarships, training programs, and flexible guidelines, can provide a more supportive environment for women in the workplace.
In contrast to the private initiatives addressing environment and women’s empowerment, the role of legislation has been instrumental in combating human trafficking. U.S. Federal regulations prohibit any contracts with the federal government that involve human trafficking. In addition, state laws such as the California Transparency in Supply Chains Act requires disclosure of efforts by companies to eradicate human trafficking from their supply chain.
Domestic laws and regulations can play an important role in holding businesses accountable and ensuring that their businesses are conducted in a sustainable manner. However, international law does not directly regulate private businesses. The traditional view is that international law governs states and they have the responsibility to enforce the law against companies and individuals. It is uncertain if binding international law directly regulating multinational corporations will be adopted in the near future. However, there are “soft laws” that apply to businesses internationally such as the UN Guiding Principles on Business and Human Rights.
Under the Guiding Principles, states have the duty to protect human rights and businesses have the responsibility to respect human rights while both have the responsibility to provide remedies for negative human rights impacts. This can be complex and daunting for certain businesses. For example, a law firm’s responsibility to protect human rights can conflict with an individual’s right to representation, even those who may be guilty of a crime or human rights violation. In those cases, the lawyer or law firm must make a decision, but a human rights policy for the firm may be a good starting point to establish a proper decision making framework. In another instance, those who perform human rights due diligence for a private company—a responsibility under the Guiding Principles—may also face a difficult decision in helping a company that has committed human rights violations. The question that some may ask is if engagement with companies that have committed abuses could improve human rights conditions in the country and company’s operations.
The trend toward an increasing focus on CSR is a welcome development, especially for human rights. The Leitner Center’s course emphasized the important role and impact of CSR to business and society. It not only identified challenges in implementing CSR but importantly, how to address them through real life examples, case studies and legal expertise. There is no one model for CSR, but there is no doubt that businesses must strive to conduct themselves in a socially responsible manner.
Takahisa Juba is a Leitner Center and Fordham Law School alumnus. He attended the 2015 Corporate Social Responsibility Leadership Course.
The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.