Wednesday, October 25, 2006

CORE ! Time for a new social contract with business

News just in is that the one of the campaign objective of the Corporate Responsibility Coalition (CORE) looks like it may be achieved. Baby Milk Action is a member of this network of campaigning organisations which is working for ways to hold corporations to account against international human rights and environmental standards.

That's the thing. Standards exist. Not just the marketing requirements for baby foods, but declarations on human rights, the rights of workers, the protection of the environment. The trouble is that it is governments that sign up to these agreements and if they do not enforce them on companies then they are not followed.

The International Code of Marketing of Breastmilk Substitutes specifically says to companies that they must ensure their activities at every level comply with the rules independently of what governments may have done. Companies don't respect this. Sometimes they argue they will follow national laws or voluntary agreements instead, and use their economic power to make those as weak as possible. Or they say they will follow the Code, but don't and can get away with it - if we let them.

What CORE is seeking are binding laws so if a UK company abuses human rights or the environment, anywhere in the world, they can be taken to court in the UK. We also want companies to have a legal obligation to report on their impact on communities and for directors to have a duty to consider communities and the environment, not just shareholders.

A few business leaders do see the point of having a level playing field so that the basic standards they wish to follow have to be followed by all. But most and certainly the business associations are opposed. So they have apparently reacted with shock and outrage that the government has added some of the provisions CORE is asking for to the Company Law Reform Bill passing through Parliament at the moment. If the law is adopted, some companies will have to report to shareholders on their environmental and social impacts and on employee and supplier issues. In addition, company directors will have a duty not only to maximise profit, but also to consider the impacts of their business on people and the environment.

You can read in the Financial Times how politicians have had the business lobbyists calling them up saying this is a betrayal. How dare the government require them to report on what they are doing and consider others! Take note, businesses are not being given a legal obligation to respect human rights and the environment. The police won't be knocking on their doors if their reports are not true or they decide to carry on exploiting people and the environment. So why the outrage? Because they fear this is a step towards binding laws. If they have to respect human rights and the environment it will increase costs and if companies in other countries don't have to follow the same standards then UK businesses will become uncompetitive.

Okay, some people reading this may say this is too cynical a view. Business leaders are human beings and they want the best for people. Not just for themselves and their shareholders, but their employees, their customers and the wider community. No doubt some do, but if they are competing with businesses who put profits first then there will always be the pressure to cut corners if there aren't laws in place.

But no, some people may say. Business leaders are not against behaving ethically, they are against more regulation. Red tape we call it in the UK. Forms to fill. Reports to write. There are already too many rules, business complains, and now they are being told to produce even more reports. Let us make the changes, but in our own way, they say. They say voluntary approaches will be more effective. See my 'Growing Fatter' posting for a response to that argument.

The voluntary approach is sometimes referred to as Corporate Social Responsibility (CSR). We have written in our newsletter about Nestlé and CSR and how it brings the concept into disrepute. Nestlé uses a few good examples and a lot of dishonest presentation of its activities to try to cover up the harm it is causing.

Now it seems that some of the people who have been backing CSR are having a rethink. In another article in the Financial Times experts from the International Institute for Environment and Development suggest that CSR is in a bad way and it is time for the Confederation of British Industry to drop its opposition to reporting and regulation. They argue that CSR is dead and a new form of CSR should emerge with the same spirit: "understanding business as part of society".

This is the 'corporate citizen' approach. A business should be a good neighbour. Should put something back into the community and so on. Then people will like business again and be more friendly to them, so the argument goes.

I think this gets things back to front. Yes business is part of society, because a business is a way of people organising themselves. A business only has legitimacy because society defines what a business is and how it must operate through the laws our elected representatives introduce. There is a social contract between society and business. Business can operate, but on the terms society sets. Changing the rules is long overdue. Rules that may have worked in the past are clearly not working now. So let's change them.

The business lobbyists will try to kill the new measures in the Company Law Reform Bill. They are well resourced and have the ear of politicians. But if you are in the UK and a voter or potential voter, then you too have influence. Visit the CORE website to see what action you can take.

Visit as well if you are outside the UK to see if you want to call for changes in your country. There are likely already groups there campaigning.

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