Sustainability Standards and Instruments

Alan S. Gutterman

• Publisher: Business Expert Press
• Year: 2021
• ISBN:
  9781953349897
• Topic: Volkswirtschaftslehre
• Subtopic: Nachhaltige Entwicklung

This book serves as an introduction to sustainability standards and instruments and includes chapters on initiatives of governmental and intergovernmental bodies, sectoral CSR commitments, CSR-related reporting and management standards, and securities exchanges and regulators.

It is becoming increasingly clear that firms can contribute to their own wealth and to overall societal wealth by considering the effect they have on the world at large when making decisions and take operational actions to execute their strategies. All of this has led to growing interest in "corporate social responsibility, " or "CSR, " which has been described as the way that firms integrate social, environmental, and economic concerns into their values, culture, decision making, strategy, and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth, and improve society.

The commitments and activities associated with any CSR initiative should begin with compliance with laws and regulations promulgated by the governmental entities have jurisdiction over the firm's activities; however, CSR extends well "beyond the law" to include important subjects as to which the law has not been able to keep. As a result, voluntary corporate responsibility standards developed from a variety of sources have emerged to fill the gap.

This book serves as an introduction to sustainability standards and instruments and includes chapters on initiatives of governmental and intergovernmental bodies, sectoral CSR commitments, CSR-related reporting and management standards, and securities exchanges and regulators.

CHAPTER 1

Introduction

Academics, policy makers, businesspeople, members of civil society, and individuals have all recognized the significant effect the activities of the private sector have on employees, customers, communities, the environment, competitors, business partners, investors, shareholders, governments, and others. It is also becoming increasingly clear that firms can contribute to their own wealth and to overall societal wealth by considering the effect they have on the world at large when making decisions and take operational actions to execute their strategies. All of this has led to growing interest in “corporate social responsibility” (CSR), which has been described as the way that firms integrate social, environmental, and economic concerns into their values, culture, decision making, strategy, and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth, and improve society.¹

The commitments and activities associated with any CSR initiative should begin with compliance with laws and regulations promulgated by the governmental entities have jurisdiction over the firm’s activities; however, CSR extends well “beyond the law” to include corporate governance and ethics; health and safety; environmental stewardship; human rights (including core labor rights); sustainable development; working conditions (including safety and health, hours of work, wages); industrial relations; community involvement, development, and investment; involvement of and respect for diverse cultures and disadvantaged peoples; corporate philanthropy and employee volunteering; consumer issues, customer satisfaction, and adherence to principles of fair competition; anti-bribery and anti-corruption measures; accountability, transparency, and performance reporting; and supplier relations, for both domestic and international supply chains. The law has not been able to keep up and the gap has been filled by CSR standards promulgated from a variety of sources.

According to Williams, most of the corporate responsibility standards are voluntary, although India passed legislation in 2014 that required companies to establish a corporate responsibility committee at the board level and contribute 2 percent of net profits to corporate responsibility initiatives.² It should not be forgotten, however, that many of the topics generally included within the general subject of CSR have previously been addressed to some degree in domestic regulations covering labor rights, environmental and consumer protection, anti-discrimination, and anti-bribery. Countries vary in the degree to which regulatory standards relating to corporate responsibility are relied upon and Williams noted that empirical evidence suggested that the underlying regulatory standards effectively shape the sustainability culture within countries, and have both a strong effect on how companies handle corporate responsibility issues and a strong effect on the sustainability. For example, Williams pointed out that Matten and Moon have argued that

in countries with stakeholder corporate governance systems and more expansive social welfare arrangements, corporate responsibility is ‘implicit’ in doing business according to law, so companies do not need to be as ‘explicit’ about taking on social responsibilities, as do leading companies in more shareholder-oriented countries. ³

Since the late 1990s there has been a proliferation of transnational, voluntary standards for what constitutes responsible corporate action including standards have been developed by states; public–private partnerships; multistakeholder negotiation processes; industries and companies; institutional investors; functional groups such as accountancy firms and social assurance consulting groups; nongovernmental organizations (NGOs); and nonfinancial ratings agencies.⁴ Influential multilateral initiatives have included the Organisation for Economic Co-operation and Development’s (OECD) Guidelines for Multinational Enterprises, the ISO 26000 Guidance on Social Responsibility, the UN Global Compact and the “Protect, Respect and Remedy” framework in the UN’s Guiding Principles on Business and Human Rights that articulates the human rights responsibilities of states and companies, and notable multisector standards initiatives have included Social Accountability 8000 and the Ethical Trading Institute.⁵ The common practice of relying on major international conventions and agreements on human rights, labor, corruption, the environment, and supply chains, such as those mentioned previously, has led to convergence among many of the voluntary standards with respect to the key topics covered and language used in those instruments, and convergence has also been fueled by the widespread adoption of initiatives such as the Global Reporting Initiative guidelines and the International Finance Corporation Performance Standards.⁶

Role of the State in CSR

Giovannucci et al. observed that governments have tended to focus on traditional lawmaking activities such as basic guarantees or regulations relating contract rules and food safety as opposed to getting directly involved in encouraging the development of CSR as a complementary tool for public policy.⁷ However, commentators have suggested that governments can and should play a more active and supportive role in strengthen CSR in the private sector. For example, a 2002 World Bank report identified four potential key public sector roles for engaging with CSR: mandating, facilitating, partnering, and endorsing.⁸ The same report listed 10 key themes for public-sector CSR-related activities: setting and ensuring compliance with minimum standards; public policy role of business; corporate governance; responsible investment; philanthropy and community development; stakeholder engagement and representation; pro-CSR production and consumption; pro-CSR certification, “beyond compliance” standards, and management systems; pro-CSR reporting and transparency; and multilateral processes, guidelines, and conventions. The report was focused primarily on developing countries and highlighted the following five key themes for future work to strengthen the CSR-related roles of public sector agencies in developing countries⁹:

• Work to build awareness of the contemporary CSR agenda within developing country agencies, including building understanding on the overall drivers, key players, and effective pressure points, as well as country-specific impact assessments of the CSR agenda for trade and investment promotion.

• Initiatives that enable public sector bodies in developing countries to become effective players in setting the terms of the CSR debate and its associated standards.

• Work to build a stable and transparent environment for pro-CSR investment, including efforts to strengthen basic norms of social, environmental, and economic governance and their enforcement.

• Initiatives to engage the private sector more directly in public policy processes associated with delivery of public goods (e.g., national sustainable development or poverty reduction strategies).

• Support for public sector bodies to develop frameworks within which to assess local or national priorities in relation to CSR.

Governments also have their traditional roles with respect to important elements of CSR programs including financial and technical support for the delivery of infrastructure, health, and education, all of which remain primary responsibilities of the public sector notwithstanding increased involvement and participation by for-profit businesses in public–private partnerships.

An OECD report noted that governments had supported an expansive international normative framework that included the Universal Declaration of Human Rights, the International Labor Organization (ILO) Conventions, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the ILO Declaration on Fundamental Principles and Rights at Work, and pointed out that these instruments have become that basis for specific and comprehensive obligations for businesses operating within the private sector with respect to human rights, working conditions, and industrial relations and sustainable development.¹⁰ The same OECD report identified four channels by which governments have endorsed standards relevant to CSR: international instruments developed and formally agreed by governments (and also having formal support from business and labor organizations); international initiatives developed by intergovernmental bodies; international initiatives endorsed by governments and national initiatives developed and endorsed by governments.¹¹

Instruments Developed and Formally Agreed by Governments

This category includes international conventions and declarations that reflect agreed international normative principles and are directed mainly to governments for domestic implementation. Well-known and widely recognized examples of standards in this category are the ILO Declaration on Fundamental Principles and Rights at Work, which has the support of a body with universal and tripartite members, the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions, which have been developed by the OECD members and additional non-OECD countries, the Universal Declaration of Human Rights, and the UN Millennium Development Goals. Examples of more modest guidelines, limited to a single sector and developed by a limited number of governments with input from business and civil society, include the Extractive Industries Transparency Initiative and the Voluntary Principles on Security and Human Rights. While directed at governments and generally derived from wide-recognized treaties, these initiatives can also be referenced by businesses as guides for how they should conduct their operations and what they should include in their own mission and policy statements and codes of conduct. These initiatives also benefit from participation by social partners (i.e., businesses, employer organizations, trade unions and civil society organizations) in the development and implementation process.¹²

Initiatives Developed by Intergovernmental Bodies

International initiatives developed by intergovernmental bodies that have either been official agreed on or recognized by governments offer authoritative guidance to businesses regarding societal expectations regarding their responsible behavior (i.e., what to do and how to do it). Prominent examples in this category include the UN Global Compact and the International Finance Corporation Environmental and Social Standards.¹³

International Initiatives Endorsed by Governments

This category includes private, and thus voluntary, CSR initiatives that have been developed with the active participation of intergovernmental organizations and/or recognized by governments, such as International Organization for Standardization standards, the guidelines developed by the Global Reporting Initiative, Responsible Care Guidelines, ICMM Sustainable Development Principles and Electronic Industry Code of Conduct. Like the initiatives in the previous category, these standards can provide guidance to businesses regarding responsible behaviors; however, they are not necessarily derived from international norms.¹⁴

National Initiatives Developed and Endorsed by Governments

An example of an initiative in this category is the Ethical Trading Initiative, which was founded and developed with the support of the United Kingdom government. The OECD argued that these initiatives were important because national governments participated in the process of developing the initiatives, typically working with business, civil society and other stakeholders, and because they may ultimately be used as reference points for international initiatives and/or codes of conduct for businesses operating in those countries (or with suppliers operating in those companies).¹⁵

Private CSR Initiatives

Private CSR initiatives provide a means for businesses to organize their efforts to go “beyond the law” in their operations to act in a manner that is consistent with societal expectations regarding responsibility. The process of creating, implementing, and monitoring private CSR initiatives allows and encourages dialogue and debate among various actors including businesses, business associations, public authorities, trade unions, intergovernmental organizations, and NGOs.¹⁶ The CSR landscape has long been complex and multifaceted with hundreds of private initiatives with their own code or set of standards relating to social and environmental issues and substantial variation in objectives, origin, areas covered, and implementation mechanisms.¹⁷ For example, an OECD report noted that

some [private CSR] initiatives aim to raise awareness of the importance of corporate responsibility in general; others promote a particular code of conduct; still others focus on providing tools such as reporting guidelines or services, e.g., certi...