When CSR Becomes a Diplomatic Business

Editor’s Note: This is the second of three articles we will be publishing on the progress that has been made in holding corporations accountable to international human rights laws. The first article can be found here

 

Corporate Social Responsibility (CSR) is “a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders”. This concept became popularized in the first decade of 2000. Authoritative transnational organizations began discussing recommendations and soft-law guidelines to target business performance in relation to human rights, transparency, corporate governance and the environment.

Governments and Corporations Need Each Other

The private sector’s response to initiatives such as the UN Guiding principle on business and human rights, the OECD Guidelines for multinational enterprises and the UN Global Compact was mostly positive. CSR principles were gradually integrated into corporations’ decision-making and business strategies. As a counterpart, corporations started claiming their voice in the international debate. A new era of global governance commenced, where flows are not exclusively unidirectional (state to non-state actors) but fragmented into a myriad of transnational actors with (almost) equal voice and capacity to play a role.

Corporations are powerful actors in today’s global governance: they are far more numerous than the total number of states, and, in some cases, have bigger turnovers that certain states’ Gross Domestic Product (GDP). Their impact on public interest is, therefore, potentially significant and often transcends national borders. For this reason, business proactiveness is fundamental to tackle sensitive issues of public interest and provide adequate solutions for major global challenges.

On the other hand, businesses need governmental protection to operate worldwide, especially in industries with strong national security implications (e.g. electricity, pharmaceutical, mining, etc.). Indeed, states dispose of many economic policy instruments on which companies rely in order to generate profits in foreign markets. Examples are export credits, investment guarantees, bilateral agreements negotiation, trade advocacy and networking. The way in which states deal with these instruments depends on their economic diplomacy strategy and intended goals. Therefore, economic diplomacy tools are “not only instrumental to promote foreign trade and investment, but they can also be powerful levers for governments to guide corporate behavior and support best practice on responsible business conduct (RBC)”.

The Canadian Approach to CSR

Canadian companies receive extensive advocacy and networking support from Canada’s Trade Commissioner Service and its missions around the world. The Commissioner’s support ranges from assisting companies with market assessment and investment preparation to providing contacts and favoring partnerships with local governments and development agencies. Nevertheless, support is conditional on the integration of major international CSR standards and good faith participation in either one of the non-judicial dispute resolution mechanisms envisaged by the 2014 Enhanced CSR Strategy. These are the Extractive Sector Corporate Social Responsibility (CSR) Counsellor, the Canadian National Contact Point (NCP) and the Canadian Ombudsperson for Responsible Enterprise (CORE) (created in January 2018 and not operational yet).

The CORE is the first Ombudsperson entirely devoted to solving disputes between Canadian companies and affected communities in multiple industries (garment, mining, and oil and gas). It will be empowered to investigate independently, undertake transparent and collaborative fact-finding and publicly report at various stages of the process. It will also have the power to issue non-binding recommendations on compensation, apology, cessation of particular activities, mitigation measures or corporate policy changes.

It will complement and reinforce the existing mechanisms, paying special attention to transparency and public reporting. In addition, it will be able to initiate investigations without the submission of a compliant. The real novelty of the CORE is the power to make direct recommendations to the Canadian government on the withdrawal from certain government trade services if a corporate wrongdoing is proven and the company refuses to cooperate or remediate victims.

The creation of the CORE has been welcomed by the CSR community, considered as positive step forward to promote responsible business practices and transparency in a country that has one of the largest extractive industry in the world. As reported by the Canadian government, in 2013 “over 50% of the world’s publicly listed exploration and mining companies were headquartered in Canada” and spread their operations in over 100 countries around the world.

With a huge portion of Canadian economy devoted to extractive activities, Canada’s government must necessarily position itself as a primary defender of CSR. Indeed, exploration and mining activities are often perceived by local communities as disruptive of people’s social life, economic sustenance and cultural sensitiveness. There are several reasons for this: they are one the most land and resources-consuming activities; they are mostly located in fragile environments, indigenous-protected areas or conflict-affected areas; and they need a strong engagement with host governments, which contributes to communities’ perception of companies unduly influencing public institutions and excluding local populations from key-decisions. These perceptions necessarily impact the government’s reputation and the country’s image abroad. Hence, it is in governments’ interests to create a level playing field by ensuring that companies are subject to fair competition and do not profit from public services with irresponsible practices.

In extremis, economic diplomacy measures paired with alternative dispute settlement mechanisms can complement judicial means in preventing and/or remediating cross-border human rights violations. Together, they can prevent never-ending judicial sagas, favor a constructive dialogue between the community and businesses and find solutions for parties’ compensation. The Canadian model illustrates how the government is playing an active role in the CSR debate to secure public interest and ultimately its reputation. This interesting approach may inspire other governments in the future.

 

Image courtesy of Flickr. Originally published by S&S on July 24, 2018.

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