Corporate responsibility and sustainable development

Citation

Rayman-Bacchus, L. (2012), "Corporate responsibility and sustainable development", International Journal of Law and Management, Vol. 54 No. 5. https://doi.org/10.1108/ijlma.2012.01054eaa.002

Corporate responsibility and sustainable development

Article Type: Guest editorial From: International Journal of Law and Management, Volume 54, Issue 5

This Special Issue presents a selection of papers from the 1st International Symposium on Corporate Responsibility and Sustainable Development, held at London Metropolitan University Business School. The event brought together researchers, practitioners, teachers and students, from 16 countries, in order to explore emerging ideas and developments in corporate responsibility and the broader notion of sustainable development. Researchers and teachers gained an insight to the perspectives and priorities of professionals working in diverse fields, while practitioners in turn had the opportunity to hear about new research into the nature of corporate responsibility and its relationship with sustainable development. Presentations were wide ranging, highlighting challenges and developments from around the world, loosely grouped into strategy, policy, and principles. There was also a track dedicated to exploring corporate responsibility thinking and practice within China.

For this Special Issue of IJLM we have selected five papers that focus on different aspects of corporate responsibility: a case study of implementing corporate social responsibility (CSR) within a large telecoms provider (MTN Ghana) and how this relates to the work of the marketing and HR departments; a survey based assessment of why in New Zealand very few companies have adopted ISO 14001, the international standard designed to help organisations develop effective environmental management systems; a review of developments around the relationship between corporate responsibility and development in parts of Africa, especially Nigeria; an empirical study of CSR policy and practice among a sample of German banks; and a discussion of how providers of political risk insurance take into account CSR policies and practices of applicants operating in developing countries.

Corporations doing business across national boundaries, are subject to political risk. Mining corporations operating in developing countries are exposed to many risks, including expropriation of assets, violence against employees and property, community opposition. As Webb notes, international trade has been able to flourish because there are mechanisms for managing political risk. Webb focuses on the range of insurance instruments available to the corporation in order to mitigate against such risks, noting in particular bi-lateral investment treaties (BITs), political risk insurance (PRI), and corporate social responsibility (CSR) policies and practices. Webb examines the move among PRI providers to assess applications from mining corporations for insurance according to whether the applicant has effective CSR policies and practices. He notes that political actions from within the host state are motivated by a variety of factors, including (seemingly) arbitrary state action and local disillusionment with the level of benefits the mining operation brings, or the environmental impact of the operation. While some factors are beyond the control of the corporation, often the behaviour of the corporation – its impacts (on the environment, the community, and local and national economy) – can influence local acceptance of its operations. For example, involving local communities in decision making, and providing employment opportunities can minimise community opposition.

There are more than 560,000 registered companies in New Zealand, yet as Lewis et al. report, only around 200 companies had obtained ISO 14001 (environmental management systems) by the end of 2010. They set out to understand why among firms in New Zealand there seems to be a low adoption compared with the global take up of this voluntary standard. They surveyed 126 registered ISO 14001 qualified companies, getting responses from all nine industry groups represented in New Zealand, though more than 60 per cent are in manufacturing. They found that the main benefit sought by these firms is the efficiency gains ISO 14001 brings to their operations, including reductions in cost and waste. In effect, firms are inclined to invest in environmental initiatives where these promise business benefits. The second most important driver they found is the need to comply with legislation and thereby reduce associated risks (financial, reputational). Among the most often cited barriers to adoption of the standard was the amount of documentation involved and its maintenance. Their study and its conclusions invite further research. For example, there is an opportunity to assess whether the low adoption of ISO 14001 is due to the generic and voluntary status of the standard. Other studies suggest industry specific standards command much higher levels of adoption.

Many corporations proclaim commitment to CSR and sustainability principles. They cite philanthropic and social engagement projects, adherence to international voluntary codes, such as on human rights issues. Yet, as Paulet and Relano show in their study of German banks, there is often a large gap between what is claimed (in CSR communications and annual reports) and what is practised (as reflected in balance sheets). Their findings also suggest that banks whose practices reflect their CSR and sustainability claims do show stronger social and economic performance. Their conclusions are based on a study of three banks, representing three types of banking organisation: Deutsche Bank (universal bank), Volksbank Baden-Baden Rastatt (cooperative bank), GLS Bank (ethical bank). The authors find little difference in business practices between universal banks and cooperative banks, even though the two types hold to different principles, goals, and forms of governance. Coop banks have not distinguished themselves in terms of CSR innovations; universal banks have often shown the way ahead. The authors present evidence that ethical banks are different; they pay as much attention to supporting the “social value of economic projects” as on their own profitability.

Hinson and Kodua adopt Maignan et al.’s (2005) eight step framework, “A stakeholder model for implementing social responsibility in marketing”, to explore how MTN Ghana, a very large telecoms provider, thinks about and implements its CSR policies. Hinson and Kodua are particularly interested in the links between CSR and marketing. Both spheres are concerned with meeting stakeholder needs, but the authors argue that CSR work could (or should) be enlisted to provide marketing with stronger competitive arguments; the “do well by doing good” argument. Through a combination interviews and a review of online documents, they build an understanding of MTN’s mission, the key stakeholders, how potential projects are selected, whether there is any auditing and periodic assessment of investments in CSR, and a brief discussion on whether MTN does or should exploit its CSR investments for competitive advantage. They found that MTN created a separate body, the “MTN Foundation”, to manage the company’s CSR (philanthropic) work. This work is targeted at alleviating two of Ghana’s most pressing social areas: health and education.

Multi national enterprises (MNEs) entering foreign markets often find themselves negotiating with the host government the provision of local infrastructure, facilities and initiatives, in exchange for access rights to local natural resources. Against this background perhaps it is not surprising for governments of developing nations to begin formalising in law the social obligations of incoming MNEs. Okoye introduces an interesting discussion about the extent to which corporate initiatives that go beyond the law (for example CSR work around community engagement), can be made mandatory substitutes for Government’s community development responsibilities. She proposes that this paradox might be managed by the state developing not only “hard” law but also “soft” law; law that is “expressive” law (proscriptive) alongside law that is “facilitative” (allowing negotiated outcomes that satisfy both state and corporation). However, such sophisticated legal frameworks demand well developed, effective, and transparent political governance institutions, something that by definition developing economies typically lack.

Conclusions

All papers of this special issue explore corporate approaches to engaging with issues around social equity, environmental stewardship, and economic development. Webb explores how applications from mining corporations for political risk insurance in developing economies are being assessed on whether the applicant has a corporate responsibility policy pertaining to the host environment. Hinson and Kodua offer a structured assessment of MTN Ghana’s CSR strategy for tackling two of Ghana’s development challenges, in the areas of health and education. Okoye examines the extent to which Government of a developing economy in an African context, such as Nigeria, can (or should) force MNEs to take on development responsibilities and thereby substitute for government responsibility. Paulet and Relano assess the extent to which different types of banks in Germany practise their promise of acting in a socially responsible manner. Lewis et al. examine why New Zealand firms seem disinclined to invest in ISO 14001 (EMS).

These papers provide clear evidence that corporate responsibility policies and strategies influence many spheres, including state level sustainable development policy making, as part of supply chain contracts, inclusion in political risk insurance contracts, and to varying degrees there is overlapping interest between CSR work and the spheres of marketing and human resources management.

Lez Rayman-BacchusGuest Editor