Extracting accountability: the implications of the resource curse for CSR theory and practice.(corporate social responsibility)

While corporate social responsibility (CSR) is important to economic development and baseline human rights in countries dependent on extractive industry revenues, failures in governance--such as the absence of basic services like health care and electricity--require new strategies and incentives to encourage governments to play their traditional role more effectively. Political economic theories of the "resource curse" see the breakdown of a sense of government accountability to its people as one of the more destructive aspects of excessive reliance on natural resource rents. The authors look to recent innovations such as transparency projects that can reinvigorate a sense of government accountability, among other positive outcomes. The authors argue that both mandatory and voluntary models of CSR could have an adverse impact on sustainable development so long as they focus exclusively on the role of the corporation rather than the on ways corporate investment might be used to create incentives for a more effective state role.

I. INTRODUCTION

In recent years, record high commodities prices-and record profits for extractive firms-have brought the failure of many resource-rich countries to achieve equitable economic development to the forefront. In a country like Equatorial Guinea, where oil revenues place it second in the world in terms of GDP per capita, (1) sixty percent of the population continues to live on less than one dollar per day. (2) In many other resource-rich countries, development of the mineral sector has also failed to result in any meaningful improvement of living standards for the majority of citizens, often making non-extractive sectors and society as a whole worse off. (3) An increasing number of researchers and activists across disciplines have turned their attention toward this seeming paradox, commonly referred to as the "resource curse." Efforts to identify and address the causes of the resource curse have produced a number of theories. The dominant understanding of this phenomenon emphasizes that dependence on natural resource rents impedes the development and proper functioning of state institutions. It is a political and economic phenomenon, at the heart of which is the diminution of governmental accountability to its people. This lack of accountability and failure of state capacity underlie many of the problems commonly observed in countries that are heavily dependent on the extractive industries--problems ranging from inadequate protection of human rights and the environment to the unavailability of essential services and infrastructure.

Extractive companies operating against the backdrop of resource curse dynamics are often caught in the middle, as they search for ways to both avoid blame for these state failures and mitigate their impact. Corporate social responsibility (CSR) is an umbrella term covering the variety of means by which companies seek to respond to these demands. In this paper, we explore how improved understanding of the resource curse should transform CSR theory and practice. We argue that a CSR agenda that focuses on the more observable needs of extractive communities to the exclusion of engagement with the extractive industry's impact on state institutions and behaviors is inadequate at best and may well be detrimental to long-term economic and social development. While the creation of unsustainable dependencies is a risk that CSR programs face in any sector, we argue that the risks are greater in the context of the extractive industries because of the dynamics of the resource curse. In making this argument, we focus on the theoretical underpinnings of CSR and on what research into the complex phenomenon of the resource curse may tell us about future directions for CSR theory and practice.

Part II looks at the evolution of the concept of CSR, and Part Ill gives an overview of research into the political economy of the resource curse. Part IV looks more closely at the interactions of these two bodies of literature, concluding that CSR should address the key issues of governance and accountability in resource-rich states by incorporating support for the social contract between people and states. Part V explores the practical implications and limits of this conclusion, arguing that an emphasis on transparency--both on a voluntary basis and through support for compulsory state-wide initiatives--ought to form the cornerstone of extractive industry CSR programs. This section then looks more closely at resource-rich states' troubling failure to consistently capture an adequate share of their resource rents, concluding that this failure highlights the limitations on CSR's ability to address some of the root causes of the resource curse.

II. WHAT IS CSR?

Contemporary notions of CSR are in many ways a direct challenge to Milton Friedman's exhortation that "there is only one social responsibility of business: to use its resources and engage in activities designed to increase its profits...." (4) The growing recognition that corporations are an integral part of society and play an important role in the development of the communities in which they operate has driven CSR proponents of different stripes to define the proper contours of the business-society relationship. These efforts have led to widespread acceptance of the concept of CSR, despite a lack of consensus on what exactly it entails. (5) Definitions of CSR have evolved over time, with the World Business Council for Sustainable Development (WBCSD) initially defining CSR as business behaving ethically while contributing to the economic development of its employees and the broader community, (6) and subsequently changing the definition to incorporate notions of businesses' commitment to "contribute to sustainable development," (7) a notion also reflected in the World Bank's working definition. (8) Other definitions of CSR have integrated the concept of the "triple bottom line," which posits that a corporation's mandate should encompass financial, social and environmental performance goals. (9)