Integration of corporate social responsibility through international voluntary initiatives.(Symposium on Operationalizing Global Governance)

Introduction

Many multinational enterprises (MNEs) and international financial institutions have formally adopted corporate social responsibility (1) (CSR) programs. The time and effort consumed by CSR is illustrated by a number of factors, including the long list of international events that form the annual CSR calendar, indices such as the Dow Jones Sustainability Indexes, FTSE4Good, and the array of voluntary initiatives that have been adopted by MNEs keen to embed CSR and to demonstrate their corporate credentials.

Despite this trend, MNEs continue to act in ways that do not accord with the spirit of good CSR. (2) This is not surprising for a number of reasons. First, there is legal and academic uncertainty about whether or not corporations have any social "responsibility" at all. (3) Second, even assuming that corporations should act in a socially responsible manner, it has been impossible to identify a definitive concept of CSR. Third, MNEs continue to be protected by a lack of legal regulation or enforcement in some jurisdictions. Finally, and perhaps most importantly, MNEs, particularly Anglo-American MNEs, have wholeheartedly accepted the economic theory underpinned by the notion that "the business of business is business." (4)

As a result, while there has been increasing scrutiny of MNEs' global social and environmental impacts, particularly in the area of human rights, and implementation of international, all-encompassing CSR reporting, the implementation of established CSR programs by MNEs remains a relatively new phenomenon. Perhaps the reason for this is that MNEs have been slow to understand their ability to use CSR in a manner that enhances corporate opportunities and competitiveness. They have not recognized that CSR has the potential to improve a company's social and environmental impacts and limit reputational damage, while at the same time improving its profitability.

This article does not seek to define the concept of CSR or to determine whether or not the pursuit of CSR by MNEs is, in reality, beneficial (either for MNEs themselves or for their stakeholders). CSR is now so much a part of the corporate landscape that it has become as important to look at how MNEs implement CSR strategy as it is to question their motives. This article therefore focuses on one of the predominant aspects of CSR implementation by MNEs--the voluntary adoption of international CSR initiatives. Such initiatives are not necessarily categorized as CSR performance or implementation initiatives and indicators (though some of them are), (5) but all play a prominent role in many MNEs' CSR strategies.

This article will focus on the Equator Principles (EPs) (6) and the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises (the Guidelines). (7) After reviewing each initiative's purposes, tenets, and influence on MNEs, this article will use the criteria outlined by Harvard Business School Professors Michael Porter and Mark Kramer (8) to test the extent to which these initiatives enable organizations to embed CSR into their daily operations and to fully capitalize on the benefits that CSR offers. This article will then address the criticism that the voluntary nature and the lack of formal legal sanction of voluntary CSR initiatives is an Achilles heel that renders these initiatives inherently unfit for their purpose. Finally, this article will suggest how such initiatives could be altered in order to improve the implementation of CSR by MNEs and financial institutions.

I. Two Key Initiatives