Glenn Prickett
As globalization pushes economic integration forward and facilitates the mobility of financial capital, multinational companies can leave a global path of environmental destruction behind them. Eager for foreign investment, developing countries are increasingly making concessions to companies in extractive industries, such as oil, gas, and mining. Consequently, the stakes have grown even higher to involve the private sector and local communities in conservation and sustainable development initiatives. Through its work around the world, Conservation International (CI) has learned that participation by these groups are critical to successful conservation programs.
However, with information about business practices becoming increasingly available to a large international audience, companies have become more sensitive about their global environmental reputation. Thus, globalization has also created opportunities for innovative NGO-private sector partnerships on conservation. For example, CI has met with considerable success in monitoring oil drilling in Peru and in launching a program for sustainable coffee production in Mexico. First, while CI was working with the Peruvian government on setting up a national park in the southern part of the country, Mobil suddenly requested a concession to search for oil in the same area. CI recognized that the Peruvian government would grant Mobil the concession because of the government's desire for foreign exchange and opportunities for economic development. In order to mitigate the environmental destructiveness of the corporation's operations, CI convinced Mobil to allow it to place environmental monitors in the field and guide Mobil's work. Ultimately, Mobil decided not to drill for oil in southern Peru, and the Peruvian government established the national park based upon CI's research. Currently, CI is working with oil and gas companies to develop "best practices" guidelines.
Second, CI has developed programs to promote alternative methods to modern production techniques of coffee, which are very destructive to rainforests. In conjunction with Starbucks, CI trains Mexican farmers with small farms to produce environmentally friendly "shade-grown" coffee and is developing a market for sustainably produced coffee. Starbucks' "shade-grown" coffee has been popular in the United States and has led to an increase in the numbers of Mexican farmers involved in the program and a rise in their earnings. Outside the United States, however, the demand for this type of coffee is not as high. For example, in Asia, the market for environmentally friendly products does not exist, and consumers buy cheaper coffee produced in an unsustainable manner. Thus, to make business environmental initiatives successful, government must play a role in promoting conservation and strengthening environmental standards.
Furthermore, large multinational corporations, the companies most easily adaptable to self-regulation, are often the companies most demonized by activists as environmentally destructive. In fact, local, smaller companies are often the most involved in altering and endangering ecosystems. Local companies often do not have the resources or the incentives of multinational corporations to be environmentally responsible. The track record of multinationals' and local companies' responsiveness to environmental concerns must be monitored. On the question of corporate social responsibility, civil society must work to engage the private sector on the environmental side of public policy debates and verify their good behavior in instances of business self-regulation.
Bennett Freeman
While the movement toward corporate social responsibility has been active for thirty years, a stronger momentum toward business self-regulation has developed in recent years. A greater discussion on business self-regulation has evolved from the backlash and activism against globalization, the increasing pressure on businesses from NGOs for more corporate social responsibility, and the proliferation of codes of conduct and self-regulation initiatives introduced by the private sector.
One response to the public debate generated by NGOs and their pressure on the private sector has been the Voluntary Principles on Security and Human Rights. Spearheaded by the Human Rights Bureau of the State Department, the U.S. government brought together its own officials, the government of the United Kingdom, nine oil and gas companies, and nine human rights NGOs to negotiate and produce these principles. The impetus for the Principles came out of allegations of human rights abuses by oil and gas companies in recent years. The relationship between these multinational corporations and security forces of the developing countries in which they operate has been increasingly scrutinized. Exxon, British Petroleum, and Mobil have been accused of using state security forces to protect their operations and facilities in Colombia, Indonesia, and Nigeria and of being complicit with government human rights abuses. Mobil allegedly allowed Indonesian military forces to use their equipment to dig mass graves; Human Rights Watch accused British Petroleum of using paramilitary forces in Colombia to protect its facilities; and in Nigeria, the government allegedly used Chevron's helicopters to attack protesters.
For a number of reasons, the State Department decided to examine these alleged abuses and the relationship between security and human rights. First, the State Department perceived a security threat to American citizens and commercial facilities in these countries. Second, the continued willingness of U.S. companies to do business in Colombia, Nigeria, and Indonesia intersected with American strategic interests. Third, the State Department wanted to initiate a dialogue between the multinational corporations and human rights NGOs because of the deep distrust between them.
Published in December 2000, the process by which the Principles were produced provides valuable insights into business self-regulation. While the Principles codified the direction these companies were heading in protecting human rights, the significance of the Principles lies in the comfort level between companies and NGOs produced by the process of negotiating the Principles. Relative to the American companies, the British energy companies BP and Shell were more forthcoming in setting up the Principles and in their willingness to talk with NGOs. This behavior was due to the greater ethic of shareholder responsibility in the United Kingdom than in the United States. Also, negotiations on the Principles included the companies' heads of security, in addition to their executive leadership. These individuals met with human rights groups, and both sides learned about the other side's concerns. Ultimately, the negotiations produced the Voluntary Principles, which attempt to address common concerns of both sides. Companies, while disseminating the Principles to their operations around the world, refused to sign the principles, fearing litigation. NGOs did not support the principles wholeheartedly because they did not want to appear as if the problems of human rights abuses had been solved. Consequently, further discussions between the companies and NGOs must occur. In sum, while the Principles must be more global and include greater Northern and Southern participation, the process by which they were developed could serve as a valuable model for government facilitation of private sector-NGO dialogue.
Dennis Rondinelli
Private sector initiatives at self-regulation will increase in the future. As multinational corporations increasingly deal with different cultures, they are looking for standards to guide their business so they act appropriately. Furthermore, governments cannot deal with issues like human rights, labor rights, and environmental protection alone; nor are they issues in which governments always have an incentive to enact and enforce stringent regulations. Consequently, business self-regulation offers a possible self-correcting mechanism to these policy shortfalls.
Information technology in the hands of civil society has forced businesses to operate in a more transparent manner. People use these technologies to gather and spread information about businesses to hold them accountable for their actions. Since companies' reputations are at stake now more than ever, they have an incentive to develop industry standards and codes of conducts so rogue companies that behave badly do not damage the reputation of the entire industry. Also, since businesses prefer to keep governments from regulating their behavior, they also have an incentive to take these steps at self-regulation. These initiatives vary from codes of conduct to stringent environmental programs. For example, the toy company Mattel has implemented a system of external auditors that examines their suppliers. The company has established quantifiable standards and issues a public report of their findings. Also, BP Amoco has implemented an internal pollution permits trading system aimed at reducing the company's emissions of greenhouse gases.
A number of factors comprise a successful system of self-regulation. These factors include sufficient funding and resources for the initiative; specificity of the issue being regulated; the inclusion of major stakeholders in designing guidelines; the transparent and systematic design of the initiative; the inclusion of impartial, external auditing mechanisms or involvement of third parties in verification; an organized system to respond to external complaints; and the enforcement of penalties by companies on each other. Indeed, a major disadvantage of self-regulation is its voluntary nature. Industries face the challenge of how to use "peer pressure" to convince reluctant companies to join self-regulation systems. Self-regulation initiatives will have greater impact if they spread to companies' suppliers and if local companies see a competitive advantage in conforming to the standards of multinationals, encouraging the behavior of multinationals to become a model for others.
The future of these self-regulation initiatives and their ultimate effects are uncertain. For instance, codes of conducts are increasingly separated from the place where the regulated good is produced. Companies also do not have to be large multinationals to sell abroad. Nonetheless, while a feeling of "code fatigue" may plague board rooms in the West, in many parts of the world, citizens are just beginning to learn about codes of conducts and are excited about their potential as tools for change.
Summary prepared by Radha Kuppalli, Junior Fellow.