A new UN report suggests that governments now should take forward the agenda that progressive companies and NGOs have developed

Governments contemplating what they can do at next year’s sustainable development conference in Rio de Janeiro to encourage a greater contribution from the private sector can do no better than to read a report released on July 26 by the United Nations Conference on Trade and Development (UNCTAD)

The 2011 edition of the respected UNCTAD World Investment Report (WIR) devotes a section on corporate social responsibility (CSR) in its review of significant global policy developments. As the UN’s lead agency mandated with promoting the integration of developing countries into the world economy, UNCTAD’s focus on CSR reflects a further maturation of the subject.

Although a relatively late-comer to the CSR scene, the UNCTAD report shows an astute understanding of the strengths and weaknesses of using voluntary approaches to maximise the sustainable development impact of corporate activities. Here’s a snapshot of the report’s findings, which are laid out in three parts.

CSR has changed the business landscape …

The first section, which offers a stock-taking of the various forms of CSR standards, serves as a timely reminder how much has changed since the Earth Summit held in Rio de Janeiro in 1992.

Whether one thinks of inter-governmentally developed standards (eg the UN Global Compact and OECD MNE Guidelines), multi-stakeholder developed standards (eg GRI, ISO 26000) or industry association and individual business codes, it’s impossible not to recognise that all but a few of the countless codes, standards and approaches that are widely used by businesses nowadays, have emerged since Rio.

In large measure, as UNCTAD notes, these standards now represent a new norm for both developed and developing countries, their DNA infusing business strategies, policies and practices internally and through the supply chain.

… but also created challenges

The differing origins, audience, focus and approach of these standards, however, have created both synergies and complexities for regulators and users alike. The report goes on to identify what UNCTAD sees as six problematical areas in the existing CSR landscape. These include: 

• The “gaps, overlaps and inconsistencies” which exist between the various standards. While perhaps under-estimating the alignment work that has been done (eg between the UN Global Compact, OECD, GRI and ISO), UNCTAD underscores the reality that adoption of such standards has created a new level of best practice against which competitors are measured. It also points to the not insignificant issue of the additional costs that these can have for business in understanding and implementation.

   

• The compliance gap – the need “to ensure that companies voluntarily adopting a standard actually comply”. Here, UNCTAD has done regulators, business and NGOs a favour by shining some light on the levels of market impact of the various standards. (Did you know that the Fair Labour Association now covers an estimated 75% of the athletic footwear industry?)

   

• The reporting and transparency gap, where despite “tremendous growth in CSR reporting … such reporting continues to lack uniformity, standardisation and comparability”. The report further notes that while reporting based on initiatives such as GRI and the Carbon Disclosure Project is growing rapidly, it is still done by a minority of companies, and then often selectively.

Regulators to step in?

The report’s final section notes that the level of uptake and impact of many of the CSR initiatives represents “proof of concept” and a recognition of the historic role played by businesses and NGOs. It then concludes that if governments wish “to promote best practice in corporate compliance with national laws and international agreements to maximise the sustainable development impact of transnational corporations”, a new level of regulator engagement is required.

A menu of eight possible policy action options is offered for consideration. These are to:

• support further CSR standards development

   

• apply CSR to public procurement policies and practices

   

• help build capacity of local business to understand and use standards effectively

   

• promote CSR disclosure and links with responsible investment

   

• use voluntary standards “as a laboratory for future government regulations”

   

• strengthen compliance promotion mechanisms for intergovernmental standards

   

• apply CSR to investment and trade promotion and enterprise development

   

• introduce CSR to the international investment regime.

To those familiar with the CSR practices of many EU countries, most of these recommendations will not be new. But they are very timely.

Even in the EU, however, there is great inconsistency of approach and across many parts of the world governments as a whole are failing to recognise the value and potential of voluntary instruments.

As the report concludes “it is time to mainstream CSR into national policies and international trade and investment regimes”. What businesses and NGOs have begun is now for governments to complete.

Paul Hohnen is an Amsterdam-based consultant who advises, speaks and writes on global sustainable development issues. He is also a member of the Ethical Corporation advisory board. Paul was one of a number of international experts consulted by UNCTAD in the development of the 2011 WIR. For more see www.hohnen.net.