How American companies shape the corporate responsibility agenda

US Council for International Business (USCIB) advances the global interests of American businesses both in the US and abroad, and contributes with opinions and solutions to a vast array of international policy issues. I talked with Adam Greene, Vice-President of Labor Affairs and Corporate Responsibility, about current topics on the corporate responsibility agenda with focus on the business perspective.

LC: What does USCIB do and what is its role in shaping the international corporate responsibility agenda?

AG: USCIB is a policy organization that serves global multinational companies. We provide our members with information and analysis on a wide range of issues pertaining to international business in various sectors and regions. Concurrently, we provide our members the ability to contribute to the development of international policy. We are the sole representative of US businesses in three main international business organizations – International Chamber of Commerce (ICC), International Organization of Employers (IOE) and the Business and Industry Advisory Committee to OECD (BIAC). These organizations feed into major international structures such as the United Nations, International Labor Organization and OECD.

Corporate responsibility and labor affairs have been on the agenda of these organizations since the 1970s, but our corporate responsibility work started in 2000 as a result of the revision of the OECD Guidelines for Multinational Enterprises. Initially, our members focused on developing internal codes, policies and frameworks on some key issues such as human rights and labor issues. Over time, the focus shifted onto the external environment that includes such key areas as the policy making environment, supply chain and stakeholder engagement.

LC: What served as motivation for companies to engage in corporate responsibility initiatives? Was it generated by self-awareness or pressure coming from various advocacy groups?

AG: Both. A lot of the earlier motivation was internal. In the US, philanthropy and community engagement is still very big component of what people see as their social responsibility. There are hundreds of years of experience of engaging with communities, hence the internal motivation of companies to do ‘good’ work. It also depends on the sector. In the area of environmental protection, corporate responsibility began with a legal framework that set high environmental standards that companies had to follow. Compliance with the law led to strong corporate programs in environmental protection. Consequently, companies wanted to get something out of their resources dedicated to compliance, so they went beyond legal environmental standards toward meeting customers’ needs and making money for shareholders. In the US, many CSR-related issues have aspects that are covered by law, so compliance is a very important and distinct area for US companies. Everything else beyond compliance, although highly encouraged, is voluntary.

LC: What are the major corporate responsibility challenges facing multinational companies today?

AG: The key challenges today are related to the supply chain and human rights issues. Regarding supply chain, most US companies have sound internal policies and are compliant with the US law. The problems stem from independently-owned supplier factories that fail to comply with their national law. In response, many companies developed advanced supply chain management programs to ensure their suppliers comply with the law. Even so, the root problem of non-compliance has still not been solved.

LC: Why not?

AG: Because companies alone cannot – and should not be expected to – ensure law enforcement throughout supplier countries. US companies usually work with a very small fraction of the factories in any given country. The responsibility to ensure that local factories comply with the law rests with the local government, not foreign companies. Having companies step in and enforce compliance in their supply chain is only a short-term solution.

Many companies are conducting thousands of audits of their suppliers annually in the name of corporate responsibility. Most companies are not in the business of inspecting factories all over the world, but they do so because they cannot rely on national governments to enforce the minimum legal standards in the supplier factories. So, a lot of what’s being done now is filling a gap, which wouldn’t be happening in a perfect world.

Although people blame globalization for this, the biggest global problem facing international business rests with the huge gap between what the law in developing countries says and what actually happens there. When the US imports goods from Canada, nobody has a problem because Canada enforces its laws. When the US imports from Mexico, there are many problems precisely because Mexico fails to enforce its laws properly.