Wilton Park Conference: "Corporate citizenship: building best practice and engagement" (20-22 November 2002)

"How can publics become more engaged in ensuring corporate citizenship?"

Sir Geoffrey Chandler (Founder-Chair Amnesty International UK Business Group
1991-2001, and former senior executive Royal Dutch/Shell Group)

delivered 21 November 2002

1. The challenge we confront today is to ensure that the manner in which companies conduct their operations reflects the contemporary values of society. It is as simple as that. It is a contention difficult for any civilised man or woman to challenge. But it is challenged in practice by business. And if the destination is clear, the path is beset with difficulties, although it is both in the self-interest of companies as well as in the interest of society that this should happen.

2. Some perspective. Most significant phenomenon of post-Cold War world is the spread of corporate presence, and therefore influence. We see this in the ever-widening company supply chains in the developing world and private investment in areas previously denied to it. It is a world often in conflict and suffering from human rights violations for which companies have been totally unprepared. Their presence therefore frequently contributes to these ills. With benefits came collateral damage. This spread of corporate influence means that companies have greater unfulfilled potential for improving the context in which they work than any other constituency, including government. This potential lies in the manner in which they conduct their direct operations and the extent to which they accept responsibility for their impact on the societies in which they work. This is of infinitely greater importance than any voluntary add-ons such as often seem to be implied under the headings of 'corporate social responsibility' or 'corporate citizenship'. These seem to me slogans damaging to understanding. Philanthropy and community development are of course important, but they are no substitute for principled behaviour applied to all company operations. To concentrate on the former is proving a distraction from what is fundamentally required, and, being voluntary, allows companies an escape route from recognising in practice their basic responsibilities.

3. History demonstrates that companies do not unlock that potential voluntarily: voluntarism doesn't work. The interests and rights of all stakeholders other than shareholders have had to be enforced by external pressure or legislation rather than coming from corporate initiative. This is true of labour conditions, for which trade unions fought. It is true of protection of the environment and of human rights for which NGOs fight today.

4. We need to be clear that we are not seeking from companies some sort of 'add-on', which would indeed be voluntary and subject to imagination and innovation. We are seeking behaviour based on principle and an accepted responsibility for the totality of their impact on the societies in which they operate. This cannot be merely voluntary. The observance of human rights cannot be a matter of voluntary choice.

5. For first time in history we have an international framework of such principles and values. These are enshrined in the UN Universal Declaration of Human Rights, the Convention on the Rights of the Child, and the core ILO conventions. These principles are now being incorporated into the UN Sub-Commission on Human Rights' "Draft norms on Responsibilities of Transnational Corporations & Other Business Enterprises with Regard to Human Rights" which provide a comprehensive checklist for corporate action.

6. It is abundantly clear that companies are not adequately responding. How then can publics bring pressure to bear to on companies to reflect these values in their operations?

7. The ideal is an informed public, purchasing goods and services not just on price and quality, but also on the conditions under which they are produced.  This could transform the scene. But that is an ideal unlikely to be easily reached. Nor is there information on which such action could operate because disclosure by companies is not enforced. Unfocused public opinion is not much help. Generalised dislike of corporate 'fat cats', disapproval of environmental pollution, a feeling that companies 'should do more' don't have impact unless clearly focused.

8. Selective purchasing by the consumer has yet to be proved effective (the buying of Fair Trade products helps, but is still a tiny part of the market) and consumer boycotts, other than in exceptional cases, rarely work because there are too many conflicts of interest. But such initiatives are nonetheless valuable in raising the profile of the issues and making companies aware that they are under scrutiny and that there are issues other than money.

9. Real change in company behaviour in the absence of company or government initiative requires active citizenship on the part of individuals in their different roles. This we need to encourage.

10. Pensioners can pressure their pension funds to build in appropriate investment criteria. In the UK government regulation has transformed the scene. The legal requirement in the UK for pension funds to declare what ethical considerations (if any) they take into account in their investment policies has transformed the scene and enabled individual pensioners to take action.

11. Shareholders can prepare resolutions for company AGMs (a process easier in the USA than in the UK). The publicity this brings is hated by companies and is therefore effective.

12. But traditionally, from the abolition of the slave trade onwards, it is non-governmental organisations (NGOs) which have articulated and fought for public values, their legitimacy deriving from the perception of what those values are and the public support they get for this.

13. The immense growth of NGOs from the 1980s onwards reflected disillusion with the ability of politics and politicians to deliver on these issues. Today it also reflects the fact that in a globalised world national governments have so far failed to re-establish their authority with the help of strengthened international institutions. Until they do so NGOs will increasingly try and fill this gap. We have a paradox today: companies have rapidly and successfully adapted to a globalised world, NGOs are striving to do so, governments have signally failed.

14. And yet it is politicians who have the biggest potential influence to change matters through a range of instruments - from non-financial leverage, for example by publicly commending good practice through their own purchasing criteria, to legislation. There is increasing recognition that a regulatory framework is required. This needs to include, as a minimum, mandatory disclosure and reporting by companies of the totality of their impact, so enabling the market to judge performance on criteria other than money alone; at best, it requires the setting of international standards.

15. Therefore as active citizens we need to bring pressure to bear on politicians.

16. And if companies don't want legislation they need to take the initiative themselves. Our ultimate goal must be to instil a new framework of thought in companies so that they act proactively rather than reactively in response to the values the world expects of them. Some companies have indeed moved today, though in response to external pressure or reputational damage. But the vast majority have not. Companies need to do right because it is right, not just because it pays, which in many cases it may not.

17. We face today a democratic deficit . European governments, in which I include the UK government, are proving subservient to the corporate insistence on voluntarism rather than regulation. It is a deficit inadequately filled by companies and NGOs. The active citizen, alienated by government indifference to what is required, can probably have more influence on the political scene by pressuring companies and supporting NGOs than through any direct political process. This is not ideal, but it is the reality. But our aim, for which all of us need to press, must be national and international frameworks which compel the meeting of at least minimum standards and accountability for the totality of a company's impact. Adoption of the UN Sub-Commission's Human Rights Norms would be a valuable step towards this and I would hope this is recognised by governments.

18. At the end of the day companies need to do right because it is right, not because it pays in money or reputation. Until they do so, they put themselves and capitalism in jeopardy. The need for change is urgent. We confront today a race between the explosion of the anger of the dispossessed, who are the vast majority in the world, and the ability of companies to change. I am not a betting man. But if I were, I would be reluctant - as things stand at present - to place any bet on which may win, though I will hope and fight for the latter.

END