Paul Hohnen Sustainability Strategies

This article was published in Ethical Corporation on August 29, 2007.

From Mr PAUL HOHNEN

Big Governments and corporate responsibility - some reasons to be interested

Corporate citizenship is all about the voluntary actions of business. So what are G8 and other governments up to by making statements about the subject, and should business and NGOs be concerned? Paul Hohnen analyses

As reported recently in Ethical Corporation, governments are showing greater interest in the corporate responsibility actions of the business sector.

Why governments should be interested

Governments have very good self-interest reasons to take a more active interest in responsible business.

Take social cohesion for starters. It's obvious that a society which fundamentally distrusts the business sector is an unhealthy one. Lack of trust can have negative effects on employment, investment, and support for new business initiatives that depend on public support. In some countries, CSR initiatives are among the few frameworks available to bring the business, labour and NGO communities together.

Second, credibility. Governments cannot go on making laws and setting policy on issues such as human rights and environmental protection, only to see them honoured more in the breach than in the observance. The role of government in maintaining growth, peace and community is too important to see eroded by delivery failures. If voluntary initiatives don't work, regulation becomes the default option.

Finally, efficiency. Good laws work, bad laws don't. While it can be argued that good laws sometimes fail for want of implementation, the political reality is that legislation can't be enacted on everything, everywhere. There is ample evidence that good voluntary instruments can complement government policy.

Recognition that corporate citizenship can result in improved corporate performance on social and environmental issues, however, does not mean governments shouldn't do anything. As the 2007 G8 Declaration recognised, governments can play a low key but effective role in promoting the voluntary. Helping clarify the maze of standards and initiatives, engaging with emerging economies, and encouraging the more promising are among many options.

Why business should be interested

Yes, the "business of business is business". But, as leading business organisations have recognized, business cannot succeed in failing societies, or where trust is an issue.

There are many reasons why business should want to encourage greater government engagement in CSR. These will range from (at the more cynical end of the spectrum) wishing to avoid regulation, through to (at the more pro-active edge) ensuring that government support is well focused and effective. After all, most CSR initiatives have emerged from the business community. A helping hand is sometimes useful, but not a heavy one. Where new standards are being created, these need to be consistent with international law.

Yes, traditional approaches to corporate citizenship (e.g. philanthropy) have played up the role of business as a respectable social partner. However as Harvard's Michael Porter and others have argued, the more strategic approach is to attack the big societal issues - climate change, health, poverty to name a few - as business opportunities.

Moreover, if business is to benefit from the expanding market represented by government green procurement and concerned consumers, the use of recognised CSR tools could prove decisive.

Climate change might be prevented as much by changes in technology and financial engineering as it will by changes in consumer habits. On both fronts, business must play a key role. In this regard, corporate responsibility has already played a pivotal role in putting these issues on the agenda, and bringing them to the point where leading companies like General Electric and Philips are integrating them into their core business.

A wider question in this context is how successful business associations are in helping lead this shift in thinking. While some are clearly on the job, there are many more lagging badly behind.

Why NGOs should take an interest

In principle, NGOs should welcome with a megaphone any movement by government to promote awareness of social and environmental responsibilities. Which raises the question why NGOs are not more actively engaged in the CSR debate. Given that corporate citizenship - think of ISO, the Global Reporting Initiative, the Equator Principles and the Clinton Global Initiative - is currently the place where many new standards and behavioural changes are being forged, an active NGO role would be natural. Often, however, this is not the case.

The mantra of "voluntary instruments don't work, we want legal accountability" needs a serious revisit. Don't they? Why not? As representatives of a sector that helped pioneer the power of voluntary action and define the meaning of "social responsibility", it's probably also time for more NGOs to look harder at all instruments of change, whether mandatory or voluntary. For some that may require rethinking their practices and outlook, often a big ask.

In the pursuit of measurable change for the better, no stone should rest unturned. Business increasingly grasps the notion and potential of CSR, as do some NGOs. Now it is time for Governments to do their bit too. They must shift from being just regulators or deregulators to also become catalysts for inclusive action.

Paul Hohnen consults, writes and speaks on CSR and sustainability issues. Mr Hohnen is a member of Ethical Corporation's advisory board and writes regularly for us on global sustainability issues. www.hohnen.net