by Richard Feinberg The private sector’s new commitment to social and environmental concerns has the power to improve the quality of life in the region. Here’s what business, governments and multilaterals must do to realize that potential. How to Fulfill the Promise of : CSR Corporate social responsibility (CSR) is a booming business in Latin America. Major companies like the Chilean copper giant Codelco and the Brazilian energy multinational Petrobras proudly use their environmental stewardship and good labor practices to demonstrate that their corporate operations are aligned with social goals. Across the region, Latin American firms are making social investments in education, health and community development. Yet corporate Latin America still trails behind Europe and the United States. Only 93 of Latin America’s top 500 firms participate in the European-based Global Reporting Initiative, the cutting-edge international benchmarking exercise that sets the global standard for CSR—and 40 of those companies are from just one country: Brazil. Only 12 Latin American companies are members of the prestigious World Business Council for Sustainable Development. Since regional corporate CSR reports often lack hard data certified by independent experts, there is a strong suspicion that many companies are spending more energy a m e r i c a s q u a r t e r ly . o r g winter 2008 Americas Quarterly 41 Corporate Social Responsibility advertising their new “green-ness” than in undertaking rigorous assessments of their environmental management systems. Too many firms appear to be printing more words lauding their philanthropic generosity than expending hard cash on local communities. Certainly, too few Latin American executives actively reach out to civil society leaders, labor leaders or environmental NGOs in formulating their CSR programs. There is, in short, a yawning gap in Latin America between the promise of CSR and the reality. Ultimately, the CSR concept has the potential to transform the business climate, bring regional management-labor relations into the 21st century, place Latin America on a sustainable development path and make a measurable difference in poverty reduction. But there is still a long way to go before professed aspirations match tangible results. Governments and the private sector must together re-examine the frameworks that determine how individual firms perform their CSR practices. If governments were to give firms stronger, clearer incentives, there is every reason to believe that private companies will respond with vigor. Why Now? A number of powerful drivers— global, regional and local—have spawned the rising interest in CSR in Latin America. Increasingly, Latin American exporters must seek certification by global brands or by transnational activist organizations which monitor their activities. Companies such as Home Depot, Chiquita Brands and Levi Strauss dispatch auditors worldwide to ensure compliance with their internal codes of conduct. Latin American firms operating in global supply chains have to meet the same high-quality standards if they are to retain access to international markets. Arguably, these market-based pressures are hav- Richard Feinberg is professor of political economy at the Graduate School of International Relations and Pacific Studies of the University of California, San Diego and is a prominent writer, consultant and lecturer on corporate responsibility and trade. He served as a senior White House advisor on InterAmerican Affairs during the Clinton administration. 42 Americas Quarterly w i n t e r 2008 ing at least as much of an impact upon on-the-ground compliance as might occur through the alterations in national labor laws and in sanctions procedures that the U.S. Congress has demanded within free trade agreements. In fact, many Latin American labor codes were developed in the mid-20th century, when labor unions were at their zenith and experts from the International Labor Organization helped draft local legislation. The critical shortcoming is inconsistent enforcement. Ministries of labor are woefully understaffed, labor judges are over-taxed, and businesses can too easily purchase the silence of underpaid officials. But image-conscious global brands cannot risk the glare of discovery of unpaid wages or child labor. International corporations have blanketed Latin America with auditors scouring factories for violations of recognized labor standards. Since the mid-1990s, Latin American corporations have received advice and encouragement from prominent U.S. foundations like Kellogg and Ford, as well as from leading pro-CSR corporate groups such as the San Francisco-based Business for Social Responsibility. But there are other motivations, closer to home, driving CSR in Latin America. Democratization has freed civil society organizations and mass media and emboldened feisty politicians to call the private sector to account. Throughout the hemisphere, the private sector can no longer count on friendly authoritarian governments to protect their interests; instead they must more openly engage in the tussles of democratic politics and the marketplace of ideas to advance their collective interests. Corporate social responsibility is also a response to the evident inability of governments to meet pressing social needs. With limited ability to tax, and facing massive social deficits and demographic explosions in already over-crowded labor markets, Latin American governments cannot supply all of the social programs and other public goods that their populations expect and demand. In Latin America, smart corporate leaders recognize that democratic stability depends upon satisfying these social needs, and the private sector has a role to play in filling some of the empty spaces left by under-funded and over-extended government agencies. A growing number of Latin American firms are a m e r i c a s q u a r t e r ly . o r g How to Fulfill the Promise of CSR Richard Feinberg Corporate social responsibility is a response to the evident inability of governments to meet pressing social needs. also buying the narrower business case for CSR—the so-called win-win-win of the “triple bottom line.” Firms that reduce their energy consumption and recycle waste products cut costs and earn unexpected revenues. Firms that honor health and safety standards keep medical costs down, and well-treated workers are likely to be more productive. In some markets, human resource departments are aware of other benefits: firms with reputations for high-quality CSR are more attractive to socially-aware business school graduates and are better able to retain quality personnel. “Net Impact” associations that bring together thousands of young MBAs seeking to employ their business skills to make a positive impact on society are already active on many business school campuses. : goal—to maximize shareholder value or, in the Latin American case, the net income of the reigning family patriarch. Under CSR, firms still pursue profits while also taking into account the diverse interests of other stakeholders: managers, employees, customers, suppliers, local communities, and interested civil society organizations. If the firms’ reach is wide enough, they must factor in the welfare of whole nations and even the entire planet. Some notable examples are CEMEX of Mexico, Embraer of Brazil, Polar of Venezuela, and the Pellas Group of Nicaragua. The expanded stakeholder theory coincides with the more demanding democratic politics facing the Latin American private sector. To re-brand its reputation and strengthen its political standing among multiple stakeholders and democratic constituencies, enlightened business leadership is embracing corpoAnother rate social responsibility. concept underpinning modern CSR is the expanded Most Latin American countries now have active stakeholder theory. Pre-CSR, firms had one simple national CSR associations. The hemispheric network Forum Empresa groups 22 CSR organizations from 20 countries with Definitions of Corporate Social 3,500 member firms. Moreover, 725 Responsibility vary, but generalLatin American companies are sigly include aligning business operations with recognized social and envinatories to the United Nations Globronmental standards, fulfilling legal obligations but voluntarily going al Compact (a voluntary initiative further to invest more in public goods such as human capital, environwhose signatories self-report on mental stewardship and, in developing countries, poverty alleviation their adherence to 10 universal prinand national competitiveness. Companies fulfill these responsibilities ciples in the areas of human rights, both through their daily operations and strategic planning—how they labor, the environment, and anti-cortreat their employees, how they manage energy expenditures—and ruption). These hefty memberships through their corporate philanthropy, their social investments on behalf are clear signals that, in principle at of brand reputations, and their stakeholders’ interests. least, CSR is gaining acceptance in CSR is somewhat distinct from “corporate governance,” which tarLatin American business circles. gets the operations of corporate boards and shareholder relations, or Moreover, leading Latin Amerifrom “corporate ethics,” which considers conflict of interests and other can firms—domestic and foreignlegal-ethical matters. CSR is also distinguishable from the personal owned—have pioneered innovative or foundation philanthropy of high net-worth individuals and families, social investments. [Editor’s Note: even though in cases where an individual’s identity is closely linked as examples please see the case studwith a corporation, such as Bill Gates and Microsoft, there is an obviies sprinkled throughout this article ous overlap with the social-giving component of CSR. and this issue]. Expanding the Stakes DEFINING CSR: a m e r i c a s q u a r t e r ly . o r g winter 2008 Americas Quarterly 43 Corporate Social Responsibility : National CSR associations such as the Ethos Institute in Brazil and Fusades/Fundemas in El Salvador have well-deserved international reputations for innovative social entrepreneurship. In late 2005, the Brazilian stock exchange launched an “Index of Business Sustainability” which now lists 34 companies screened for good social responsibility. Yet few regional firms publish stand-alone social responsibility reports, and many continue to equate social responsibility with traditional philanthropy and family charities. Not surprisingly, opinion surveys suggest scant public knowledge of CSR beyond well-publicized but isolated initiatives of particular firms. Few Latin Americans would credit CSR as contributing significantly to the broad national social agendas. So far, CSR has not materially improved the rather tarnished image—only marginally better than that of political parties—of the private sector in Latin America. Various studies point to a number of reasons that since external monitoring—whether by business associations, governments or NGOs—is generally spotty, it’s more prudent to maintain a low profile. In fact, government can play an important role in making it possible for corporations to act. While CSR emphasizes the “voluntary” nature of privatesector actions and activities, governments can create the incentives to encourage CSR-consistent behavior that advances the public interest. There are already important precedents: Costa Rica’s Certificate of Sustainable Tourism rates hotels on resource management; Peru’s Programa Minero de Solidaridad con el Pueblo matches public funds with social investments by over 40 mining companies; Brazil’s Zero Hunger campaign enrolls private firms in providing nutrition to needy citizens; and USAID’s Global Development Alliance (GDA) forges public-private partnerships worldwide. For example, in Central America, GDA brings together governments, interna- CSR reporting is still largely superficial, so few business leaders know what their counterparts are doing in the field. why Latin American firms are not fully exploiting the opportunities that CSR offers for their businesses and communities. Probably the leading factor is confusion with regard to CSR itself—still a new concept to many executives—who are left wondering just what is expected of them or how to set priorities among CSR’s growing list of agenda items. Many firms remain unpersuaded of the business case for CSR: can they be sure that the expected returns will exceed the extra costs? Other executives support CSR in principle, but feel that their firm is too small to affect larger social problems. A further complication is that CSR reporting is still largely superficial, so few business leaders know what their counterparts are doing in the field. And finally, public pressures on firms to adhere to CSR principles vary greatly across companies. Many executives decide it’s wiser to keep their heads down and hope that the “pesky NGOs” focus their harsh publicity on firms whose high public exposures render them more vulnerable to attack. Firms conclude 44 Americas Quarterly w i n t e r 2008 tional brands, local factories, and non-governmental organizations to raise labor standards in textile and apparel factories. However, CSR’s potential is still not readily apparent to key players around the hemisphere. For the Bush administration, government promotion of corporate social activism poses ideological issues. As former White House strategist Karl Rove told the author, “It’s fine for the private sector to voluntarily pursue CSR, but those should be market-based decisions.” At the other end of the spectrum, orthodox leftists and some labor leaders regard CSR as an encroachment on public-sector or union responsibilities, or denigrate it as corporate propaganda. Making CSR Matter CSR is as important to hemispheric governments (other than those dedicated to demonizing imperialist corporations) as to the private sector: both share an interest in promoting democratic stability and mitigating social (continued on page 46) a m e r i c a s q u a r t e r ly . o r g case studies: community development • vale • Royal Dutch/Shell Mining isn’t pretty. Ask anybody who lives close to a mine. In recent years, the formerly state-owned Brazilian mining company Vale (formerly CVRD) has dealt with challenges such as opening new mines in remote communities and confronting angry inhabitants in the state of Espírito Santo, over what locals call pó preto (black dust), emitted by seven pelletizing plants in its capital, Vitória. For the global giant that mines everything from iron ore to potassium, the twin challenges of meeting rising global demand and maintaining community peace are enormous. Aware that these pressures affect the bottom line, the company will increase its spending on environmental protection for its worldwide operations to $475 million in 2008, 26 percent more than the previous year. Vale has also allocated $280 million to social projects. “It’s a demand from the market itself and we have to face it,” says Roger Agnelli, the company’s CEO. As Vale opens up new mines in farflung places in Brazil and the world, it also has to improve local environments, not just for the residents but for its employees as well. Vale and the city of Marabá, in the Brazilian state of Pará, for example, signed a $5.2 million agreement last August to reform existing schools and improve local health centers. And those residents in Vitória who had to endure the black dust? The company signed a deal with the community in June 2007, backed by the State Office of the Public Prosecutor (Ministério Público), promising to reduce dust emissions in two years. Says Paulo Esteves, an exemployee of Vale and representative of the Associação de Amigos e Moradores da Ilha do Frade, in one of the affected parts of the city, “we are hopeful.” —Carolina Pasquali Barranquitas, a poor fishing community of 11,000 on the banks of Venezuela’s Lake Maracaibo, is not the kind of place where you expect locals to cheer for corporations. But the endorsements for Royal Dutch/Shell come without prodding. “If Shell hadn’t come, rebuilt the school, and provided scholarships, I wouldn’t have the future I have now,” says Angel Soto, a 19-year old university student. Similar praise comes from Violeta Melendez, one of the 16 wives of Barranquitas fishermen whose training to set up a cooperative for selling fish was bankrolled four years ago. Royal Dutch/Shell has earned its goodwill through 13 years of assistance in dozens of social initiatives. Its entrepreneurial programs, including the one aimed at Melendez’s cooperative, often start with the basics: reading and writing. “We aim to improve the potential of the areas where we establish a presence,” says Arnaldo Rodríguez, Shell’s Planning and Communications Manager in Venezuela. And there has been a payback. “In all these years, there have been no protests,” he notes. In a country marked by tensions with the private sector, Shell’s success is no small feat. —Tábata Peregrín a m e r i c a s q u a r t e r ly . o r g • AIG Small entrepreneurial businesses, many of them family owned, have provided the first rung in the ladder for Latin America’s poor. Nevertheless, their lack of access to life and accident insurance leaves them poised on the brink of financial disaster. Having sunk most of their savings into start-up costs, these small-scale entrepreneurs face almost certain ruin if they are hit with an unexpected crisis, such as the death of a family member or a natural disaster. American International Group (AIG) has stepped in to fill the gap. Over the past three years, the multinational insurance and financial services giant has provided $5.25 million to ACCIÓN International, active in 16 Latin American countries, for the administration of microfinance loans to put entrepreneurs in marginalized communities on their feet. So it’s a logical step to provide them with insurance. While the sums are small, they can provide some measure of financial security for emerging entrepreneurs. —Kelli Bissett winter 2008 Americas Quarterly 45 Corporate Social Responsibility (continued from page 44) pressures through poverty alleviation. CSR offers governments additional resources to pursue their core goals. In addition to financial resources, management skills and technical expertise, private firms often have more information—about project-level environmental trade-offs, labor market demands and global supply chains—than the public sector can amass on its own. Here are some initiatives that hemispheric governments should take, individually and collectively, and in close cooperation with national CSR associations and multilateral institutions, to encourage high-quality CSR.1 1: Provide guidelines and incentives for highquality annual reporting. Working closely with national CSR associations and other stakeholders (including knowledgeable civil society and labor organizations), governments should help set voluntary reporting standards that conform to international guidelines, notably to the UN Global Compact and the Global Reporting Initiative (GRI), with its more detailed sector-by-sector guidelines. Also relevant would be existing industry-driven codes that govern production in global supply chains in various sectors (electronics, forestry, footwear, toys, cocoa, coffee, etc.). To promote dynamic flexibility and continuous improvement, and to allow the best firms to maintain reputational advantage, quantitative benchmarks can be raised gradually over time. The clarification of reporting standards would help to remove the confusion and ambiguities that have inhibited CSR, especially among medium and small firms. Incentives can vary from issuing national awards to top performers to conditioning operating licenses or access to certain preferential government programs on conformance to consensual standards. More transparency in reporting would have another big pay-off: consumers, citizens and communities would become much more aware of CSR standards and practices. High-quality, credible reporting would translate into high-impact 46 Americas Quarterly w i n t e r 2008 advertising. Eventually, firms would compete among themselves to showcase their responsible internal management practices and their extensive social commitments. Firms and the publics they serve would have more confidence in national reporting standards if they were compatible across the Americas. As more Latin American firms engage in multiple regional markets, consistency of standards would simplify regional business integration. Harmonization of standards could be pursued by networks of national CSR associations, but for reasons of national pride and mutual distrust, it is likely that a strong transnational forum, such as a multilateral development bank, will have to assist. Logically, firms would finance their own reporting and evaluations, as they do in traditional financial reporting. At the outset, governments and multilaterals could provide an infant-industry subsidy to allow firms to gain knowledge and confidence in the process. 2: Promote rigorous independent evaluations of CSR reporting. Reporting guidelines should encourage self-evaluation of CSR efforts. Inevitably, however, self-reporting raises questions of objectivity. Governments can encourage independent evaluations—as can national CSR associations—of compliance with environmental standards, ethical labor practices and community investment projects. Governments and multilateral banks can also provide capacity-building for independent social auditing firms, including start-up funds, training and certification. The goal should be to create a market of CSR auditors, just as there is for accounting firms that audit financial statements. Over time, the more successful certification firms will upgrade to the trans-national level, gaining in credibility and disseminating best-practices along the way. Eventually, no firm will consider issuing a social audit without an external review, just as today no public company would issue an annual financial statement without an independent audit. a m e r i c a s q u a r t e r ly . o r g How to Fulfill the Promise of CSR Richard Feinberg 3: Encourage firms to fit their social investments within larger policy frameworks. National social programs or the UN-sanctioned Millennium Development Goals (MDGs) can provide macro frameworks to orient CSR investments. In some cases, government agencies—national, provincial and municipal—can engage private companies in formal public-private partnerships, enabling firms to better leverage their sources and participate in larger projects. By contributing to macro goals, firms can overcome their isolation and better see how their corporate programs are making a strategic difference. Endorsed in 2000 by 189 governments, including the 35 Western Hemisphere states, the MDGs set 2015 as the deadline for success. The eight goals and 18 subtargets include such quantitative, country-specific objectives as reducing extreme poverty by 50 percent, reducing by two-thirds infant mortality, and ensuring universal primary education. Goal Eight, “Develop a global partnership for development,” includes two sub-targets addressed specifically to the private sector: “In cooperation with pharmaceutical companies, provide access to affordable essential drugs;” and, “In cooperation with the private sector, make available the benefits of new technologies, especially information and communications technologies.” Implementation of the MDGs in the Western Hemisphere is being closely tracked by various multilateral development agencies. As might be expected, progress has been mixed, both across countries and targets. To help guide corporate social investment, governments with the support of the multilateral agencies should produce matrices that cross the remaining implementation gaps with the known projects—public and private—that are addressing the targeted needs. Thus, each private firm could search through the matrix and match its interests and expertise within the MDG gaps. For example, pharmaceutical and food firms could pinpoint health goals while makers of cement can address shortages in schools and housing. Firms could also search out partnerships with listed public agencies and other private firms laboring in the same a m e r i c a s q u a r t e r ly . o r g vineyards. Participating firms would welcome the wider public exposure and implicit official benediction of their good works. Already some global firms, such as Petrobras and Nestlé, align their activities to MDG targets in their own social reporting. 4: Set quantitative voluntary targets for social investments—up to one, then two percent of earnings. In the United States, large firms invest an estimated one percent of pre-tax profits in corporate philanthropy (separate from what individual executives or large shareholders might donate on their own accounts). There are no comparable figures for Latin America, although it is a safe guess that the numbers are lower. Imagine if the hemisphere’s governments, in concert, were to urge larger firms (say, those with over 500 employees, whether domestic or foreignowned), on a voluntary basis, to invest one percent of their pre-tax profits on social programs—and to gradually raise their sights to 2 percent! Governments should offer to assist participating firms in aligning their contributions to broader social programs. The firms will gain by increasing their leverage, efficiency and triple-bottom line (financial, social and environmental) rates of return. Over time, corporate contributions will amount to many billions of dollars. Some might protest that such public appeals to private firms would be equivalent to an informal tax, but the critics would be wrong. Firms would retain control over their social expenditures, and be able to link them to their own corporate investment and marketing strategies. There is a precedent for encouraging corporate investments through public target-setting. In Great Britain, since 1986, the top corporate CSR association, Business in the Community, has set the standard of one percent of pre-tax profits as a target for community investment. In 2006, 179 companies publicly reported their ratios and absolute amounts of giving: the median ratio was 1.63, and total giving reached nearly one billion pounds. To maintain their credibility, Latin American (continued on page 49) winter 2008 Americas Quarterly 47 case study: social development case studies: EDUCATION • CEMEX • Canal Cl@se CEMEX, one of the world’s largest building materials companies, is helping to renovate Consuelo Silva’s modest home in Jalisco, Mexico. That may not sound like an important deal for the Monterreybased firm, which has been behind such mammoth projects as the 25,700 footlong bridge connecting Sweden and Denmark. Call it a long-term investment. Silva, her husband and their four children were squeezed into two little rooms in an asbestos-sided house when they discovered Patrimonio Hoy, a microcredit program developed by CEMEX in 1998. Using Patrimonio Hoy’s services, such as lending for fixed-price materials and technical assistance, the family finished their first project in 1999, adding an extra room for the children. Over the past nine years, more than 180,000 families like the Silvas—in Mexico, Costa Rica, Nicaragua, Colombia, Venezuela, and the Dominican Republic—have received similar help. For CEMEX, it’s a way of mixing good works with good marketing. More than 40 percent of CEMEX customers in Mexico are low-income earners, and offering them good credit on fair terms has paid off. Patrimonio Hoy has provided over $67 million in credits since its inception—and the loan repayment rate is a stunning 99 percent. The program has actually turned a profit since 2004, thanks to its model of direct delivery of materials to households, which not only cuts waste and theft, but shortens construction times. Many customers have gone on to finance further expansions. Some have even built their own businesses. Thanks to Patrimonio Hoy, Silva’s house has been growing by leaps and bounds. “I’m planning the second floor, with a terrace and a big room for myself,” she boasts. —Eva Fernández and Danielle Renwick Since early last year, more than 300,000 teachers and about 177,300 students in Mexico’s public schools have received roundthe-clock educational broadcasting provided by Canal Cl@se. Named after the satellite (and cable) educational channel on which it is transmitted, Canal Cl@se was launched over 10 years ago by the Cisneros Group to broadcast cultural, language, math, and science programs to schools and teacher-training centers around Latin America. The Peruvian Educación Vía Satélite program, a partnership between the government and the Group, is the latest example in its efforts to make quality education available throughout the hemisphere. Canal Cl@se has turned out to be a profitable venture for Cisneros Group, a family-owned communications company based in Caracas, since its founding in 1996. Subscriptions to the educational channel are bundled with cable and satellite packages in eight Latin American countries. Making Canal Cl@se subscription-based ensures not only its sustainability but also that there is an engaged audience for the service. The agreement with Peru will make Canal Cl@se available to 4,500 primary and secondary schools throughout the country by June 2008. For a lot of young Peruvians, that will represent their first introduction to the infrastructure of modern communications. —KB 48 Americas Quarterly w i n t e r 2008 • Arcor Arcor Foundation of Argentina has supported more than 1,400 primary education and community-building projects throughout the country. Its list of initiatives is impressive, but what makes it unique is the commitment to get sustainable results. The Arcor Group, started as a family business in 1951 in Córdoba, is one of the world’s largest candy producers. The Foundation was created in 1991 and began by making one-time donations to schools and hospitals. In 1996 it switched its focus to providing long-term grants to organizations benefiting children, funding teacher training, and at-risk youth programs, among others. But pursuing social conscience did not mean ignoring business principles. One of the benefits of Arcor’s support is the technical guidance provided to its NGO grantees. Celia Susana Fava, of Cáritas in Córdoba, says Arcor’s emphasis on financial and programming reports helped to strengthen its management. “The magic bullet is evaluation”, says Marcelo Cabrol of the Inter-American Development Bank’s Education Division. Arcor Foundation has also published several case studies on the initiatives it funds, so others can replicate them. Its pioneering work has earned the first place on Clarín newspaper’s list of Argentina’s 100 most-admired businesses for four years in a row. —Caitlin Miner-Le Grand a m e r i c a s q u a r t e r ly . o r g How to Fulfill the Promise of CSR Richard Feinberg (continued from page 47) governments should establish benchmarks for social accounting, just as they do for tax-free philanthropic contributions. In measuring corporate philanthropy, firms typically report not only financial donations but also contributions in kind, such as volunteer staff time and equipment transfers. But firms should not be allowed to over-price products nor claim credit for purely commercial expenditures with no special social purpose. Ideally, governments should cooperate to harmonize such social accounting standards. Available evidence suggests that multinational firms steer their social investments toward their home markets. According to the Committee Encouraging Corporate Philanthropy, U.S. companies earning over 40 percent of their revenue abroad allocated only 15 percent of their philanthropy budgets internationally. Developing countries ought to be annoyed, since they are receiving in social investment a lesser percentage of corporate profits. Hemispheric gov- undermines the broad strategic objectives of CSR. In truth, many U.S. and European firms that champion CSR are open to the same criticism. To address such self-destructive contradictions, reporting requirements should include information on corporate lobbying—not just amounts spent but also positions advocated. Stakeholders could then judge whether firms’ CSR departments are isolated or integrated into mainstream management operations and strategic planning. 6: Encourage Private CSR Associations To Pioneer These Initiatives. Optimally, national CSR associations, collaborating through their umbrella organization, Forum Empresa, will pioneer many of these initiatives. Private firms have more confidence in their own organizations. : CSR IS AS IMPORTANT TO HEMISPHERE GOVERNMENTS AS TO THE PRIVATE SECTOR: BOTH SHARE AN INTEREST IN PROMOTING DEMOCRATIC STABILITY AND POVERTY ALLEVIATION. ernments—including the U.S. and Canada but also Mexico, Brazil and Chile—whose top firms invest globally, could issue a dramatic call: the one-two percent voluntary targets would also apply to subsidiaries, and firms should report these country ratios in their annual social responsibility reports. 5: Align corporate public-policy lobbying with CSR policies. Too many firms in Latin America press for taxes so low that governments can’t hope to erase social deficits (or attain the MDGs). Too many powerful firms seek to capture regulatory mechanisms to undermine market competition, to the detriment of clients and consumers. Too many Latin American firms behave as though compliance—not just with CSR but also with national laws and regulations—is voluntary. Such behavior opens the whole CSR movement to accusations of hypocrisy and corporate white-washing and a m e r i c a s q u a r t e r ly . o r g Yet collective action problems, uncertainties about outcomes, resource constraints, and short-term horizons may inhibit private initiatives—which are why governments exist in the first place. But even where states must initiate action, CSR associations and interested private firms should be highly visible and fully engaged. Each government can decide for itself how best to coordinate its various CSR initiatives, but intra-governmental coordination is vital. A 2005 study by the U.S. Government Accountability Office (GAO) found that over 50 federal programs (albeit often very small) in 12 agencies—ranging from the Overseas Private Investment Corporation (OPIC) to the Inter-American Foundation—support CSR-related activities.2 Yet, there is no broad federal CSR mandate, and little coordination among these dispersed programs. One option is for each hemispheric government to name a national point of contact, a CSR pivot, to coordinate CSR programs within and among nations. In the United Kingdom, the Cabinet Level Department winter 2008 Americas Quarterly 49 Corporate Social Responsibility for Business, Enterprise and Regulatory Reform has responsibility for intra-governmental coordination of CSR. Sweden appoints a roving CSR Ambassador. 7: Mandate the Multilateral Development Banks To Scale-Up Their Contributions. The Inter-American Development Bank has played a pioneering role in fostering national CSR associations and their umbrella network. The Inter-American Bank has also published seminal studies on linking CSR and the MDGs and on ways to more fully engage small and medium enterprises in social responsibility and sector clusters. Similarly, the World Bank Group has supported cutting-edge CSR initiatives, including the Equator Principles that help major private financial institutions screen large raw materials projects for compliance with CSR standards. Now, in the next “scaling up” stage proposed here, the multilateral development banks (MDBs) have much more to contribute: resources and expertise and, perhaps of even greater value, the powers of convocation and validation. Beyond the periodic CSR conferences that the Inter-American Bank has been sponsoring since 2002, the MDBs can take notice of the success of the Clinton Global Initiative which convenes each September in New York City during the UN General Assembly, gathering high-profile political personalities and civil society leaders with corporate CEOs to shine their intense spotlights on worthy CSR initiatives. In addition, the multilateral banks excel at capacity-building, and should bolster those civil society organizations that make up the “demand side” triggers for CSR. The MDBs can also help construct the Richard Feinberg certification market so necessary to improving the transparency and credibility of corporate reporting. But the MDBs will fully engage only if the U.S. government, as their major shareholder, urges them to do so. It would be much better if the approach is made not by the U.S. alone but by interested Western Hemisphere nations as a group. In 2009, coincident with a new team in the White House, the 5th Summit of the Americas is scheduled to convene in Trinidad and Tobago. What a perfect opportunity, in the context of a summit undoubtedly focusing on the pressing social agenda, for the region’s top political leadership to enroll its private sectors, in partnership with the MDBs, in an historic campaign to stabilize democracy by driving poverty from our hemisphere. Seizing the Moment Today, favor- able trade winds are blowing in most of Latin America. For the private sector, profits are rich and equity markets have skyrocketed. Yet the heady numbers conceal smoldering social resentments, widespread public cynicism and debilitating poverty. Increasingly, the Latin American private sector recognizes that corporate social responsibility can help to bridge these dangerous divides. But if CSR is to fulfill its promise in the Western Hemisphere, governments and private sectors must join forces to design a robust regional regime that builds credible, high-quality standards and sets meaningful, measurable goals that pursue broader national aspirations. The general public must be assured that the private sector is acting with social purpose and that pledges are truly being met. The precise arrangements among public institutions and private firms will vary from country to country. What matters to the average citizen, as always, will be the actual results. ENDNOTES 1 These proposals draw on several studies: Tom Fox, Halina Ward, and Bruce Howard, Public Sector Roles in Strengthening Corporate Social Responsibility: A Baseline Study (Washington, D.C.: The World Bank, 2002); Susan Aaronson and James Reeves, Promoting Global Corporate Social Responsibility (Washington, DC: The Kenan Institute of Private Enterprise, Study Group Consensus, 2003); David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, D.C.: The Brookings Institution, 2005); Antonio Corral, et al., Contribución de las empresas al Desarrollo en Latinoamérica (Washington, D.C.: InterAmerican Development Bank, 2006); and Felipe Agüero, Business, Politics and Social Responsibility in Latin America, forthcoming. 2 Government Accountability Office, Globalization: Numerous Federal Activities Complement U.S. Business’s Global Corporate Social Responsibility Efforts (Washington, D.C.: GAO-05-744), August 2005. 50 Americas Quarterly w i n t e r 2008 a m e r i c a s q u a r t e r ly . o r g
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