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.
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2008
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