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Corporate Citizenship

Author: Ralph Hamann ~ Unisa Centre for Corporate Citizenship

( Article Type: Explanation )

Corporate citizenship is an aspiration much like other ideals, such as democracy or sustainable development. It refers to the hope that business can and will contribute to sustainable development and that, rather than being part of the problem, it becomes part of the solution. It means that corporations balance their rights as legal persons with due regard for their responsibilities, and that they can identify and exploit innovative business opportunities in addressing complex social and environmental problems.

The view that business can be part of the solution to sustainable development took hold during the Rio Earth Summit in 1992. Agenda 21 argued that ‘the policies and operations of business and industry, including transnational corporations, can play a major role in reducing impacts on resource use and the environment’. It called for a growing private sector that will provide more ‘employment and livelihood opportunities’, and business leaders were called upon to contribute decisively to sustainable development by changing their strategies and decisions.
But this view of business contributions to sustainable development has been surrounded by some controversy ever since. Calls for partnerships between corporations, governments and civil society were prominent during the Johannesburg World Summit in 2002, for instance, but they were also met with widespread concern regarding ‘greenwash’. In a dialogue paper published in preparation for the Summit, Third World Network and other NGOs argued: “Today, in a world that is more unequal, with a small number of Trans National Companies (TNC’s) dominating each sector and exerting tremendous influence on governments, this concept of ‘partnership and stakeholders’ perpetuates the myth that there is a collective endeavour, and that all players are equal and conflicts of interest can be resolved by roundtables seeking consensus”.

Since then there has been something of a rapprochement between critics and proponents of corporate citizenship. We argued in the wake of the 2002 World Summit that a ‘hybrid model of corporate citizenship’ would emerge, as proponents – including corporations – would recognise that government regulation and civil society activism play an important role in enhancing the accountability of private sector organisations, while critics would acknowledge that businesses can make important contributions to addressing complex social and environmental problems, premised on efficient resource allocation and innovation capabilities, for instance. This expectation has been supported to some extent. An example of this is the partnership between Unilever and Oxfam in studying the impacts of the company’s supply chain on poverty in Indonesia. It demonstrated that NGOs can collaborate with corporations while retaining a necessary degree of independence and an ability to be critical, and that such collaboration can provide important learning opportunities with practical implications for both parties. In the climate change arena, too, the interactions between NGOs and corporations were characterised by acrimony much of the time and a more nuanced picture has emerged. While governments have struggled to reach binding targets, some corporations have shown themselves as important innovators in developing mitigation or adaptation initiatives, and some have been prominent lobbyists in support of more concerted government action on curbing emissions. Of course, much depends on the sector and pertinent issues in question. For instance, the reinsurance industry has become something of a champion in proactively addressing climate change – see, for example, the role of Munich Re in supporting a large-scale renewable energy project in North Africa and also providing detailed multilateral policy recommendations. At a more local level, South African insurance company Santam is partnering with research organisations and local government to implement catchment management practices that better adapt to climate change and thus reduce its risk exposure. On the other hand, mining companies have been more resistant to change, such as recent policies on a carbon tax in Australia, even if they, too, have been trying to understand how to reduce emissions and adapt to likely climatic changes.

If you don’t understand yourself as part of the problem, you cannot be part of the solution
Another reason why the corporate citizenship debate has moved on from 2002 is because our understanding of its meaning has improved. An influential contributor to this has been the UN Secretary General’s Special Representative on business and human rights, John Ruggie. His mandate was informed by the acrimony surrounding an initial proposal to identify particular human rights for which business ought to assume responsibility. At the same time, the other prominent UN initiative in this field, the UN Global Compact, showed little promise of going beyond a ‘learning network’ that introduces corporate citizenship principles to a broader audience. Ruggie had two three-year terms in which, based on consultations around the world, he developed a framework and proposed implementation mechanisms. The framework insists that governments need to fulfil their duty to protect human rights, while companies have the responsibility to respect human rights, which means that they need to demonstrate due diligence in understanding and mitigating their potential impacts on human rights. 
So, while the dictum of 1992 was that business can be part of the solution to sustainable development, Ruggie convinced corporations and their critics that companies cannot be part of the solution if they do not understand how they can be part of the problem. This was successful in creating a platform reconciling various parties with widely diverging perspectives previously. So, while The Economist was rehashing Milton Friedman’s view of ‘the business of business is business’ just a year previously in a special edition criticising the notion of corporate social responsibility, it welcomed Ruggie’s first report on human rights: ‘What is striking today is how often activists, big firms and governments are now in agreement about the importance of human rights, and are working together to advance them.’

If you are not part of the solution, you are part of the problem
Yet Ruggie’s framework had some prominent critics, who argued that it placed too much emphasis on ‘do no harm’ and therefore neglected the opportunity of companies making more proactive contributions to promoting human rights. Indeed our normative view of corporate citizenship is evolving. We now expect leading companies to not only mitigate their negative social and environmental impacts, but now expect them to come up with innovative solutions. This has become the staple even of mainstream management theory. Strategy scholars Michael Porter and Mark Kramer argue in an influential Harvard Business Review article that the purpose of business should be not the creation of profit but ‘shared value’, that is, to “enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.“ They suggest “this will drive the next wave of innovation and productivity growth in the global economy… [and] legitimize business again.” Many such inspiring examples of merging social impact with business success have been discussed under the rubric of social entrepreneurship, but they are not limited to small start-up organisations. The example of Daimler’s Car2Go initiative shows that even large, established corporations can implement profoundly innovative business models with social and environmental benefits.

This imperative to identify and implement innovative solutions to pressing social-ecological and economic problems as part of business strategy is premised on increasing urgency at various levels. Inter-connected global environmental, social and economic changes linked to climate change (and associated positive feedback loops and possible regime shifts), food security, overfishing and acidification of the oceans, soil degradation and water scarcity, among others, are manifesting at local levels in ways that worry long-term business planners. Even in the short-term and at the local level, companies are realising that legal compliance and mitigating negative impacts is often not good enough for stakeholders with influence over business success.
In sum, corporate citizenship will be driven more and more by market competition, complemented by strengthening, more nuanced government regulation and civil society scrutiny. It is likely that its best manifestations will be entirely independent of any reference to corporate responsibility, but will be a natural part of core business strategy.