Tag Archives: CSR

A Trade Union leader’s personal perspective

Jim Baker’s thoughts on “The Social License” by John Morrison (Palgrave MacMillan, 2014)

JimBaker

(Jim Baker was Co-ordinator of the Council of Global Unions (CGU) until 1 July 2014. The CGU was formed in January of 2007 and is composed of Global Union Federations, which group trade unions by sector and occupation as well as the International Trade Union Confederation (ITUC) and the Trade Union Advisory Committee to the OECD (TUAC), which bring together national trade union centres. Prior to that, Baker was the Director of the Bureau for Workers’ Activities (ACTRAV) at the International Labour Organisation (ILO). Before joining the ILO, he held the post of Director of the Department of Multinational Enterprises at the International Confederation of Free Trade Unions (ICFTU) in Brussels. These comments represent his personal thoughts)

The book accomplished what I understood to be its mission. It provoked thought and helped to further the discussion. What follows are some fairly unorganised thoughts that it provoked, by no means exhaustive: some of which might be useful.

Traditional CSR, public relations, and due diligence

The book showed restraint in its reflections on CSR, but I think that the essential points were made about its weaknesses and about the nature and self-propelling characteristics of the CSR industry. I had two complementary thoughts.

First, some of the comments reminded me of how CSR language has tripped us up. As George Orwell wrote,“…if thought corrupts language, language can also corrupt thought”. I suspect that we have all been afflicted by this language effect. We have become artificially conditioned to react in a way devoid of common sense. It is as if we have become one of Pavlov’s dogs that confuse noise with real food.

That brings me to a larger point that came to mind in several sections of the book; the degree to which we have all been affected by public relations and “hype”. Growing up in the Northwest, dependent on the lumber and wood products industry at the time, I recall that major companies were being attacked for logging without restoring the forests (inadequate planting of new trees to replace the barren ground that they had created). One of the major companies responded, not by planting more trees, but by calling themselves, “the tree growing people”. Part of the struggle for us all will be to separate the real from the imaginary.

The most serious danger of misinformation and disinformation is, undoubtedly, for democracy. The level of political debate is lower than at any other time in my memory. The people may still make decisions, but based on what information? And, where is that information coming from? In the US, with the end of key restrictions on political and issues funding, the “marketplace of ideas” is becoming more distorted as it is being increasingly “bought”.

But, to get back to smaller problems, the business and human rights framework is the best way out of the incestuous CSR world. However, the element that is probably, in practical terms, the most important is due diligence. It gets beyond companies saying and “proving” how good they are and others saying how bad they are to something that, rather than a good and evil measure, can be judged on how robust a process is; in that sense, it compares to democracy. After all, democracy is, above all else, the question of the value and validity and legitimacy of a process.

One of the useful and salvageable words in CSR is “responsibility”. I think that, to some extent, the use of the word “obligations” in the business and human rights discussions has worked. It is the same sense that rehabilitation of the word “responsibility” might be useful.

Legitimacy

A key argument of the book is legitimacy. It is related to the social license along with other concepts and it covers business, government and civil society organisations. I understand the importance of the argument and that without it, it does not hold together as well as it would otherwise. However, my idea of legitimacy is more restricted; probably reflecting the fact that I have spent my life dealing with it in a trade union context. And, defining legitimacy was central to the fight against totalitarianism, but also against company unions and other outside influences and control.

Legitimate trade unions are what were called “free trade unions”. Although the term has gone out of style, the concept remains important. Trade unions should be controlled by their members, not by the boss or by government or by a party, or by a church or by various stripes of mobsters. There have been two issues; the lack of outside control and democratic procedures to ensure that there is internal control by members. As in other democracies, the real democratic life in trade unions does not depend exclusively on having democratic constitutions and rules and dedicated democrats as leaders.

I think that it is important (in reference to a passage in the book) to maintain the importance of the distinction between Amnesty International and Human Rights Watch. Both make a significant contribution to the human rights debate, but having democracies inside democracies are also quite important. That is, of course, also true of trade unions that are, if they are free trade unions, both democratic and representative as well as being part of both the private sector and civil society. Trade unions and other democratic organisations also serve as schools for democracy. Also, democratic organisations depend for their legitimacy on internal factors; the expression of views of members or citizens rather than “stakeholders” or others.

That, in no way, minimizes the impact of expertise, dedication and good work any more than it is a form of attack on the great men and women that you quoted in your book. Non-governmental individuals (NGIs) are important, but are different than representative organisations. And, “membership-based” organisations are neither automatically representative nor democratic.

Constraints on business

Although we all have high hopes for the impact that the United Nations Guiding Principles (UNGPs) on Business and Human Rights will have on the future of capitalism, it is important to be realistic. Although there are forces and pressures building for companies to be more sensitive to human rights, such considerations are not driving business, even those making the most sincere efforts. And, there are other powerful forces in the world economy that business cannot ignore.

One of the realities of the financialisation of the economy culminating in the financial crisis is that the actors in financial markets often had more power than the people who were running businesses in the productive economy. Businesses were making bad decisions, in purely business terms (even though they often had human rights impacts as well) because they had to place priority on paying high dividends over investing in the future of their enterprises. If not, they risked hostile takeovers, asset stripping, etc. As has become clear with the BEPS work of the OECD, businesses were also often making bad business decisions related to shifting profits and transfer pricing; again, unrelated to production or services.

I have had a number of discussions with trade union leaders who saw eye to eye with their managers that action that undermined the long-term viability of companies and that resulted in bad investment priorities (and often in layoffs even if units were profitable) was destructive, but that they were in a context where there was no choice. With the GPs, we tend to look at MNEs as if they are powerful forces that can extend their respect for human rights to others. That is, to some extent, true, but it does not mean that they always have complete control or absolute power.

Of course, the market context is different for different sectors and companies inside of sectors. It is important and necessary to try to improve the health and safety and the rights situation in Bangladesh. However, that does not change the fact that in labour-intensive industries like garments, there is enormous competitive pressure for low wages and poor conditions. In other words, to look at Bangladesh without looking at the way that the global market in clothing works is only a tiny piece of the picture. Although it might sound protectionist to some, we did not have these massive problems in the 1970’s when much of the clothing market was being supplied by companies producing in the UK, the US and other developed countries. Workers had fought for their rights for generations and had made huge progress before they lost jobs as employment shifted to workers without rights. In the US, famously on the docks (although it existed elsewhere), there were “shapeups” where workers gathered each morning and were picked by the bosses to work that day. We are now in a sort of global shape-up where the labour of a human being has, once again, become a commodity and the basis of competitive advantage in some markets.

However, there is one specific area where the UNGPs have enormous potential concerning institutional investors. In the trade union movement, we have always had to explain to pension trustees that they cannot use their positions to “do good” or even to carry out their missions as trade unionists. Their job, often restricted by law and regulation, is to get a good return on investments to benefit retirees. If they could help in some situations, it was through the “business case”, in other words, arguing that bad industrial relations or environmental practices could jeapardise the profits and futures of companies and, for that reason, should be avoided. Decisions of the Dutch and Norwegian National Contact Points on due diligence responsibilities of institutional investors even with minority investments are an important change. If such considerations could have equal weight with fiduciary considerations, and if laws could be modified in keeping with that idea, it could, indeed, have great impact.of

Public Private Partnerships

PPPs are in fashion, in part, because governments and international organisations are looking for new sources of revenue. However, I think that there are not enough discussions about their usefulness, about any effects on democratic governance or public priorities or even their efficiency. I have always supported using private money for public purposes, but in the form of government bonds. Investors get a safe, guaranteed return and governments get needed resources, but public control remains intact. That is not the same as turning over services to private parties.

“Stakeholders”

The book helpfully tries to limit the use of the word “stakeholder”, but I have come to the conclusion that we need a stakeholder like in the Dracula films that can put a stake through its heart. It has gotten so out of control that governments are often considered stakeholders in companies, citizens are considered stakeholders in their governments (that might be true in China, but citizens are “shareholders” in democratic governments). It is an over-used and abused, and misleading word.

Some other more specific points

Page 34. The book mentions that CSR directors are restrained on employee issues because that is the province of HR directors. This cuts both ways. CSR directors often see employees, even the companies own employees as “stakeholders”. HR directors, by contrast, most often see employees as internal. An HR director who is instructed to respect human rights is, in fact, at the nexus of one of the few places where democracy actually has an impact on the company. He or she is dealing with trade unions on a daily basis. A good HR director often has the mentality of working and negotiating with people. A bad one, like a lot of CSR directors, sees his/her job as “taking care” of people.

Page 59. I found the Wikileaks example very interesting and completely concur that there is an issue of adverse impacts. An extreme example from some years ago was publishing names of CIA agents; thus putting their lives in danger. However, your paragraphs prompted another thought. Wikileaks also shows how weak and fragile professional, ethical journalism has become. The same information, handled by skilled journalists would have been much more useful than the flood of information with no study or analysis. Would newspapers be capable of breaking the Watergate story today even if they had all the information? And, what will Google do down the road when there is no reliable content?

Pages 70-71. I think that the book is right not to be “absolutist” when it comes to trust. It is very difficult to really understand what it means. In terms of SRI, a very large proportion of money that was SRI invested went into banks – pre-financial crisis. Was that trust mis-placed? But, that probably reflected public sentiment. If you can’t trust the banks, who can you trust?

And, there is the issue of trust by whom. Some decades ago, the US Department of Labour did an extensive poll on attitudes towards trade unions. As expected, it showed fairly negative views by the general public. And, when union members were asked about trade unions, in general, there was little difference from the public reaction. But, when they were asked what they thought of their own trade unions, they were very positive. For me, the second figure is the most important. However, the reaction of union members to trade unions in general also shows that union members are influenced by what they hear in the media in spite of their personal experience. I cite this example as something that shows how complicated trust can be.

Page 84. I thought that the points about tacit consent and about manipulation were very important. If we are to protect democracy, we have to work at it, but these issues are rarely on the agenda. Some years back, a friend of mine from the UAW was complaining about the fact that the Republican right was able to reach some of our members. He said, “It is like convincing the chickens to vote for Colonel Sanders”.

Page 91. I thought that the quotation from Salil Tripathi about not being able to measure a human rights abuse was excellent. The foolishness of claiming respect for freedom of association in China based on interviews is along these lines. This is another reason why due diligence rather than claiming virtue makes sense.

Pages 99-101. The discussion of businesses working in cooperation with NGOs and supply chains prompts me to point out that it is also appropriate for global companies to speak with Global Union Federations about their employees. As opposed to trying to improve conditions and rights in suppliers, some companies, through this process of examination of the situation in their facilities and suppliers some companies are actually making many workers direct employees and, in that way, ensuring that their rights are respected.

Pages 101-102. Although I do not disagree with you on outrageous CEO pay, I tend, however, to look at it as part of a broader issue of inequality. Pay determination is always subjective. To me, paying a CEO millions in salary and other benefits for his work is not inherently more evil than enabling somebody to make millions without working by clipping coupons.

Pages 105-106. The section about understanding power was really good. It is, in fact, an argument that is largely missing in CSR. And, there is no place where the imbalance of power has a bigger effect on rights or their absence than at the workplace. In fact, the worst impact on rights in triangular employment relationships is that a relationship between a worker and an employer that, in labour law, is recognised as being inherently unequal is replaced by commercial law relationships where parties are assumed to be equal. Fear is also highly relevant to power. As bad as it may be to be powerful; it is worse to be powerless.

The start: Why The Social License?

I wanted to write a book about the current state of affairs at the business-society interface and wanted a fresh approach – not one following the tramlines of existing ‘corporate social responsibility’  (CSR) thinking or another book on business and human rights, there have been several excellent books already written on the latter (not least by my colleagues at the Institute for Human Rights and Business). I wanted to come to the issues afresh and from first principles as much as possible. I am therefore wholly to blame for the arguments set out in the book and this blog.

The enduring vision I have of why I work in this area is that of the evolution of the marketplace – a point Anita Roddick was lucid on. Several hundred years ago, and still in physical markets in many parts of the world, buyers and sellers operate in close proximity – they know each other, where each other lives and are likely to meet on a weekly or daily basis. There has been and still is, in such market places, a greater sense of interpersonal accountability. This is not to say that there were not long complex supply chains in past ages (obsidian, for example, was traded over thousands of kilometres over thousands of years) and also there were clearly abusive practices such as slave labour, but customers were much more actively involved in making judgements about the quality and reliability of not just the product but also the behaviour of the seller. Contrast this with the world of the past 20 years, where global value chains are hugely complex and where the humans involved (be they workers, investors, customers or consumers)  are very much disempowered in their ability to  influence the way the business of business is conducted.  We need new tools, awareness and laws to bridge this gap which has externalised the true social and environmental cost of production. At a instinctive level, the book is a reaction to the dehumanising effect of much of what we now call the global marketplace.

I was also interested that the term ‘social license to operate’ was emerging in many different places around the world and for different reasons. True, it remains a term still associated mainly with the extractive industries, but it I hear it elsewhere – within constitutional think tanks in Kenya, for example, or US-based beverage  companies. It is an attractive term because it is suggestive of a rationale about why any non-state actor should engage in social issues, particularly why an organisation whose primary stated purpose is not social (i.e. a business) should do so.  Unlike CSR or even human rights, it is an outcome and not just an objective. That said the term ‘social license’ was not clearly defined and was at risk quickly moving into the category of ‘self-declaratory CSR’ – as John Ruggie would call it.

So the book tries to pin down the ‘social licence’ concept and in a way relevant not just to business, but all other types of organisation. The pinning required something of a conceptual framework, more perhaps than a non-academic book should attempt (particularly when written by someone who is very much not an academic).  I had the work of all my colleagues in the business and human rights field as ballast – which reminds us that a human-centric approach must be about impact and impact in human rights terms. And that accountability is about redress and remedy, but it is also about prevention as well as transparency. This I had ‘in my back pocket’ so to speak and those of you that read the book will see it becomes an important feature of the later chapters. But I needed to get there – and particularly for the more skeptical reader who might think that ‘social licence’ sounds nice but is just a fashionable buzz word, and that human rights and business have little to do with each other.  Therefore I evoked the thinking of some of the greatest in making some superficial but important links back to social contract thinking of 200-300 years ago. It is not so easy to dismiss social contract theory as fluff given the influence it had on shaping democracies and ideas of civil society in many parts of the world.

It seems I am one of the first in the world to define social license in social contract terms, and you can judge to what extent I pull this off. The social contract experts who have seen my book have been polite and kind, but I knowingly dip my toe into what are very deep waters. However, there is much of what I seen in the writing of those such as Locke, Hobbes and Rousseau which does resonate with questions about the role of business (and other organisations) in contemporary society. At a minimum, I hope to provoke a reaction from which we all might learn something. And, as my patience with the ‘CSR industry’ is wearing thin, I give us all a good collective kick to do better and too ask the tougher questions about the activities of all of our organisations.

I will not just be blogging to promote this my first book. Rather I wish to develop my own voice and thinking on a range of issues, perhaps resulting in future books perhaps to be written by others. I hope some of you will share this journey through your own comments and writings. The role and legitimacy of non-state organisations in today’s world (be they businesses, NGOs, communities, religious organisations, regional authorities and so on) is one of the most fundamental of our life time and so tough questions need to be asked.