Corporate social responsibility practices often lack 'on the ground' change -- SFU research

July 22, 2020

The economic restart prompted by COVID-19 provides an opportunity to innovate and change how companies conduct business.

For instance, companies that practice corporate social responsibility (CSR) could ensure more positive outcomes by tackling "real change on the ground" rather than focusing on single projects and budgets, according to Simon Fraser University political science professor Andy Hira.

Hira's paper, published this month in the journal Global Affairs, analyzes the impact of CSR in three industries: forestry, mining and textiles.

"When you look at CSR reports they're talking about expenditures and these great one-off projects they've built for communities,'" he says. "But there also needs to be a willingness to tie themselves to real changes that will have broader and lasting impact."

Hira also analyzed initiatives and programs designed to help consumers make sustainable product choices. He found that overall, few approaches translate into improvements for local communities.

In terms of the bigger picture, Hira suggests there is a need for increased global pressure on firms to be transparent and enforce CSR practices.

"Consumers need to let retailers and politicians know that they are concerned about these issues," Hira says. "Canada has ethical standards on the domestic level but we turn a blind eye to all the goods that we import. If we could extend those standards and say we're not going to allow imports on unethically produced goods everything would change."

Hira notes that government procurement could lead the way by ensuring ethical production and that Canada could coordinate with markets in Europe and U.S. to adopt standards, using market access as a lever to push for developing country standards enforcement.

Hira's assessment included the Forest Stewardship Council (FSC), which offers a certification program to help consumers choose sustainably sourced wood products from their local hardware store.

In the mining sector, he focused on the Extractive Industries Transparency Initiative (EITI), which aims to encourage transparency in government revenues received from oil, gas and mining. Many mining companies are headquartered in Canada but conduct exploration and mining projects all over the world, without the protections that Canadian regulations provide. Based on his first-hand research and data analysis, mining shows no real improvement for local communities or diminution of conflicts, despite a plethora of global CSR efforts.

The flaws he identifies in these programs makes it difficult for consumers to make ethical product choices.

"If anyone buys a gold ring to get married they can't guarantee that gold hasn't been produced by conflict or child labour in Sub-Saharan Africa," he says. "They can't guarantee that people involved in that gold mining are getting a fair wage, or that their communities are benefiting from the mining project or that the environmental effects won't last for generations once the mining project ends."

He is critical of the textile industry, which has a number of competing standards and frequently contracts factory auditing to Non-Governmental Organizations (NGOs) or consulting firms. This practice creates an inherent conflict of interest and widespread reports have highlighted major flaws in the monitoring process include a clear bias towards factory owners.

Hira's research on the textile industry builds on the book he wrote about CSR in the wake of the 2013 Rana Plaza disaster in Bangladesh. Thousands of workers at the factory were producing clothing for major western brands and were killed when the building collapsed.

He notes that increased consumer and investor awareness prompted companies to engage in reporting and auditing but more changes are needed. In addition to conflicts of interest, there are no consequences for companies that fail these audits and no required remediation.

To improve audit neutrality, he suggests creating an international organization funded through a taxation system of member organizations to avoid the conflict of interest that arises from receiving a contract from one particular company.

Hira says companies could eliminate competing standards by working with international organizations, NGOs and governments on a harmonized label for consumers. This would improve consumer confidence that the products they are buying were produced ethically and sustainably.

Organizations can also work with local unions and activists to put pressure on local governments to improve conditions for workers. Better Work Cambodia is one example of this approach.
He is also editing a forthcoming special edition of the Journal of Developing Societies on the subject of developing country capacity, to be published this fall.

Simon Fraser University

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