From Code To Compliance
–
A Few Remarks On CSR Monitoring And Implementation
With A Special Focus On Labour Rights
Karin Lukas
Introduction
Many businesses in emerging markets are realizing benefits from CSR-based initiatives, with
quantified improvements in productivity and market access. While these companies tend to
focus more on revenue gains, brand value and reputation are more significant for companies
in developed countries.1 Looking at the other side of the coin, NGOs claim that CSR has
widely remained lip-service and is even used to deflect from human rights violations.2
A judgement on who has really profited from CSR is not made easier given the variety of
instruments used to implement CSR. These range from the funding of social projects and
codes of conduct to labelling and rating initiatives. As it is impossible to go in-depth into the
strengths and weaknesses of these initiatives, I would like to point out some key issues to be
addressed when looking at monitoring and implementation of CSR, in particular regarding
labour rights monitoring.
Definitions and key issues
What is monitoring? What is implementation?
While the implementation of CSR is quite well understood as giving effect to and putting into
action given CSR standards3, the meaning and scope of monitoring of CSR is less clear. A
useful definition of monitoring is provided by Hellawell (1991)4, modified by Brown (2000):
“Monitoring is an intermittent (regular or irregular) series of observations in time, carried out
to show the extent of compliance with a formulated standard or degree of deviation from an
expected norm.”
In line with this definition, one needs to define the standard in terms of objectives or targets,
and then undertake monitoring to assess whether these objectives are being met.
When looking at CSR monitoring, roughly five types can be identified5:

Ludwig Boltzmann Institute of Human Rights
See CSR page of the Worldbank, http://worldbank.org/privatesector/csr.
2 Christian Aid, Behind the mask. The real face of corporate social responsibility (2004), p.1-2.
3 Those standards, however, vary widely depending on the CSR area of activity and the level of commitment of the
company. For this see also the discussion on different reporting standards on page 3 of this paper.
4 JM Hellawell, Development of a rationale for monitoring, in: Monitoring for conservation and ecology (1991), Goldsmith,
FB (ed.), Chapman and Hall, NY, pp.1-14.
5 SOMO (Centre for research on multinational corporations, “From code to compliance”. Five concrete European
experiences with monitoring and verification in the garment industry (2001), p.1.
1
1
1, internal compliance monitoring
2, external monitoring
3, accredited/certified/verified monitoring
4, NGO reports
5, monitoring of monitoring
Among those, internal, external and to some extent, accredited monitoring will be dealt with
in this paper.
Barriers to effective monitoring and implementation
Looking beyond the technicalities of monitoring, underlying issues of competing interests,
motives and behaviours of the different players play a key role in success or failure of CSR
monitoring and implementation.
Balancing interests
Businesses are afraid to be disreputed, NGOs are afraid to be instrumentalised. There are
competing needs of transparency and confidentiality. These fears must be taken seriously and
addressed, the divergent interests must be balanced. For example, when conducting interviews
with workers as part of the labour rights monitoring process, the individual protection of those
workers must be balanced against information disclosure.6 Especially in the case of worker
rights monitoring external cooperation with unions and NGOs must be sought by the
company.
Different standards and interpretations
Given the variety of CSR initiatives and the very different understandings of and motives for
these initiatives, it is vital to reach a common understanding of the topic. Confusion on
terminology is frequent; if we talk about monitoring labour standards in a code of conduct, we
must be clear about those standards and what they imply. Fundamental labour standards as
developed by the ILO are internationally broadly recognised and their scope is clear. 7 These
standards have been unambiguously interpreted for the business context.8
Lack of external monitoring
Many reports on CSR implementation point out that the major barrier to effective
implementation is the lack of external monitoring. Businesses are reluctant to allow outside
monitoring of their activities. This is partly due to the mistrust between the two communities
(business and civil society), given the competing interests I’ve pointed out earlier. Thus, it is
not surprising that social audits by accredited firms are more popular among businesses.9
6
Supra, p.3.
ILO, Declaration on Fundamental Principles and Rights as Work (1998),
www.ilo.org/public/english/standards/decl/declaration/text.
8 See for example the interpretation of standards by the ILO Committee on International Investment and Multinational
Enterprises; the ILO Governing Body Sub-Committee on Multinational Enterprises of the Committee on Legal Issues and
International Labour Standards.
9 Nina Alscony/Ineke Zeldenrust, Discussing elements of monitoring and verification (2001), p.5,
http://www.somo.nl/monitoring/related/disc-key-elements.htm.
7
2
However, successful cases of external monitoring of CSR are increasing, following the
well-established trend of independent monitoring of the environmental behaviour of
companies.
This type of monitoring would also meet the intense criticism of NGOs claiming that CSR has
been mostly rhetorical and is even used to distract from human rights violations.
Lack of control over subcontractors/suppliers
Some businesses claim insufficient influence on their suppliers and subcontractors. A „fair
prize“ given out by the buyer could be pocketed by the supplier without reaching the workers.
Thus, monitoring must ensure that the whole chain follows the rules. If suppliers continue to
ignore these rules, the CoC should include clear guidelines when and how the relationship can
be terminated.10
Some companies, especially when monitoring labour rights, have started training programs
for their suppliers in the South in order to ensure compliance throughout the whole chain.11
Varying reporting standards
A Worldbank study on CSR implementation in supply chains 12 showed that given the
different local contexts and specific industries, current approaches are highly unsystematic
and reflect “ad hoc and isolated decisions.”13 The Bank calls for more collaboration of the
different CSR players to reach more systematic approaches. This includes additional means of
implementation such as capacity building and worker empowerment.14
However, some progress has been made in terms of standard CSR reporting. The Global
Reporting Initiative 15 has established reporting guidelines to promote comparability and
support benchmarking and assessment of sustainability performance with respect to codes and
performance standards. Although the GRI has yet to be fully developed and implemented, a
large (and growing) number of companies16 include GRI standards in their CSR reporting.
Quite naturally, the decentralised nature of CSR has led to unsystematic and largely
incomparable approaches presenting a patchwork picture of implementation. Also due to this
patchwork picture, the debate on a regulatory approach to CSR has gained momentum.
Voluntary versus regulated implementation of CSR
The heated debate on voluntary versus regulated implementation of corporate social
responsibility is ongoing.17 As obvious as the lines of the divide seem to be (companies pro
10
Supra note 5, p.4.
Supra note 3, p.4-5.
12 The World Bank Group/Corporate Social Responsibility Practice, Strengthening Implementation of Corporate Social
Responsibility in Global Supply Chains (2003),
http://www.worldbank.org/privatesector/csr/doc/Strengthening%20Implementatio.pdf.
13 Supra, page 2.
14 See f.e. the paragraph on training programs on page 2 of this paper.
15 Established in 1997 by the UN Environment Programme and the Coalition of Environmentally Responsible Economies,
http://www.globalreporting.org.
16 For a complete list view http://www.globalreporting.org/guidelines/reporters_all.asp.
17 See for example the discussions on the effectiveness of the Global Compact Initiative, http://www.unglobalcompact.org.
11
3
voluntary, NGOs pro regulated) there are good arguments for a combination of both
approaches showing that regulation can be beneficial to companies as well.
Perspectives on implementation by regulation
Making clear that businesses profit from regulated CSR
As the International Council on Human Rights points out, international regulation of business
behaviour is positive for businesses for the following reasons18:
“1, it prevents unethical business competitors from taking advantage of voluntary approaches
by simply not joining; international standards would provide a „level-field“ for all businesses;
2, clear legal obligations provide clarity; when the scope of business duties is uncertain,
companies have difficulties to show compliance and thus defend their activities against
criticism;
3, when clear minimum standards exist, it is easy for companies to show that they do more
and are therefore „more socially responsible“; currently, the worst codes of conduct can be
hyped whereas excellent ones remain to be difficult to defend against criticism.”
Making clear that businesses are part of society and cannot operate outside the law
Businesses enjoy the protection of the law in terms of investment protection, right to property,
etc when operating in a legal environment. Similarly, they are bound by the law that protects
them. Double standards are clearly unacceptable. If national law (or, in its absence, political
action) only provides one-sided protection of business interests, international standards have
to step in.
Developments in international law
I will not go into this much because it is going to be dealt with in a separate working session
but I’d like to point out the strong implications of the UN Norms on the Responsibilities of
Transnational Corporations and Other Business Enterprises with Regard to Human Rights
adopted in August 2003. They provide general provisions19 on implementation which include
periodical reports on implementation of the Norms in the company rules of internal operation,
internal evaluations on the impact of operations on the Norms, external monitoring, and
reparations (where the Norms should be dealt with by national courts and/or international
tribunals). It remains to be seen how these Norms can be used to have a greater impact on
companies’ CSR activities. Evidently, they have been rather unfriendly received by the
business community.
Conclusions
18
International Council on Human Rights, Beyond Voluntarism. Human Rights and the developing international legal
obligations of companies (2002), p.20.
19 Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human
Rights, U.N. Doc. E/CN.4/Sub.2/2003/12/Rev.2 (2003), paras 15-18.
4
The Worldbank has conducted extensive research on the impact of CSR20 and concludes that
“the contemporary CSR agenda is relatively immature in all countries. Despite widespread
rhetoric, impact is still patchy; in practice, many companies’ implementation is shallow and
fragmented.”21
In a similar vein, Christian Aid says that “[v]oluntary approaches can only ever address
company behaviour in a partial and non-sustainable way. Market forces will push some
companies towards more responsible practices, while others will take advantage of this to
undercut them.”22
This bottom line is reflected by the various approaches to monitoring CSR. Whereas some
good practice models, in particular for labour rights monitoring have emerged, there has been
little concerted effort to a more systematic monitoring of CSR.
The aforementioned “patchwork picture” of CSR makes an informed judgement on its
effectiveness close to impossible. This will not, however, divert resources from CSR activities
and hamper CSR from developing further. Corporate reputation is still a highly demanded and
fragile commodity.
From the point of view of human rights, it is foreseeable that international law will in due
time conquer company reluctance to take responsibility. Here, time seems not to be on the
side of business. The sign posts show the way from corporate social responsibility to
corporate social accountability. In the meantime though, willing businesses and civil society
should try to find a common road to make CSR more effective.
20
World Bank, Company Codes of Conduct and International Standards: An Analytical Comparison, Part I and II (2003);
Strengthening Implementation of Corporate Social Responsibility in Global Supply Chains (2003); all reports available under
http://www.worldbank.org/privatesector/csr.
21 http://www.worldbank.org/privatesector/csr.
22 Supra note 2, p.19.
5