Corporate Social
Responsibility
Statements and false
advertising laws
26 September 2008
John Southalan
Rio Tinto Research/Teaching Fellow
Overview
Reflections on the environmental -vsocial tension within CSR, and
international aspects
 Regulation of CSR statements
 CSR statements and false advertising
laws.
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Environment -v- social
tensions
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To date, CSR regulation and CSR reporting has been
more on environmental rather than social aspects.
Environmental aspects are often easier to deal with
because: economic convergence, more readily
measurable and 'treatable', greater consensus.
Have been occasional disputes where social and
environmental ends conflict, but largely glossed over.
This leaves it to be addressed in future.
Starting to see in concepts of 'sustainable markets‘
(Borregaard & Dufey 2005) and 'responsible
competitiveness‘ (Zadek 2006) - looking at wider
factors than just one company or metric.
International aspects
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One aspect of a 'wider' perspective: appreciating the
different conditions in different countries.
A 2007 study of CSR across many different countries
identified four key determinants of 'corporate social
and environmental responsibility': public corruption,
economic development, and political and economic
freedoms (Baughn & o'rs 2007).
This is not surprising - where a country’s population
has spending capacity and its regulation allows, it is
more likely to be an environment that will encourage
firms' CSR behaviour. CSR is more likely to be
effective.
Useful to look at the disparities, which question the
universal applicability of much CSR analysis and
standards.
Public corruption: Latin
American & OECD countries
10
low
corruption
9
8
7
6
5
4
3
2
1
high
corruption
0
Public corruption: Latin
American & OECD countries
low
corruption
high
corruption
Per capita GDP (PPP
adjusted): Latin American &
OECD countries
70000
rich
60000
50000
Brazil
poor
United States
10000
Mexico
Australia
20000
Canada
30000
United Kingdom
40000
0
0
10
20
30
40
50
60
70
80
90
100
Regulation of CSR
statements
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The development of regulation for CSR is a long and
slow thing, but there is scope for false advertising laws to
control some aspects while the broader picture develops.
CSR statements = material produced about CSR
aspects of business (eg. annual report, press release,
product advertising, industry promotion).
Most obvious current form of CSR statements is CSR
reporting. Reporting has historically focussed on
environmental issues, and is more about stakeholder
management than stakeholder engagement (Hess &
Dunfee 2007). What can/should regulation do to
address?
Caution against fixation on reporting overshadowing
actual operations. 'Sustainability reporting...is becoming
one of the basic criteria for judging the social
responsibility of organisations' (Aust Govt 2005) - I hope
not!
False advertising laws - intro
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Australia has a nation-wide 'false advertising' law. Prohibits activity in
business that 'is misleading or deceptive or is likely to mislead or deceive'
(TPA 1975, s52).
This applies to statements as well as actions, and has been applied to
CSR statements (examples follow).
Wide scope of law:
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no need for 'intention' (eg. even where the party acted honestly and reasonably
and did not mean to deceive);
silence can be misleading, as can partial disclosure (the circumstances and
parties' dealings may make it misleading to withhold certain information);
disclaimers/limitations have limited affect in avoiding liability; and
covers representations about the future, or predicted results.
Anyone can bring claim against misleading/deceptive statements (incl.
government regulator, competitors, customers, the public, and community
groups - even where the party making the complaint has not suffered any
loss because of the statement).
Broad range of remedies (incl. compensation, injunctions, order corrective
advertising, order refunds, fines in some circumstances - not for s52
alone).
False advertising laws – eg’s
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Examples relevant to CSR field:
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advertisements for a carbon-neutral car, biodegradable plastic bags, and
claims of an 'environmentally friendly' air conditioner for 'a new ozone era keeping the world green';
production of a timber industry-promoting film by the government and a
group of firms (law does cover, but this was not relevantly misleading),
tobacco industry advertisements promoting the industry in general (rather
than any particular firm or product),
even statements of someone not involved in business who seeks to
encourage others to do business with a particular firm.
can strengthen use of non-binding standards and codes, eg. misuse of
labelling.
Similar in the UK. In August 2008, Shell’s breach of advertising code in
advertisements promoting Shell’s sustainable approach in connection
with north American oil sands and refinery projects. The advertisement's
content and use of the word 'sustainable' implied an environmental
priority which the projects were not shown to have.
Conclusions
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These decisions do not prevent firms from promoting
their CSR initiatives for commercial advantage, but
simply require that CSR statements must be accurate.
Companies have breached the law when they cannot
substantiate their claims.
In various jurisdictions, the authorities have warned
against the use of vague terms like 'green',
'sustainable', 'environmentally friendly' etc because
these can risk misleading consumers and thereby
breach the law (eg. Aust Govt 2008, UK Govt 2003,
EC 2000).
Applicability to other jurisdictions depends on their
structures and resources (eg. problems in US because
of constitutional provisions in relation to ‘free speech’).
Has been more useful in environmental aspects (rather
then social).
References
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Aust Govt, 2008. Australian Competition and Consumer Commission, Greenmarketing and the Trade
Practices Act. Available
<www.accc.gov.au/content/item.phtml?itemId=815763&nodeId=69646a6d15e7958a41b40ab5848c6968&f
n=Green%20marketing%20and%20the%20Trade%20Practices%20Act.pdf> 3 May 2008
Baughn, C & ors, 2007. Corporate Social And Environmental Responsibility In Asian Countries And Other
Geographical Regions. 14 Corp. Soc. Responsib. Environ. Mgmt 189–205.
Borregaard, N & Dufey, A, 2005. Challenging preconceptions about trade in sustainable products: Towards
win-win-win for developing countries. November 2005, Sustainable Markets Discussion Paper Number 1.
Available <www.iied.org/pubs/pdfs/15500IIED.pdf> 13 September 2008.
EC, 2000. European Commission, Guidelines for Making and Assessing Environmental Claims,
Directorate-General Health & Consumer Protection, Report No. 67/94/22/1/0028, December 2000.
Available <http://ec.europa.eu/consumers/cons_safe/news/green/guidelines_en.pdf> 16 September 2008.
Hess, D & Dunfee, T, 2007. The Kasky-Nike Threat to Corporate Social Reporting: Implementing a
Standard of Optimal Truthful Disclosure as a Solution. 17(1) Business Ethics Quarterly 5-32. Available
<http://webuser.bus.umich.edu/dwhess/Hess%20and%20Dunfee%202007%20Kasky%20Nike.pdf> 17
September 2008.
TPA 1975. Legislation of the Australian Parliament, Trade Practices Act 1974. Available
<www.austlii.edu.au/au/legis/cth/consol_act/tpa1974149/> 22 September 2008.
UK Govt, 2003. Department for Environment, Food and Rural Affairs, Green Claims – Practical Guidance:
How To Make A Good Environmental Claim, November 2003. Available
<www.defra.gov.uk/environment/consumerprod/pdf/genericguide.pdf> 4 September 2008.
Zadek, S, 2006. Responsible competitiveness: reshaping global markets through responsible business
practices. 6(4) Corporate Governance 334-348. Available <www.corporateresponsibility.org/module_images/corporateabuse_discussionpaper.pdf>12 September 2008.