Corporate Social Responsibility (CSR)

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MHCi MONTHLY FEATURE: 

January 2003 

Corporate Social Responsibility and Some Labour Issues

 
Abstract:  Labour issues are much wider than purely human resource concerns as they step into global development issues.  This feature looks at the ILO’s Core Labour Standards and how they have been used as a foundation for CSR application by the Global Reporting Initiative, by the Ethical Trading Initiative, by the EU and by the UN Global Compact.  Following a brief examination of each, one can ask whether companies should really bother about any of these.  And should you?

 

1. CSR is more than Human Resource ManagementCSR is essentially about treating its stakeholders decently.  Of the many stakeholders in a corporation a key stakeholder is its employees.  With the increased attention given to CSR these days does this mean that human resources are now a concern of the CSR department?  Yes and no is the quick response.  Many CSR concerns have been focused upon such issues as child labour, conditions of work, employee rights, living wages, sweat shop labour and so on.  Although these are not new concerns for companies, many have been either swept under the carpet or have not been a major concern of HR departments at least until recently. There are wider concerns too and not only with the vexed issue of top executive’s pay and benefits.  For example, one analyst from an investment bank wrote to me that these days corporates are asking what they need to do to satisfy investors and whether they are handling corporate social responsibility issues adequately.  “And it isn't just ethical investors. Large, global investors like Standard Life are asking questions about CSR as part of their mainstream investment process in order to evaluate company management and competitiveness. In my view people management issues are always key to company success, and I always ask about them.  Corporates are very interested in what information large institutional investors are looking for about how they manage labour issues[1].”

2. Global Instruments

Additional pressure is directed at companies through such instruments as the UN’s Global Compact, the Global Reporting Initiative (GRI), SA8000, the EU’s European Action Framework for CSR, AA1000 and the Ethical Trading Initiative of the UK Government to name but a few of the most prominent ones.  All refer in some way to the ILO labour standards and therein lies a problem.  This is simply because the ILO labour standards have been aimed at countries and to be enforced by Governments and have not been directed at companies. The ILO’s Governing Body have identified eight Conventions as fundamental to the rights of human beings at work and these are sometimes referred to as the ILO core labour standards[2].  They are:
  1. Freedom of Association and Protection of the Right to Organise Convention, 1948  (No. 87)
  2. Right to Organise and Collective Bargaining Convention, 1949 (No. 98)
  3. Forced Labour Convention , 1930 (No.29)
  4. Abolition of Forced Labour Convention, 1957 (No. 105)
  5. Minimum Age Convention, 1973 (No. 138)
  6. Worst forms of Child Labour Convention, 1999 (No 182)
  7. Equal Remuneration Convention, 1951 (No. 100)
  8. Discrimination (Employment and Occupation) Convention, 1958 (No. 111)
It can be seen that some of these conventions date from the early part of the last century and that the ILO has been quite busy in developing nearly 200 conventions on labour.  Do all countries observe these?  The procedure is not quite that straightforward.  A country can ratify some or all of these conventions, then an expert group makes some comments on what the country has done (these are published very usefully on the ILO website), then what?  Well some countries pass the conventions into their own domestic law but there is no obligation for them to do so.  Nor if they ratify and completely ignore what they have ratified are they punished through any legal way – it is not only banana republics, France is as guilty as many of ratifying and ignoring. 3. Relevance of core ILO standards for business But, for the purposes of this article, what relevance do the Core Labour Standards (CLS) have for companies?  Obviously there are many aspects of each of the CLS that companies can observe although no detailed revision of these codes have been made for companies.  Hence, just taking one statement from the CLS almost at random we read such things as:   The illegal exaction of forced or compulsory labour shall be punishable as a penal offence, and it shall be an obligation on any Member ratifying this convention to ensure that the penalties imposed by law are really adequate and are strictly enforced.  [ILO Forced Labour Convention No.29, Article 25]Clearly this statement suggests that CLS, right now, hardly apply to companies, at least in this form!

4. Global Reporting Initiative

The proponents of CSR and labour refer to ILO CLS in a variety of ways.  For instance, the GRI has a complex approach to employment and labour issues which is not necessarily a bad thing since the issue is complex.  Through its consultative process[3], GRI has selected indicators by identifying key performance aspects surrounding labour practices, human rights, and broader issues affecting consumers, community, and other stakeholders in society. GRI states that[4] “specific aspects for labour practices and human rights performance are based mainly on internationally recognised standards such as the Conventions of the International Labour Organisation (ILO) and international instruments such as the United Nations Universal Declaration of Human Rights. In particular, the labour practices and human rights indicators have drawn heavily on the ILO Tripartite Declaration Concerning Multinational Enterprises and Social Policy, and the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, which were deemed most relevant to the responsibilities of business during the GRI consultative process.”  So the GRI has not fallen into the trap of blindly following the ILO CLS.

5. Ethical Trading Initiative

Nor has the Ethical Trading Initiative, strongly promoted at one time by the UK Government, which statesETI member companies agree to adopt or incorporate our Base Code, and must require that their suppliers meet the provisions of that Code within a reasonable timeframe.  The ETI Base Code was the result of negotiations between trade unions, NGOs and business in 1998. It is based on Conventions of the ILO.”

6. EU White Paper

However, the same cannot be said of the EU which states in its White Paper on CSR[5] “the need to ensure the respect for core labour standards in the context of globalisation…and the universality of core labour standards and the need for codes of conduct to integrate the ILO fundamental Conventions.”  The  Commission proposes to build its strategy to promote CSR on a number of principles.  These are as follows:
  • recognition of voluntary nature of CSR;
  • need for credibility and transparency of CSR practices;
  • focus on activities where Community involvement adds value;
  • balanced and all-encompassing approach to CSR, including economic, social and environmental issues as well as consumer interests;
  • attention to the needs and characteristics of SMEs;
  • support and compatibility with existing international agreements and instruments (ILO core labour standards, OECD guidelines for multinational enterprises).
Surprisingly, the EU does not stop at the corporate world since it also wished to impose CLS on small and medium enterprises: “….and promote SMEs proactive policies, in particular in the fields of core labour standards” and finally sweeps on all who deal with the third world when it states: “CSR benchmarks should build upon core values and take their starting point in international agreed instruments such as ILO core labour standards that should constitute a minimum baseline for such schemes. This includes encouraging respect for core labour standards, since this forms a necessary underpinning for successful CSR activity by companies investing in developing countries.”  Looks to me as if the EU should go back to the drawing board and better define how they intend to apply CLS.
7. UN Global Compact
The UN Global Compact is a little more circumspect when treating CLS[6].  It draws upon ILO CLS but restates them into four principles:
  1. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
  2. the elimination of all forms of forced and compulsory labour;
  3. the effective abolition of child labour;
  4.  eliminate discrimination in respect of employment and occupation.
 Yet clarity is not forthcoming when they state: “The four labour principles of the Global Compact draw on the International Labour Organisation's (ILO) Declaration on Fundamental Principles and Rights at Work, which was adopted at the 86th International Labour Conference in 1998,”  continuing  wisely, albeit elusively, with “the challenge for business is to take these universally accepted values and apply them at the company level”.   It then maps out each of the four principles and identifies a number of suggested actions that a company can take.  For instance, for forced labour it advises:
  • Develop and make available to all employees, employment contracts stating the terms and conditions of service, the voluntary nature of employment, the freedom to leave (including the appropriate procedures) and any penalties that may be associated with a departure or cessation of work;
  • Develop additional training for staff, working towards the development of systems that allow for the review and revision of practice where necessary;
  • Investigate the opportunities to work outside company facilities and co-operate with other business, up and down the supply chain;
  • Use industry forums to develop solutions for workers removed from forced labour, for example, through micro-credit schemes.
8. Concluding Remarks
Labour issues are much wider than purely human resource concerns as they step into global development issues.  One can ask whether companies should really bother about any of these.  But, perhaps more appropriately, there is a need to see what are the essential items where companies can operate while treating labour responsibly and what should be more the concern of the Government.  None of the instruments referred to have considered this but some, at least, have started to realize that blindly applying ILO core labour standards is not the way to move ahead.
									[Contributed by Michael Hopkins, Director and Partner, MHC International Ltd with comments from			
			
									 Ivor Hopkins. A longer version of this paper was presented at an ILO expert group meeting on the 			
			
									social impact of globalisation, ILO, Geneva, Feb., 2003] 			
			

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[1] Julie McDowell, SRI Research Manager, Standard Life Investments

[2] ILO: “The ILO’s Fundamental Conventions”, (Geneva, 2002) and see www.ilo.org

[3] the author was part of that team

[4] See the GRI principles on their website www.globalreporting.org

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