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Agenda
1. Definition of terms CSR, CR, CS, etc 2. CSR V. CS Synonymous or Distinctive Terms 3. Legal Concept of Corporate Sustainability 4. Legal Rules and Principles of Corporate Sustainability 5. Highlights of Judicial approaches in Development Vs. Environment cases
Olawale Ajai, PhD, Lagos Business School/Pan African 2
Definitions
The following elements are significant: Materiality of impact of companys affairs on society and environment; Distinction between philanthropy and core business activities; Emphasis on CSR activities undertaken voluntarily and not legally compelled (note that the ISO working definition includes lawabidingness as integral to CSR). Ideological attempts to widen or narrow the boundaries of the concept or to deflect negative neuro-linguisitic public communication stereotypes. Using CSR and CS as synonyms on the premise that sustainable development is the imperative objective of CSR activities
Synonyms or what?
It appears from the selective list of definitions that CSR and CS are not exactly identical. CS seems to concentrate more on the impact of a company on its environment and vice-versa, whilst CSR seems to focus on the benevolent and beneficial activities of the company to society, although some definitions interchange the terms indiscriminately. In essence there is the idea that CSR is focused on stakeholder benefit/equity considerations primarily, whilst CS is focused primarily on fostering socio-economic development, albeit on terms of social equity.
Olawale Ajai, PhD, Lagos Business School/Pan African 4
humpty dumpty
Like Humpty Dumpty many commentators have chosen to treat CSR, CR and CS as synonyms. It has been said that CR evolved because businesses were uncomfortable with the Social in CSR and that CS evolved because it is less emotive and deflects the rabble-rousing passions of the term CSR. It has also been well said that CSR takes on a different hue and focus depending on the country and region, its history and ideology and that there is little practical reason in insisting on ONE definition so long as the general sentiment of holding corporate power in check and bending it creatively to the service of society is maintained. .
..dumpty humpty
Another perspective is that there has been an evolution of the concept such that CSR is now identified with current concerns about climate change, global warming, conservation of biodiversity, etc., and the concept of sustainable development which from the notion of inter-generational equity includes the Human rights concerns of social equity in the globalized socioeconomy. Whatever, the case may be whether you call it Corporate Governance, CSR or CS it seems unhelpful that one concept is referred to by several terms.
Inter-generational equity
There is a more critical point, however, in that CS is generally defined by reference to the notion of inter-generational equity between present and future shareholders and stakeholders of companies. This suggests that there may be a distinct character to the concept of CS after all. The implication of this notion is that corporate law can and should be Greened. What is the distinctive character of CS and how Green is corporate law now?
Olawale Ajai, PhD, Lagos Business School/Pan African 7
elements
Frugality & thrift - requires: that cost be reduced by eliminating waste and that inputs, production and management processes, design of product and services and their disposal ecoefficiency; that externalities be internalized; that profits be optimized and be conservatively apportioned in compensation and dividend practices in favor of strategic savings for the rainy day ( building up healthy reserves) as a buffer for inclement times or unforeseen contingencies and reparations
elements
Precautionary approach: This suggests that there is an imperative that risk management be based on conservative principles and state of the art considerations, avoiding recklessness or excessive risk-taking.
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elements
Polluter pays principle: Shows up in cases where courts impose absolute liability for highly hazardous activities, even in tort law.
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elements
Meaningful participation and long term engagement: Sustainable development tends to be incremental and long term in scope and gestation. Therefore, ad hoc and uncoordinated acts of corporate philanthropy are too scattershot, immaterial and amount to a pin in a hay stack effect that will not facilitate development. This suggests that CS activities be targeted and leverage on efforts by other stakeholders, including the subject communities themselves
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CS Hard law?
Section 172 of the Companies Act of United Kingdom, 2006 has lengthened the list of interests directors may consider in the performance of their duties beyond the traditional category of shareholder and employees interests, to the environment, consumers, suppliers and the general society, since it is permissive and not directory in character or tone. No doubt the best interests of the shareholders and the company are ultimately promoted if these matters are considered in corporate decision making. The criteria spelt out in the UK Act are an inexplicit best practice benchmark for company directors. Ignoring them by failing to install reasonable architecture and oversight processes in the company would presumptively mean that directors are in breach of their duty of care and skill to promote the success of the business, or to act in the best interest of the business. The above legal norm of corporate sustainability is further strengthened by statutory requirements for reporting of environmental or social responsibility This rule applies in countries that practice the common law where the list of concerns has not yet been explicitly extended beyond the interests of shareholders and employees
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Crafting new procedural devices to improve access to justice and to impose novel rules of environmental liability; A cost-benefit approach which appears inherently to favour the profit motive rather than the precautionary principle; Upholding accepted commercial legal standards in cases that touch upon CSR obligations of companies tending to favour the application of CSR duties by not insisting on a higher threshold for establishing CSR Obligations. Keeping a close watch on exercise of regulatory power in order to preclude abuse and egregious politicization; Keeping a close watch on protecting Businesses from egregious partisan ideology or the ideological plaintiffs; Tension between activist mindset and conservative rule constructionist mind set keeping within the boundaries of black letter law versus judicial policy/law making Materiality of impact versus blameworthiness; Protecting the national revenue base from natural resource exploitation
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Need for a positively framed explicit statutory directors duty of care towards the conservation of the environment as a matter of natural evolution, although this is now implicit as argued above. Alternative formulation to foster sustainable development may be too wide for now in view of the still evolving nature of the concept
Olawale Ajai, PhD, Lagos Business School/Pan African 17
Finally
Thank you.
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