All Party Parliamentary Group on Corporate Social Responsibility: 1 July 2002

Submission by Sir Geoffrey Chandler, Founder-Chair, Amnesty International UK Business Group 1991-2001 and former senior executive Royal Dutch/Shell Group

I start with the presumption that the market economy is a good thing and essential to democracy and that economic globalisation should be of benefit to the world. I believe neither are sustainable as currently practised. If we want to preserve the market economy we need radical change in business thinking and practice. And if we want to retain the benefits of globalisation we need to eliminate the collateral damage that it currently inflicts.

In this, companies have greater unfulfilled potential for improving the situation than any other sector of society. It is unfulfilled because most companies have yet to recognise the totality of their responsibilities.

A company's responsibilities to society encompass a spectrum - from the profitable provision of quality products or services to the principled treatment of all its stakeholders. (Stakeholders are those who contribute to a company's success - shareholders, employees, contractors, suppliers, customers - and those affected by its social and physical impact).

If the now popular concept of 'corporate social responsibility' (CSR) were to embrace this whole, then it would be of value. But it has so far not been helpful. It implies less than this whole, suggesting an optional 'add-on', and suffers from a debilitating variety of definitions. These definitions appear to be crystallising into meaning philanthropy or community development - something extraneous or additional to the core responsibilities of a company.. If this is all that CSR implies, then it is wholly inadequate. Philanthropy and community development are important and have long been part of any successful company's activity, but they are by definition voluntary, will be haphazard in their take-up by the corporate world as a whole, and have no clear parameters against which stakeholders or the market can judge relative performance. They may well be subject to the fluctuations of individual company fortunes. CSR, if so defined, is no substitute for the application of principles to the totality of a company's direct and indirect impact wherever it works. Any benefit CSR may have will be dwarfed by the potential environmental and social costs of a company which lacks such principles.

The most important point I have to make is that companies can do infinitely more to make a better world and better context for themselves through the application of international values to the totality of their operations - this being their direct and legitimate responsibility - than through any voluntary activity or philanthropy external to those operations.

CSR will be largely cosmetic if there is no commitment to labour conditions based on acceptable standards for a company's own employees and its supply chains, if there is no acceptance of responsibility for the environmental and human rights impact of its operations, if there is no monitoring and reporting on that impact as rigorous in principle as reporting on money.

Relevant values do not have to be invented. They already exist in the international framework of values and principles set out in the United Nations Universal Declaration of Human Rights, the Convention on the Rights of the Child, and the core conventions of the International Labour Organisation. It is on these that a few leading companies today base their own principles and codes of conduct.

We need common standards. It is therefore important that the UN Sub-Commission on the Promotion and Protection of Human Rights is currently drafting Human Rights Principles for Business based on these accepted international norms. Among the plethora of external codes today, this is the only truly comprehensive document, covering the whole of a company's responsibilities, and provides a template against which companies can shape their own codes of practice.

It is, like other codes, essentially voluntary. We know from history that exclusive reliance on voluntary action by companies has in the past failed to bring about the changes required by society and that law and regulation have been needed to do this. But international regulation and any mandatory imposition of international standards are a long way off. We need to seek other ways of stimulating corporate response. The challenge is to produce a regulatory framework which does not burden companies unnecessarily, but provides an incentive for them to respond to what society is asking. We need to make the market - the most potent influence of all - operate on a broader range of issues than money alone which is essentially short term. Disclosure and systematic reporting on the full impact of a company's operations, not just its financial results, would enable the market to judge issues vital in the longer term to the company's own success and survival and to the interests of society.

The prospective reform of UK company law reform provides an opportunity to make such disclosure and such reporting mandatory. This would be of benefit to the better performing companies, enabling the market and the public to reward their performance and diminishing the threat of undercutting by the worse performers.

I respectfully recommend to this Group, first, that it uses the UN Draft Fundamental Principles as a blueprint for its definition of CSR and, secondly, that it uses its influence to encourage a reformed UK company law which enforces disclosure and reporting across the totality of a company's operations.

Companies daily touch individual lives more intimately and continuously than government. Past experience has shown that without principles covering the whole of a company's responsibilities, damage is done to people, to their social and physical environment, and to the company's reputation.

If CSR is defined as the responsibility of a company for the totality of its impact, then I believe the prevalence of the phrase will prove of value in providing the necessary foundation for the future success of individual companies and for the survival of capitalism. As an optional add-on, it will do nothing to help transform the situation or change the public view that profit is put before principle.

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