Corporate Social Responsibility and Codes of Conduct
Corporate Social Responsibility and Codes of Conduct: Interviews for McKinsey Corporate Responsibility Project
Father Oliver Williams recently participated in one of several interviews that McKinsey and Company recently conducted on corporate social responsibility. Listed below is a summary of some of the views expressed in the interviews. McKinsey and Company has been working with a charitable foundation to explore the role it might play in supporting efforts to promote corporate responsibility in the developing world. They explored the potential of a corporate responsibility system – including a code of conduct and associated reporting/verification processes – to positively affect corporations’ behavior. The team’s research and analysis include a large number of interviews. In an effort to further promote the dialogue around corporate responsibility, they compiled the following summary of some of the views expressed in the interviews.
McKinsey and Company conducted 55 interviews of 21 major corporations, 14 interest groups, and 20 code experts and corporate responsibility initiative representatives. The interviewees were not selected from a broad cross sample of companies or interest groups, and should not be viewed as representative of either corporate or interest groups’ views.
Areas of Consensus
There was widespread consensus on a number of areas related to corporate responsibility, including the need to address problems associated with corporate involvement in the developing world, the ability for changes in corporate behavior to address these problems, and the potential for certain practices to positively influence corporations’ behavior.
There was broad consensus that globalization and the growing involvement of corporations in developing countries was associated with problems that should be addressed. These problems fall into three broad categories: labor and related human rights issues, environmental issues, and societal issues.
Problems identified by labor groups included unsafe and unhealthy working conditions, use of child labor or forced labor, worker discrimination and harassment, lack of right to free association and collective bargaining, and unfair wages.
Environmental problems identified included point-source pollution, ecosystem destruction, climate change, energy conservation, and sustainable development.
Societal problems included issues related to interactions with private security forces, support of repressive regimes, and lack of respect for rule of law (e.g. bribery).
While company interviewees and experts acknowledged that these are prominent issues and should be addressed, many also pointed to the benefits of jobs created by multinationals, which are typically better paying than other job opportunities.
Though there is debate over the significance of the identified problems, most agreed that these problems fall within the sphere of influence of corporations. Though many of these problems occur at local suppliers’ factories rather than at the facilities of multinational corporations, most companies were cautiously optimistic about their ability to influence the behavior of their suppliers.
Finally, there was broad agreement that corporate behavior could be positively influenced through external reporting and transparency on social responsibility issues, dialogue and best practice sharing among corporations, and the adoption of internal management systems to monitor and proactively ensure compliance.
Areas of Disagreement
The magnitude of the potential impact of a global corporate responsibility system and how such a system would be implemented was a more contentious issue. There was disagreement on three issues: the usefulness of a dominant global corporate responsibility system, the value of significant NGO involvement in such a system, and the need for independent monitoring and verification of corporate conduct within such a system.
Many interviewees suggested that the emergence of one global corporate responsibility system as the “gold standard” would improve overall corporate responsibility, while others maintained that improvement should come through other avenues, such as internal company initiatives or systems specific to one sector of locale.
Some company interviewees in favor of a “gold standard” system said that they would welcome such a system because it would simplify the many reporting and compliance demands they currently face and would confer credibility of the company’s good intentions to several parties.
Many experts and activists also argued that a global corporate responsibility system would be a detriment to the landscape of initiatives to improve corporate responsibility.
Several interviewees suggested that one set of standards applied globally imposes the values and practices of developed countries onto less developed countries – a form of cultural imperialism.
Others felt cross-sectoral codes would, by necessity, remain vague and therefore lack impact.
Still others questioned the notion that any voluntary system could improve the behavior of corporations, suggesting that those companies that joined would already be the most responsible ones anyway.
Several interviewees suggested that a global corporate responsibility system could be effective if it incorporated locally defined standards by industry and region. This would maintain the brand name benefits of a global corporate responsibility system while mitigating the charges that it is culturally imperialistic or too vague to have impact.
The role of NGOs was another area of contention. Though most experts and interest groups believed significant NGO involvement was crucial to any successful corporate responsibility system, some (but not all) companies disagreed about the value of NGO involvement, questioned their agendas and level of expertise in any given sector, and were wary of working too closely with them.
Company representatives also expressed conflicting views on the acceptability of independent verification and monitoring within a corporate responsibility system. Activists and experts are agreed on the importance of independent monitoring and verification, but some (though not all) corporations disagreed on its necessity and on their willingness to join a system that includes it.
The interviews suggest that a corporate responsibility system could address labor, environmental and societal issues in developing countries by affecting the behavior of corporations and creating beneficial dialogue amongst corporations and various stakeholders. The interviews suggest that the largest obstacle to implementation of a system that is credible is the disagreement over independent monitoring and verification.