United Nations
Commission on Sustainable Development

Background Paper


Commission on Sustainable Development      Background Paper No. 3
Sixth Session
20 April - 1 May 1998


                 RESPONSIBLE ENTREPRENEURSHIP:
              NGO PERSPECTIVES AND RECOMMENDATIONS

Non-Governmental Organization Steering Committee


1.   In June 1997, the UN General Assembly emphasized the importance of strengthening
"interaction with representatives of major groups including through greater and better use of
focused dialogue sessions and round tables."  The report specifically mentioned dialogue which
includes "input from...business and industry groups in the elaboration, promotion and sharing of
sustainable development practices and their promotion of corporate responsibility and
accountability."  The upcoming 1998 CSD Dialogue on Industry provides an important
opportunity to examine how corporate responsibility and accountability fit within the larger
framework of sustainable development.

2.   This Dialogue seeks to achieve some common understanding of a number of concepts
critical to the realization of sustainable development.  The concept of responsible
entrepreneurship, linked to Agenda 21's call for stewardship of natural resources, elicits a range of
interpretations and opinions.  In turn, the meaning of corporate responsibility and accountability
garners a wide diversity of opinion among NGOs, business and industry, trade unions,
governments and the United Nations.  In this Dialogue we hope to establish enough of a common
language to help us agree on the steps we are willing to take to go beyond words and concepts to
the way we do business.

3.   While this paper cannot adequately address the diversity of issues and concerns of this
topic, we hope to at least focus sufficient attention on some of the critical points NGOs have
raised in this process.  All the NGOs who have contributed ideas and recommendations to this
paper may not agree with all the points raised.  However, this paper is meant to begin a dialogue,
not to present the final word.


           I.  WHAT IS RESPONSIBLE ENTREPRENEURSHIP?

4.   An entrepreneur, following Webster's definition, is "one who organizes, manages, and
assumes the risks of a business or enterprise."  Ironically, environmentalists and human rights
advocates tend to criticize corporations precisely for externalizing their risks and costs, passing
these on to the environment and society.

5.   Several NGOs find the concept of responsible entrepreneurship problematic.  Six years
after Rio, many NGOs agree with our colleague from Eco News Africa who finds that "such
responsibility is not reflected in the behaviour of huge corporations, and if anything, things are
only getting worse."

6.   For the Northern Alliance for Sustainability (ANPED), responsible entrepreneurship
"could be considered a contradiction in terms when related to sustainable development," in that
for most entrepreneurs, their responsibility is to their own financial bottom line.  ANPED offers
its definition of a "responsible" entrepreneur as someone that "actively supports sustainable
development, that does not harm the environment, public health or the social fabric of society and
that allows all of society to be knowledgeable of the possible social and environmental impacts of
their practices."

7.   Many if not most NGOs agree that the widespread adherence by industry to responsible
business principles and practice depends on the degree to which they are also accountable to
society, that corporate responsibility requires accountability.  One NGO describes the notion of
corporate responsibility without accountability as like trying to run a bank without a security
guard.  In spite of all the best practices of honest customers and staff, bank managers fully
understand that it takes only a single dishonest exception to take away everyone's common
savings.  The same is true with sustainable development.


                   II.  VOLUNTARY AGREEMENTS

8.   Voluntary agreements differ dramatically according to scale of application, the parties
agreeing, the motivations and incentives driving the agreement, and how compliance is assured
and verified, in addition to the issues (e.g., labor, health, environment) at the heart of the
agreement.

9.   Agreements can be distinguished according to their scale or level of application.  They
may be:

     (a)  Company specific (e.g., Levi Strauss & Company; The Gap; Liz Claiborne;
Reebok; Phillips-Van Heusen; L.L. Bean; the Petrobas Ideas Network);

     (b)  Product or Industry specific (e.g., the CMA's Responsible Care initiative; the
White House Apparel Industry Partnership);

     (c)  Location or Community specific (e.g., Clean Clothes campaign in Bangor, Maine;
the PADE Programme for waste management in Rufisque);

     (d)  Global or National (e.g., Sullivan Principles; ICC Business Charter; OECD
Guidelines for Multinational Corporations; CERES Principles; ICCR's Principles of Global
Corporate Responsibility).

10.  There is a big difference between "closed" agreements, among companies within an
industry, and more "open" agreements, involving a broader range of employees, communities and
populations directly affected by company operations, consumers, concerned stockholders -
sometimes clustered together under the term "stakeholders".


 III.  "CLOSED" AGREEMENTS:  INTERNAL TO BUSINESS AND INDUSTRY

11.  Agenda 21 encourages business and industry to "increase self-regulation, guided by
appropriate codes, charters and initiatives integrated into all elements of business planning and
decision-making, and fostering openness and dialogue with employees and the public."  This does
NOT say that business does not need to be regulated, but that business and industry should
voluntarily operate in a socially and environmentally responsible manner.  From a business
perspective, voluntarily implementing and adhering to corporate responsibility codes can help
companies anticipate the impacts of investment or production decisions on the environment,
health and human rights - and thus avoid costly litigation, public protest, and unhappy
shareholders.

12.  From the perspective of NGOs, the value of corporate self-regulation depends on whether
or not companies make significant progress in adopting responsible practices and creating
sustainable products.  NGOs are fully aware of inevitable decision-making situations where
responsibility clashes with profitability.  Such conflicts highlight the weakness of closed voluntary
efforts, which often result in noncompliance, double standards, inadequate targets or standards,
and greenwashing.  These weaknesses obviously damage the public credibility of the agreements.

13.  "No matter how great the goodwill or sense of responsibility of a business or industry, it
cannot escape the reality that it has to remain competitive and financially viable," the South Africa
New Economics Network (SANE) points out.  "To give effect to its desire to operate responsibly,
it has to be assured that other organisations with which it is in competition do not establish an
advantage over it if they do not act in the same responsible manner."

14.  In other words, the "rules of the game" must be the same for all; there is no room for "free
riders."  Where there is a conflict between the competitive economic bottom line of the company
and adherence to legally non-binding ethical guidelines, pressure will be on management to choose
the bottom line.  Therefore, industry-based voluntary codes must be supplemented by appropriate
government regulations and enforcement as well as public access to information and community
participation in relevant company decisions.

15.  As Friends of the Earth concluded in their report on the issue, this is not an argument
"against voluntary initiatives by groups of firms or trade associations that aim to improve
environmental performance beyond compliance with regulations.  However...such schemes do
not, and cannot, represent an alternative to regulation." 


     IV.  "OPEN" AGREEMENTS:  NEGOTIATING WITH STAKEHOLDERS

16.  In contrast to the closed agreements within business and industry are those more "open"
or negotiated agreements and codes involving a wider range of parties.  NGOs and the public are
more likely to be skeptical of closed voluntary codes and agreements -- especially with no
independent monitoring and verification of compliance.  On the other hand, NGOs are more likely
to support open agreements reached through negotiations with stakeholders. 

17.  One example of a stakeholder oriented agreement is the Ethical Trading Initiative,
currently chaired by the New Economics Foundation (NEF).  This initiative, explains NEF, "is
funded by the UK government and incorporates 18 companies (mainly food and clothing retailers)
and 16 UK NGOs.  It has been established to develop common codes of conduct and approaches
to business in poorer countries, in an effort to positively impact on the well-being of employees
and their communities.  Through the process of experimentation, dialogue and negotiation, the
ETI will aim to widely endorse a set of standards and an approach to monitoring and verifying
these codes of conduct."

18.  In some cases, community-groups, consumer organizations, or NGOs may themselves
initiate a corporate code or agreement, lobbying companies to sign on as partners.  For example,
the "Maquiladora Standards of Conduct," developed in 1990 by the Coalition for Justice in the
Maquiladoras (CJM), an international coalition of environmental, religious, community, labor,
women's, and Latino organizations.1/  These standards were designed as guidelines to alleviate
acute problems created by the maquila industry along the U.S.-Mexico border.  Unfortunately, the
Maquiladoras have yet to voluntarily adopt and implement these standards, which nevertheless
serve help raise public awareness and support the workers and community organizers in Mexican
border towns. 

19.  The Interhemispheric Resource Center (IRC) describes the emergence of
stakeholder-initiated codes "as a response to the globalization of the marketplace."  According to
IRC, "consumer groups and labor organizations see codes as a way to regulate the practices of
corporations that have operations across the globe, while the companies themselves have adopted
codes to improve their corporate image and head-off damaging boycotts and bad publicity."  On
the other hand, some NGOs warn against open agreements whereby corporations specify the rules
and control the moves in the process, using the term "stakeholder" to redefine and reduce
communities, workers, and citizens to corporate constituencies in the global economy.2/   "A
prerequisite for such participative forums to work is a degree of trust between the parties," states
World Wildlife Fund-UK,3/  a trust which "has been undermined in the past by the secrecy with
which most companies have shrouded their environmental performance.  Responsible companies
should have a presumption of transparency about their operations, and work to release as much
data as possible.  This openness should be supplemented by having regular independent
environmental and social audits, drawing on input from employees and the surrounding
community." 


                  V.  CONCERNS AND CRITICISMS

20.  NGOs express concerns about both types of voluntary corporate agreements, including the
potential for greenwashing and public manipulation, wasted time, undermining of needed
legislation and regulatory efforts, weakening of monitoring and enforcement mechanisms,
divisions among NGOs, and a masking of the increasing power and influence of corporations over
civic and governmental bodies.

21.  Since the 1992 Earth Summit, the concept of  "voluntary agreements" or "self-regulation"
remains a red flag for many NGOs, as this was given to justify removing the Code of Conduct for
Transnational Corporations from the Agenda 21 negotiations.  This 17-year body of work, despite
its non-binding nature, was dismissed at Rio with the promise of a new era of responsible
business.  "The most glaring weakness at Rio was the failure to include the regulation of business,
financial institutions, and transnational corporations in Agenda 21 and other decisions," pointed
out Martin Khor of Third World Network in a speech at CSD5.4/   "If nothing else," laments
Joshua Karliner of TRAC, "the Earth Summit clarified the fact that global corporations have the
power and capacity to seriously influence the focus and trajectory of international agreements on
environment and development."5/ 

22.  Greenwashing is one obvious reason for NGOs' mistrust of corporations and concerns
about voluntary agreements.  In their book on greenwash, Greer and Bruno of Greenpeace stress
the need to look at the reality hidden beneath the green image fostered by TNCs, that "TNCs are
not saviors of the environment or of the world's poor, but remain the primary creators and
peddlers of dirty, dangerous, and unsustainable technologies.  The claims of these companies must
be scrutinized carefully and their activities and products regulated for the good of the planet and
its people."6/

23.  According to ANPED, voluntary agreements "have not worked, do not reach all
entrepreneurs, and are not participatory ... which means that they are ineffective."  As they put it,
"the road to environmental and social hell has already been paved by such `codes of conduct' and
alleged good intentions.  The only solution to this situation lies in international legally binding
regulations to ensure that responsible entrepreneurship will be the only manner in which
corporations world-wide operate." 

24.  Friends of the Earth International (FoEI) also identify fundamental problems with the
voluntary approach:7/  (1) ineffective, "because the potential motivations for compliance are
neither strong enough nor sufficiently widespread;"  (2) stifle innovation, "not only to fail to
stimulate innovation but also to tend to lock firms into existing, often short-term solutions;" (3)
undemocratic, focusing on industry's interests and definitions of the problems while leading "to
the Government effectively abdicating responsibility for whole sections of environmental policy," 
(4) lack public credibility, raising "the fear that it will serve the narrow interests of the firms
concerned rather than those of the public," and that even "industry groups themselves have
serious doubts about the voluntary approach which centre on the lack of motivation for
compliance and, in particular, the problems of free-riders." 

25.  Noting the wide gap between business and industry's promotion of voluntary codes and
NGOs' criticisms, Eco News Africa suggests that "this would be a good place to look into how far
corporations have respected codes" as well as corporate neglect of sustainable practices, "despite
previous disasters that they have helped create and despite the existence of voluntary codes." 
Research is needed to clarify the record, to identify the successes and failures, and to assess both
the problems and the potentials of the different types of voluntary agreements.  "Such an
evaluation should include the views of the civil society at large," stresses this Kenyan NGO;
"NGOs and Community-Based Organizations working in countries could work on an effective
strategy on how this could be best achieved." 


  VI.  RECOMMENDED CRITERIA FOR EFFECTIVE VOLUNTARY AGREEMENTS

26.  Given these concerns and skepticism, several NGOs believe it is still possible for voluntary
corporate codes and agreements to be designed and implemented in such a way that they
contribute positively to sustainable development.  Out of numerous discussions about what is
required for effective voluntary agreements, NGOs have identified the following:

     (a)  SUBSTANCE:  appropriate content and language (i.e., not watered down; addressing
the important issues and not minor details; not ambiguous and full of loopholes);

     (b)  INCLUSIVENESS:  active participation of appropriate stakeholders;

     (c)  MOTIVATION:  sufficient incentives to encourage voluntary compliance;

     (d)  INTEGRATION:  incorporation of the social and environmental values of the
agreement into not only the policies and operations of companies, but in the way they define and
measure success and progress;

     (e)  TRANSPARENCY:  independent monitoring of implementation;

     (f)  CREDIBILITY:  independent verification of compliance; and

     (g)  ACCOUNTABILITY:  regulatory and civic mechanisms able to impose sanctions,
penalties or other means to deal with companies that consistently behave irresponsibly.


        VII.  STRENGTHS AND LIMITS OF VOLUNTARY APPROACH

27.  Thus we begin the CSD Dialogue with a mixture of hope and skepticism, noting that
voluntary corporate codes "can be formulated as serious company policies or as public relations
gestures."8/   Overall, we find a fairly wide agreement among NGOs that corporate self-regulation
can supplement but not replace appropriate regulations and enforcement nor civic engagement
and public pressure.

28.  While companies can use voluntary codes to help improve their social and environmental
performance, as well as their relationship with local communities and civil society, the credibility
and effectiveness of these codes depends on establishing independent monitoring and verification
mechanisms and involving appropriate stakeholder groups throughout the process.  "If global
guidelines and codes lead to building partnerships among those who have a stake in the health and
well-being of communities in which they operate," says Interfaith Center on Corporate
Responsibility (ICCR), "then they can prove to be useful tools for sustainable  economic and
human development."9/


                  VIII.  REGULATORY FRAMEWORKS

29.  Both industry and public advocates complain, for different reasons, about the inadequacy
of regulatory frameworks for motivating responsible business practices.  Industry often describes
regulations as interfering with their ability to establish responsible practices.  Advocates of
regulation claim that threats of litigation and fines impel companies towards responsible behavior,
that regulation inspires voluntary responsibility.  Other critics point out that current regulations
are not always enforced, or that the substance is watered down by industry lobbyists.


            IX.  INDUSTRY PERSPECTIVES ON REGULATION

30.  On the one hand, the International Chamber of Commerce (ICC) seems to agree on the
need for certain regulations to safeguard and encourage sustainability, claiming that "business
looks to government to provide the necessary regulatory framework based on sound science, the
understanding of risk assessment and economics" - supplemented with "market-based and
voluntary approaches."  On the other hand, in the Special Bulletin prepared for CSD5, the ICC
complains that "entrepreneurial solutions to environmental problems" are blocked by  "complex
and cumbersome regulations."  In their eyes, responsible innovations are hampered by "punitive
regulations, costly and time-consuming enforcement and licensing methods,"  which have not kept
up with the "increased awareness of the complex interrelationships between man [sic] and nature." 
"Such negative approaches to regulate the environment induce even the most conscientious
enterprises to high degrees of frustration as they wait for a license or permit," explains ICC,
adding that "the resulting delays may ultimately threaten their very existence as commercial
deadlines are not met, and as capital investments lie idle."  In response, such frustrated companies
drafted the Business Charter (which in turn was promoted by ICC as their alternative to the UN
Code of Conduct for TNCs).

31.  Outside CSD, certain elements in industry and government have been secretly advancing a
different, heavy-handed strategy for dealing with frustrating regulations.  Through the
internationally binding Multilateral Agreement on Investment (MAI), companies will have the
power to legally override local and national regulations and laws if they are determined to be
obstacles to foreign investment.  As NGOs gradually learn of this "stealth agreement" they tend to
be scandalized and outraged at such an undemocratic and manipulative attack on hard-won laws
to protect the environment, health, and human rights.  Thus, five years after Rio, industry's quest
to escape accountability reaches new heights.  In turn, NGOs continue to struggle for appropriate
and effective safeguards, regulations, and access by citizens to information and liability rights.


               X.  NGO PERSPECTIVES ON REGULATION

32.  NGOs are not obsessed with burdening industry with regulations, acknowledging with
groups like  Friends of the Earth International (FoEI) that "traditional forms of regulation have
been too prescriptive and consequently the opportunity for exploiting the ability of business to
produce novel and timely solutions is constrained," that "industry is granted no discretion in how
to achieve an environmental goal." 

33.  Most NGOs readily agree that regulations are only one of many different instruments for
influencing corporate and public behavior.  As part of the input to this paper, NGOs recommend a
number of social and market-based instruments, such as shifting taxes from labor to resource
consumption and pollution,10/  instituting an international CO2 tax, taxing airplane fuel,11/ 
implementing the Tobin tax on currency speculation, phasing out damaging and unsustainable
subsidies by the year 2010,12/  committing to time-bound targets, mounting public education
campaigns. 

34.  Acknowledging that "governments have often over-stretched regulation, and barely tapped
the potential of market approaches," David Roodman of Worldwatch13/  also points to a mix of
market instruments and regulations, noting that "laws - not market forces alone - are what will
protect endangered species, manage nuclear waste, and ban pollutants that may be deemed
unacceptable in any amount, such as DDT or dioxins."  In contrast to industry arguments,
Worldwatch observes "there is remarkably little evidence that regulations have seriously
depressed the fortunes of industry, or that they have chased businesses into `pollution havens' -
countries with lax environmental rules."  Furthermore, says FoEI, "there is strong evidence that
regulation remains the primary motivation for firms to improve environmental performance."


    XI.  THE NEED FOR AN INTERNATIONAL REGULATORY FRAMEWORK

35.  Many NGOs agree with Friends of the Earth on the "need for an international regulatory
framework in respect of the monitoring and guidance of TNC activity," that since the closure of
the UN Center on Transnational Corporations, "there has been no official debate on how TNCs
should be monitored and regulated."  For ANPED, "nationally enforced regulatory frameworks
provide the only tool to hold corporations accountable and ensure that responsible
entrepreneurship includes all business."  Furthermore, regulations level the playing field,
eliminating the free rider problem by making the rules of the game the same for all.  "This way of
giving direction to business and industry," explains South African New Economics Network,
"largely removes the complex issues which they need to face if these are left entirely up to the
criteria of moral judgment and response to social pressure." 


         XII. MIXING REGULATIONS AND MARKET INCENTIVES

36.  In general, NGOs tend to call for defending and improving national and international
regulations as well as market instruments.  For example, the Taskforce on Business and Industry
(ToBI) calls for governments to "send the right message" to business -- stressing a mix of
ecological tax and subsidy reforms in combination with strengthening citizens' right to know and
liability rights to challenge irresponsible practices. 

37.  The Women in Environment and Development Organization (WEDO) also encourages
CSD6 to promote the language agreed in the Habitat Agenda, in which governments commit
themselves to "strengthening regulatory and legal frameworks to enable markets to work,
overcome market failure and facilitate independent initiative and creativity, as well as to promote
socially and environmentally responsible corporate investment and reinvestment in, and in
partnership with, local communities and to encourage a wide range of other partnerships to
finance shelter and human settlements development."

38.  To guide this mix of regulations and market incentives, minimum standards to define
responsible practices are needed.  To succeed, WWF-UK says, these standards must be "locked
into place with binding international regulation." To implement environmental and social
accounting practices across the board, international regulations and binding standards are
required.  Furthermore, such regulations and standards should be promoted by company
environmental officers and industry representatives such as the International Chamber of
Commerce and World Business Council.


  XIII.  NGO CONCERNS:  NEGLECTING THE PRECAUTIONARY PRINCIPLE

39.  In their reaffirmation of the Business Charter, the International Chamber of Commerce
explained that "business looks to government to provide the necessary regulatory framework
based on sound science, the understanding of risk assessment and economics."  This emphasis on
so-called "sound science" and risk assessment is a standard excuse made by industry to sidestep
regulatory safeguards to put controversial new products, chemical additives, genetically modified
organisms, or other questionable items on the market or in the environment -- unless science has
undeniably proven significant harm or damage.  Thus, for new chemicals or biotechnology
products, the burden of proof and risk is passed on the potential victim - not on the company to
demonstrate to the public that their intended actions are truly safe.  This is the subtle shift in
language, from precautionary "principle" to precautionary "approach."  Groups like ANPED,
ToBI and others continue to urge incorporating the precautionary principle as part of clean
production standards and regulations. 


             XIV.  NGO CONCERNS:  DOUBLE STANDARDS 

40.  This is the problem whereby companies comply with certain environmental, health and
labor standards in countries where this is legally required, but fall far short of such standards in
other countries where they have subsidiaries, suppliers, or where they relocate. "Companies rarely
relocate to take advantage of lower environmental standards, but when operating abroad often
behave in ways which they know would be totally unacceptable in their home countries," says
WWF-UK.  However, "a truly responsible company should not act in this inconsistent manner,
but aim to operate to worldwide standards."  In this regard, "companies should undertake regular
independent environmental audits of subsidiaries and major overseas suppliers," and "any variation
in environmental performance for similar processes must be explained inside the context of a
company's global responsibilities." 


                         XV.  REPORTING

41.  In last year's UNGASS report, governments agreed to encourage the "voluntary
publication" by business "of environmental and social assessments of their own activities."  The
intent is to encourage greater transparency by business and industry in providing valid and timely
information - especially about those practices having an impact on the health and well-being of
communities and the environment. 

42.  In some countries, certain types of company reports -  on campaign contributions and
lobbying expenditures, environmental impact assessments for proposed projects or developments,
and registers of toxic releases - may be legally required.  Beyond these requirements, it is up to
the companies as to what additional information they will divulge.  Indeed, for the sake of
improving their relationship and image with consumers, shareholders, government, and partners,
many companies voluntarily provide an assortment of reports about their various practices.  In
turn, NGOs pose various questions about their reporting.


           XVI.  QUESTIONS ABOUT CORPORATE REPORTING

43.  As with voluntary agreements, many NGOs are skeptical of voluntary company
self-assessments, suspicious that such self-audits and environmental reports "effectively serve to
preempt pressure on companies to open their facilities and books to independent inspectors who
could more objectively assess the environmental impacts of their operations."14/   In general,
NGOs raise a number of questions about corporate reporting, whether voluntary or required: 

     (a)  Is timely and relevant information about company practices available to the public?

     (b)  Is the information a company provides credible?

     (c)  Is it comprehensible and comparable?

     (d)  Is it actionable?  (Is the public empowered with the means to act on this information?)



 XVII.  MAKING INFORMATION AVAILABLE:  COMMUNITY RIGHT TO KNOW

44.  In response to NGO skepticism, the chemical industry with their Responsible Care
program says "don't trust us, track us."  Whereas Responsible Care companies are supposed to
conduct annual self-evaluations, "the evaluations are not available to the public," says
Greenpeace.  "Without access to information - even that generated by the company itself," they
continue, "the public does NOT have the opportunity to track the corporation any more than it
did before Responsible Care."15/   In order to effectively track companies and determine whether
they are conducting themselves in a responsible manner and causing no harm, the public needs the
necessary information.  If companies will not provide this information voluntarily, then
government needs to take the necessary steps to ensure public access.

45.  One example of information that companies are required to report to government and
which in turn are to be made available to the public, is the Toxic Release Inventory and
Community Right to Know laws (in the US) and the Pollutant Release and Transfer Registers
(PRTRs) in OECD countries.  "Citizens armed with information," observes ANPED, "empowers
them to monitor their neighbourhood polluters and takes some of the regulatory burden off
resource-strapped authorities."  Simply by making this information available to the public, claims
the OECD, PRTRs "have had a stronger impact than many regulatory programmes even though a
PRTR sets no improvement goals mandatorily."16/   What is mandatory, however, is the
reporting. 

46.  Only a small handful of countries have yet implemented and enforce community right to
know laws.  Even in these countries, the Right to Know has yet to be extended to include not just
a company's emissions, but the toxic chemicals used in the production process and in the products
themselves.  NGOs seek the extension of Right to Know to cover pesticides used and residing in
food (an issue of increasing concern regarding the impact of endocrine disrupters), as well as on
radioactive materials and genetically engineered organisms.

47.  Industry representatives typically argue against this expansion of Right to Know, using
many of the original arguments they used against reporting their toxic releases.  Companies claim
that public access to information needs to respect "certain limits," that some data must be
respected as proprietary and kept secret.  NGOs argue that "too often corporations hide behind
the mask of `commercial confidentiality' claiming that disclosure will reduce their ability to
compete."17/  

48.  A colleague from Australia suggests that to help soften the "policing nature" which
businesses may perceive of government reporting requirements, the reporting system could be
extended "to include recognition of outstanding practice through rewards such as
awards/preference given to government contracts, etc."


    XVIII.  CONCEALING INFORMATION:  CORPORATE SECRECY LAWS

49.  Moving in the opposite direction from Right to Know is a trend toward what might be
called the "corporate right to secrecy," in which "environmental audit privilege" laws are enacted
allowing companies to conceal information contained in environmental self-evaluations from
national and local enforcement and environmental agencies, the courts, and citizens.18/   Another
component of these corporate secrecy laws is the "privilege" given to regulated facilities of
"outright immunity from prosecution for companies who disclose and self-correct violations as a
result of auditing," which will "allow some lawbreakers to retain the financial fruits of their
previous disregard for the law."19/  


    XIX.  ACHIEVING CREDIBILITY:  MONITORING AND INDEPENDENT
                          VERIFICATION

50.  In order for a company or industry to establish its credibility with NGOs, more is required
than sophisticated advertising and clever public relations.  Methods and criteria need to be
established that will verify a company or industry's claims about the harmlessness of their
activities.  Whether due to gaps in information, simple errors, or overt greenwashing and
deception, there are many reasons to question the validity of company reports not verified by
reliable, independent methods.  Several NGOs clearly state their lack of trust of voluntary
programs like Responsible Care, described as "vehicles that the transnationals use to define
environmental issues on their terms"20/  and designed to "divert attention from the fundamental
environmental issue:  products such as nuclear reactors and toxic chemicals form the lifeblood of
many TNCs."21/   Even if these companies make their self-assessments available to the public,
what is necessary for them to be credible?

51.  Eco News Africa asks a critical question: "Who would establish such a means for
independent verification?"  Some NGOs, such as Germanwatch, suggest that governments,
business and green NGOs should jointly select an institute to conduct corporate monitoring.  The
Good Neighbor Project for Sustainable Industries suggest a "right to inspect," in which
community representatives and workers are entitled to accompany their own experts to inspect
problem plants.  In many places, particularly in developing countries in Africa and elsewhere, the
technical capacity for such monitoring and verification is not immediately available.  Rather than
commission outside (Northern) consultants to do the job, there is the suggestion of "building the
strength of primary stakeholders," particularly local community-groups or others who understand
the problems and are best positioned to observe a company's on-going behavior. 

52.  "Today, there is a struggle going on over the definition of independent monitoring and
who can qualify as an independent monitor," the Interfaith Center on Corporate Responsibility
(ICCR) points out.  "The pressure created by NGOs for companies to adopt independent
monitoring has created a new industry.  Accounting, auditing and consulting firms ... have moved
into the monitoring field and developed social audit instruments to measure compliance with
company codes of conduct."  While the big accounting firms may appeal to companies as credible
monitors of their behavior, these firms are less suited for on-going attention and sensitivity to the
daily labor, health and environmental violations to which local NGOs and community groups
would be more attuned.  Furthermore, since such NGOs are perceived as "not beholden to the
company," they have a credibility "which can carry weight with consumers, investors, labor,
human rights groups and the public." 

53.  One example of an NGO-business partnership to develop such an independent monitoring
and verification system is among the Gap and ICCR, Businesses for Social Responsibility, and the
National Labor Committee Education Fund in Support of Worker and Human Rights in Central
America.  In this case, the Gap responded to NGO observations of a violation of the Gap's Code
of Vendor Conduct by its maquiladora supplier in San Salvador.  By February 1996, the
Independent Monitoring Group of El Salvador (IMGES) was formed, a result of consultations
and negotiations with factory workers and managers, local and international NGOs, religious and
business groups to develop appropriate independent monitoring methods.  In March 1996, a
historic resolution was signed pledging all parties to focus on improving worker-management
relations, rehiring former union leaders and giving total access by NGOs to the plant to monitor
the factory's operations.  A year from that date, the IMGES issued a public report on its work,
stating that all points in the resolution had been fulfilled. 

54.  While this example may not be a model for all independent verification situations, it is one
positive example of a process in which a company gives up some of its control and trusts in the
integrity of an equal partnership with the community and NGOs to reach a solution to a volatile
human rights situation.  Such an example might be contrasted with the disastrous experience of
Royal Dutch Shell with the Ogonis in Nigeria. 


 XX.  SOCIAL AND ENVIRONMENTAL AUDITS AND SCREENS: MAKING THEM
                           MEANINGFUL

55.  There is also the need of mechanisms ensuring company self-audits and monitoring reports
about companies are comprehensible, comparable to some kind of appropriate standard, and that
the public has the capacity to respond in a meaningful way. 

56.  A number of organizations, such as the Council on Economic Priorities (CEP), the New
Economics Foundation, and others are working to develop appropriate auditing and screening
mechanisms to make coherent sense of company practices.  For CEP and organizations working
to promote Socially Responsible Investment (SRI), the emphasis is on developing and using
environmental and social screens by which to gauge the degree to which a company is acting in an
environmentally and socially responsible manner.  Such screens are useful to concerned investors
who want to be sure they are not investing in enterprises which are causing harm.  Groups such as
the Institute of Social and Ethical AccountAbility promote "best practices in social and ethical
accounting and auditing" and is working to "develop standards and accreditation procedures" for
professional social auditors. 

57.  In general, available and timely data about company behavior is worthless if it is not easily
accessible, understandable and comparable to some kind of standard or criteria.   Special training,
technical assistance and software may be needed to allow public interest groups to access and
apply this data to their work in monitoring the effects of companies on their community. 

58.  In the European Community, the UNECE Convention on Access to Environmental
Information and Public Participation in Environmental Decision-Making is now being negotiated,
with NGOs trying "to strengthen the role of the public as an environmental watchdog."  Among
European NGOs' concerns with the Convention include "excessively long time limits ... proposed
for responding to information requests from the public," and that "information should be provided
in the form requested, where available, and certain data placed on the Internet."  European ECO
Forum members also stress the importance of making information not only available, accessible,
and credible, but that it be actionable - that they can use it for meaningful public responses to
environmental problems.  In particular, they argue that the UNECE Convention on Public
Participation "needs to provide not only the right to complain about infringements of the
Convention, but also the right to sue both public and private bodies for breach of environmental
laws in general."

59.  In general, right to know and public participation laws need to be developed not just in the
US and Europe, but in all regions.  Technologies and methodologies, including information and
legal systems, to establish public access to information and participation should be considered part
of the discussion about technology transfer to developing countries.  In some countries and
locales, citizens do not even know they have a right to information about the company practices
that affect them.  Furthermore, efforts to provide access to information, participation in decision
making and access to justice should be gender sensitive and account for the needs of women.


            XXI.  THE NEED TO PROTECT WHISTLEBLOWERS

60.  One traditional type of nongovernmental monitoring and reporting which requires
governmental protection and public support is company "whistleblowing" - whereby employees
within a company "blow the whistle" on harmful, dangerous or illegal company practices, which
otherwise would remain unknown to the public or government agencies.  However, such
employee watchdog activities can easily earn demotion, dismissal or other punishment without
legal protection by government and a supportive public.  Such protection needs to be provided in
all countries.

61.  Despite national whistleblower protection laws, workers may be pressured by various
"marginally legal" methods to discourage disclosure of embarrassing or costly secrets. 
Furthermore, warns the Good Neighbor Project for Sustainable Industries, efforts are being made
to enact anti-whistleblower provisions into environmental audit laws, which "actually authorize
corporations to bring liability suits against employees who disclose hazards identified in 'audits'." 
Therefore, in addition to having the capacity to challenge such provisions in court and
legislatures/parliaments, communities and workers "need expanded rights and opportunities to
ensure responsive action on identified hazards." 


                      XXII.  PARTNERSHIPS

62.  As UNIDO recently observed, "relatively few companies have successfully integrated
sustainability requirements into their overall corporate strategy and even fewer have made a
commitment to follow through in the absence of stringent regulations.  Today's challenge is to
stimulate businesses to take this step."22/   As to partnerships between businesses and NGOs, it
comes as no surprise that there is much mutual suspicion as well as differences in priorities and
worldviews.  Many NGOs are especially disturbed by the behavior of industry lobbies to kill
environmental legislation or water down agreements, as in the Kyoto climate change hearings,
which offer "disturbing examples of this lack of responsibility presented by the large oil companies
and car manufacturers in the US as they financed a multi-million dollar dis-information campaign
to undermine the climate change treaty negotiations."23/


        XXIII.  WHAT KIND OF PARTNERSHIPS ARE POSSIBLE?

63.  A number of different kinds of partnerships among NGOs, businesses, government and
trade unions are possible and are continually being created.  There are numerous examples and
configurations from the neighborhood to the global level.  We will undoubtedly hear about many
of these examples between now and the Dialogue in April.  Some of these will be inspiring models
which we may wish to promote or attempt to emulate, such as Clean Clothes Campaign in
Bangor, Maine or the examples Malick Gaye of ENDA gives of entrepreneurial citizens working
to build the local economy and community democracy by finding innovative, grassroots solutions
to provide local services.  Other examples, such as the Brent Sparr incident, the legacy of Bhopal,
the failure of the finance industry to curb irresponsible global currency speculation, or the
aggressive industry lobbying against the climate change treaty, we may wish to hold up to better
understand some of the problems we are up against.

64.  "The NGOs are being bamboozled by the UN and the corporations," David Korten warns. 
"We are given just enough opportunity to create the appearance of citizen input, but the real
action is elsewhere.  I think it is time to blow the whistle in the realization that talking to ourselves
in rooms provided by the UN has little to do with citizen participation in a democratic global
governance process."

65.  However, many NGOs continue to believe that the CSD is the exact place for NGOs
committed to sustainability to come together to form partnerships with each other and to engage
our governments, the UN, business and industry and other major groups to define our roles and
responsibilities, our obligations and our accountability to society.  Particularly in light of the
global power being granted to corporations by the industry-oriented World Trade Organization
and the Multilateral Agreement on Investment, NGOs look to the CSD as the primary
international institution where the multiple voices for sustainability have a chance to be heard. 

66.  On another level, perhaps the term "responsible entrepreneur" should be thought of not so
much in terms of companies but rather in terms of specific responsible individuals within
companies and government.  Such entrepreneurs would be those people who have personally
accepted the risks and responsibility for improving things -- even if their colleagues, staff, Board
members or superiors are not convinced.  In this case, informal, personal partnerships and
alliances among committed individuals may provide the vital levers to move reluctant companies
and industries towards more responsible policies and practices.  Thus, even if a company
continues to cling to irresponsible policies and practices, there may be a set of potential partners
within that company who are struggling to change it and who deserve to be acknowledged and
supported. 


         XXIV.  PARTNERSHIPS TO PROMOTE RESPONSIBILITY

67.  Many of the concerns and hopes raised by NGOs in this paper rest on the responsibility of
government to ensure that business behaves responsibly.  Corporations are not citizens and do not
have the right to risk the health and well-being of communities and the environment, despite their
responsibility to shareholders to seek higher revenues and financial returns.  To possess legitimacy
in the eyes of civil society, businesses must be accountable to society. 

68.  To move forward, NGOs need to make greater efforts to develop partnerships with
businesses sincerely trying to be responsible and that accept their obligations and accountability to
society.  At the same time, NGOs also need to make greater efforts to develop partnerships with
government to help define and implement accountability and public participation mechanisms, as
well as methods that will identify, encourage and ensure responsible business practices.  NGOs
also need to build stronger ties with trade unions to help protect the rights, health and well-being
of workers in all countries and companies.  Furthermore, NGOs need to take advantage of the
CSD's efforts to include NGOs and major groups more directly in dialogues and consultations
with member governments, to help build more productive relationships and mechanisms to
achieve deeper understanding and solutions to the global challenge of implementing sustainable
development. 

69.  Finally, in the words of Eco Africa News, "[the suggestions] need to be debated by all the
players who are willing to spend their time to build up good strategies and who can do some
work.  Otherwise, very often we all get together in New York, have long discussions and go back
home to the business as usual scenario."  Since our involvement in this Dialogue is to change
business as usual, it is up to us to make sure there are indeed practical outcomes.


    XXV.  NGO RECOMMENDED OUTCOMES FOR CSD6 INDUSTRY SESSION

70.  NGOs recommend for the CSD, business and industry, trade unions, and other major
groups over the coming months and years to join with NGOs to engage in the following
actions:24/ 

     (a)  FOR CSD TO SPONSOR A SYSTEMATIC INVENTORY AND EVALUATION
OF THE EFFECTIVENESS OF VOLUNTARY AGREEMENTS.  This evaluation should
include active participation by representatives from business, NGOs, trade unions, and research
institutions involved with these issues, as well as an analysis of their differences.  The goal would
be to identify the strengths and limitations of voluntary agreements and viable mechanisms to
assure and verify compliance.  The results of this evaluation could be reported at Earth Summit
+10 in 2002, with yearly status reports to the CSD up to that time.
 
     (b)  FOR CSD TO ESTABLISH A PANEL ON CORPORATE RESPONSIBILITY
AND ACCOUNTABILITY.  This Panel could serve as a vehicle for governments and major
groups to explore in greater depth methods for promoting corporate responsibility and
accountability, as recommended in the UNGASS Programme for Further Implementation of
Agenda 21.  This Panel could coordinate or sponsor dialogues among major groups and different
sectors of business and industry to better define those areas where government regulation and
oversight is appropriate and necessary (accountability), and needs to be strengthened to correct
for market failures and to promote socially and environmentally responsible investment and
reinvestment in local communities.  With this aim in mind, the Panel could implement some of the
following recommendations, such as the inventory and evaluation of voluntary agreements, and
provide a vehicle for partner dialogues on the results.  In turn, in 2002, the Panel could issue a
joint position on recommended measures to the General Assembly for ways to more effectively
promote corporate responsibility and accountability in sustainable development.

     (c)  FOR CSD TO COMPILE, DEFINE AND FURTHER EXPLORE NGO AND
OTHER MAJOR GROUPS RECOMMENDATIONS EMERGING FROM THIS DIALOGUE. 
Such recommendations include:  (1) That companies commission regular independent
environmental audits of subsidiaries and major overseas suppliers;  (2) that companies support
efforts to give affected host country citizens the automatic right to primary redress in the
company's home country courts, without having to fight for legal standing on a case by case basis; 
(3) that companies support efforts to institute binding international minimum standards on
environmental and labour practices to avoid others free-riding on their efforts;  (4) for
governments to enact or strengthen laws protecting whistleblowers from company reprisals;  (5)
for each country should present a plan to phase out all non sustainable subsidies step by step until
2010.


                            ENDNOTES

1/   Interhemispheric Resource Center.

2/   Karliner, Joshua.  The Corporate Planet: Ecology and Politics in the Age of Globalization.
Sierra Club Books, 1997, p. 42.

3/   Nick Mabey, World Wildlife Fund-UK.

4/   Khor, Martin.  "Globalization is undermining sustainable development," in Third World
Resugence, No. 81/82, May/June 1997, p. 26.

5/   Karliner, p. 57.

6/   Greer, Jed & Kenny Bruno.  Greenwash: the Reality Behind Corporate Environmentalism. 
Third World Network & Apex Press, 1996, p. 12.

7/   Tony Juniper, Friends of the Earth International.

8/   Interhemispheric Resource Center.

9/   Schilling, David.  "Making codes of conduct credible: the role of independent monitoring". 
Paper prepared for conference on "Global Codes of Conduct" sponsored by the Center for Ethics
and Religious Values in Business, at Notre Dame, October 6-8, 1997.  Interfaith Center on
Corporate Responsibility.

10/  Betty Paschen, Canadian Green Party and Sustainable Edmonton Society.

11/  German Forum for Environment and Development.

12/  Germanwatch.

13/  Roodman, David Malin.  "Getting the signals right: tax reform to protect the environment
and the economy."  Worldwatch Papers, No. 134.  May 1997.

14/  Karliner, p. 48.

15/  Greer & Bruno, p. 34.

16/  OECD.  Pollutant Release and Transfer Registers: Guidance Manual for Governments.  Paris,
1996.

17/  ANPED.

18/  These secrecy laws have been enacted in 19 states in the US, as of November 1996, although
challenged by the federal environmental protection agency.

19/  Network Against Corporate Secrecy.  Letter to Carol Browner, USEPA, March 24, 1997.

20/  Karliner, p. 48.

21/  Greer & Bruno, p. 33.

22/  UNIDO.  Changing Course: Sustainable Industrial Development as a Response to Agenda
21.  Vienna, June 1997.

23/  Gail Karlsson, UNA/USA and CitNet Working Group on Climate Change and Energy.

24/  These suggestions were adapted from Germanwatch, WEDO, and others.

Responsible Entrepreneurship, draft 1  (Dec. 9, 1997).
NGO Taskforce on Business & Industry.

"When our outgo exceeds our income, our upkeep becomes our downfall."

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Date last posted: 8 December 1999 15:15:30
Comments and suggestions: DESA/DSD