United Nations
Commission on Sustainable Development

Background Paper


Commission on Sustainable Development               Background Paper No.8 
Sixth Session
20 April - 1 May 1998


       Corporate Management Tools for Sustainable Development

          Department for Economic and Social Affairs (DESA)
     United Nations Conference for Trade and Development (UNCTAD)
            United Nations Environment Programme (UNEP)


I.  CORPORATE SOCIAL RESPONSIBILITY

A.  Introduction

1.   Business and societies all over the world are confronted with new
challenges and demands.  Globalization, deregulation and new
technologies are creating more trade and intensifying competition,
especially in communication and information.  Broader deregulation and
liberalization have also given enterprises more freedom to make their
investment decisions and to operate, both at home and abroad. 
Enterprises have become more vulnerable to global competition and are
therefore increasing their efforts to achieve competitive advantage. 
To win in an intensified competition and to have more freedom to
invest, enterprises need to be socially responsible.
  
2.   As a follow-up of the World Summit for Social Development, the
Programme of Action encourages business enterprises to pursue
investment and other polices, including non-commercial activities,
that will contribute to social development, especially in relation to
the generation of work opportunities, social support services at the
workplace, access to productive resources and construction of
infrastructure.
  
3.   The business leaders of today and tomorrow must not only adapt to
the dynamic global changes and challenges, they must also help shape
them in a way that promotes social progress and development.  The main
focus of this section is business social responsibility and the role
of partnership for social cohesiveness.

B. Social responsibility and the role of business

4.   The awareness of the social responsibility of the firm goes back
to the birth of the corporative and mutualist movement of the XIX
century.  The topic  appeared in the United States at the end of the
1960s when pollution risks, employment security, accident prevention,
minority promotion and social usefulness of products began to be taken
into consideration.  A great debate took place on this issue in the
1970's in France, and it has recently resurged in many European
countries.  This new concept of corporate social responsibility is
based in companies■ concerns for the protection of their social and
physical environment, and responsibility for the destiny and stability
of the community.

5.   The concern for social responsibility has been given a new thrust
from the agitation of some employers in the face of the increased
social exclusion menacing society and firms.  A firm is generally
considered socially responsible when it seeks to reduce social
disintegration or when it contributes to social cohesion. 

6.   A broader concept of corporate social responsibility suggests
that firms should also consider their impact on a range of
stakeholders, i.e., parties that affect or are affected by a
corporation■s action.  This approach reaches beyond shareholders to
include other groups such as employees, managers, suppliers, customers
and even competitors, local communities and governments.  The nature
and degree of corporate social responsibility that an individual firm
may have toward these various groups depend on an examination of the
characteristics that relate an enterprise to a specific issue.  Among
such characteristics are an enterprise■s capability, proximity,
awareness, knowledge and impact on the issue.  The size and power of
large modern corporations give them an enormous potential impact on
the societies around them.

7.   Development is a social responsibility.  Government, business and
industry, including transnational organizations, share this social
responsibility.  The threats to social cohesion in different parts of
the world vary, but the threat of social exclusion exists everywhere. 
New pressures to social cohesion emerging from the structural changes
of economies include widespread poverty, unemployment, ethnic
conflicts, the spread of HIV/AIDS, organized crime, drug abuse and
illicit trafficking, etc., which are major obstacles to business
activities locally and globally.   The purpose of enhanced social
responsibility of enterprises is to make social policy more productive
in order to achieve social cohesion at the lowest costs to society.

8.   It is widely recognized that social cohesion is in the interest
of business in the long run.  The business sector will also benefit
from more cost efficient solutions to social problems that may be
obtained when enterprises participate.  Each corporate facility is an
integral part of the community in which it operates.  Like an
individual, it benefits from character building, health, welfare,
education, and cultural activities.  And like an individual, it also
has citizen responsibility to support such activities.        

9.   In developing countries and in countries with economies in
transition, in which social guidance and protection mechanisms are not
fully effective, international corporations have a greater corporate
social responsibility for self-regulation to assure they do not harm,
and do positively benefit, the people of those societies.  For
instance, where fair market practices are not enforced, corporate
social responsibility standards should still call for firms to behave
in a responsible manner rather than seek to extract exploitative
profits to the society■s detriment.  Social responsibilies do not give
a transnational corporation a right to make political or social
choices for a society.  Instead, it calls for greater transnational
corporation sensitivity to the corporation■s capability and impact on
a country■s social conditions as well as its economic productivity
goals.  Cooperation with governmental authorities and other local
leaders is essential to help guide appropriate corporate responses to
the society■s need.

10.  It is widely recognized that transnational corporations can play
an important role in human resources development and industrial
relations in the countries they operate.  Corporate social
responsibility should exceed corporations■ legal requirements, drawing
on their international experience to assist and advance local
practices.  Issues of appropriateness and choice may be raised where
foreign methods and standards are introduced into different cultural
and socio-economic settings.  Under these circumstances, the concept
of corporate social responsibility could suggest principles and
processes to maximize the benefits and minimize possible disruptions
related to the impact of foreign affiliates.

11.  Some of the issues that constitute core topics for business
social responsibility regarding human resource management include
employment, conditions of work, wages and fringe benefits, safety,
training, closures and adjustment.  Non-discrimination should be a
widespread principle of corporate social responsibility standards on
employment. Both in hiring practices and in the treatment of
individuals once employed, corporate social responsibility standards
should be expected to prohibit discrimination on the basis of
distinctions such as race, gender, religion or ethnicity.  Enhancing
social protection, reducing vulnerability and strengthening employment
opportunities for groups with specific needs are major aspects of
corporate social responsibility.

12.  Personal and societal advancement can come from worker and
management training programmes that are self-interest corporate goals
increasingly vital to maintaining competitiveness in a dynamic global
economy.  Sharing skills and knowledge with local employees can be an
expression of a corporate social responsibility to fill a role when
governments cannot.  Transnational corporations can work with local
governments, labour unions and other societal representatives in
exploring cooperative links between public and private sector
programmes to benefit the socio-economic needs of particular host
societies.  

C.  Partnership for social progress and development

13.  Partnership initiatives are based on voluntary participation by
both business and government.  Partnership may be established at
different levels: local, regional, national or international.  The
concept of voluntary responsible interaction between business,
government and the rest of society first attracted international
attention at the World Summit for Social Development in March 1995. 
In its resolution 1996/97, the Economic and Social Council reaffirmed
the need to ensure an effective partnership and cooperation between
Governments and the relevant actors of civil society, the social
partners and the major groups as defined in Agenda 21, including non-
governmental organizations and the private sector, in the
implementation of and follow-up to the Copenhagen Declaration and
Programme of Action.

14.  It is of utmost importance to encourage the establishment of
mechanisms to facilitate partnership for social progress and
development both at the national and international levels among
government, the private sector and organizations of civil society. 
The idea of partnership is to unite efforts for social cohesion rather
than shifting burdens.  Partnership of this kind can only be based on
voluntary commitments in areas where business and public authorities
have or can develop mutual interest.  It provides a framework for
joint efforts of businesses, governments and social partners to
develop a more productive, more flexible and more capacious labour
market.

15.  The potential scale and scope of partnerships cannot be assessed
in advance, but have to be explored in practice.  That will depend,
for example, on the extent of legislation and collective bargaining
making demands and constraints on social behaviour of business, the
traditions for interaction between governments and businesses in
different parts of the world, and on the capacity and flexibility of
public authorities.

 D.  Mechanisms to further social responsibility of corporations

16.  Social responsibility extends beyond donations or charitable
actions.  It assumes a thorough reformation of business, its functions
and its decision-making in order to incorporate methods and attitudes
able to measure the consequences of its decisions upon society. 
Mechanisms and measures for corporations in formulating and
implementing social policies include  a variety of possibilities. 
These include -Codes of Conduct■ in accordance with the social
commitment of the enterprise; dialogue with relevant stakeholders;
social auditing and motivating and mobilizing employees to take part
in social initiatives in order to strengthen a supportive workplace
culture.

17.  The main task of governments is to support and stimulate this
development by committing themselves through partnerships, and by
providing an appropriate framework for development.  Extensive social
challenges and the speed of change in societies are forcing national
and local governments to develop a capacity for flexible responses
which they have to develop in partnership with the private sector as
well as with other agents in society such as the social partners.

18.  One of the toughest political issues stemming from privatization
is the loss of public-employee jobs.  This problem can be mitigated,
however, if government and its private-sector partners work together
to ensure the least pain and the most gain for those individuals who
have been displaced by efficiency efforts.  The loss of jobs is a
serious issue that must be dealt with openly, compassionately, and
comprehensively.

II.   ENVIRONMENTAL MANAGEMENT TOOLS FOR SUSTAINABLE DEVELOPMENT

19.  Due to increasing regulatory pressure from governments and public
demand for a better environment, industry has needed to develop tools
to successfully manage the environmental impacts of its operations. 
Such tools can be used internally by companies to better design and
manage their operations, and to monitor their results.  They can also
be used by governments to lead industry towards environmental
improvement and Cleaner Production.

20.  Cleaner Production means a preventative strategy applied to
processes, products and services to prevent waste at source, to make
efficient use of raw materials, and to reduce risks for humans and the
environment.  In order to implement the Cleaner Production strategy
and eco-efficiency, government decision-makers and industry managers
need two types of "tools":  cleaner and leaner technologies - the
hardware; and environmental management tools - the software.

21.  Environmental Management Systems (EMS) is an increasingly popular
set of basic environmental management tools, as it can be implemented
to fit the needs of an individual company.  EMS is part of the
company's overall management system.  It includes strategic planning,
organizational structure and implementation of the environmental
policy as an integrated part of the manufacturing process.  An
attractive element of EMS for many companies is that a company does
not  have to adopt a complete EMS at once: an EMS can be introduced
step by step. The process of implementing an EMS catalyzes companies
to begin thinking about the environmental impacts of production. 

22.  EMS voluntary standards are a useful tool to enhance the
environmental performance of an organization, as well as to reduce
costs through a more efficient use of resources. However, voluntary
standards on EMS are a complement to and not a substitute for
regulatory measures. The development of international standards, such
as the ISO 14000 series on environmental management systems (EMS) and
the European Union's Eco-Management Audit Scheme (EMAS), has been key
in promoting the use of  some environmental management tools

23.  International standards in general can make an important
contribution to facilitate international trade and the development
process of developing countries. However, while compliance with the
ISO 14001 standard may enable certain companies to strengthen market
positions, the standard could act as a barrier to trade for companies
that find it difficult or costly to comply with the standard.  In this
regard, it is necessary to pay appropriate attention to national
implementation issues as well as to international cooperation to
facilitate EMS implementation in developing countries. Governments can
play an important role in providing an enabling environment for the
implementation of EMS, particularly in developing countries, for
example by promoting the creation of necessary infrastructure and
legislation, as well as appropriate incentives. 

24.  SMEs in both developed and developing countries may face
significant constraints in setting up and maintaining an EMS. 
Positive incentives, including technical assistance are need in this
respect. Cooperation between large firms and SMEs as well as
cooperation between SMEs, particularly those in the same sector and
geographical area, could help to reduce the costs of EMS
implementation. Similarly, companies in developed countries should
establish a supportive cooperation with their suppliers in developing
countries in the area of EMS implementation. Transnational
corporations (TNCs) could play an important role in this regard.  

25.  Certification and accreditation must be fair and rigorous to
safeguard the credibility of international standards on environment
management systems.  Developing countries should be assisted in
developing the necessary infrastructure to allow conformity
assessment, certification and accreditation. In doing so, they should
follow the relevant international standards and guides.  A key element
is the creation of an internationally recognized certification and
accreditation system and the work of the Quality System Assessment and
Recognition (QSAR) and the International Accreditation Forum (IAF) can
be highlighted in this respect.  Developing countries should be
assisted in identifying the possibilities of increasing their share in
the domestic and external markets for certification bodies and
consultants, including through South-South cooperation.  

26.  The UNCTAD■s Commission on Trade in Goods and Services, and
Commodities, convened an Expert Meeting on Trade and Investment
Impacts of Environmental Management Standards, particularly the ISO
14000 series, on Developing Countries, which was held from 29 to 31
October 1997. 1/ At this meeting, experts identified a number of
needs of developing countries with regard to national implementation
of the ISO 14001 standard. They recommended that actions aimed at
facilitating EMS implementation in developing countries should focus
on: (a) awareness-building among the concerned stakeholders; (b)
identification of sources and dissemination of information; (c)
creation of infrastructure, training auditors and consultants; (d)
access to and transfer of environmentally sound technology; (e)
assistance in developing and implementing related legislation; (f)
support for participation in relevant forums and for sharing
experiences with the implementation of EMS.  The Experts also urged
the need for special financial and technical assistance for least
developed countries (LDCs) in implementation of the ISO 14001 standard
at their national levels. 

27.  Experts recommended that empirical analyses be carried out,
including in UNCTAD, of the trade implications of ISO 14000 standards
as well as on national implementation issues that may have a bearing
on international trade. UNCTAD and UNDP■s Public Private Partnership
Programme are now initiating a joint technical cooperation project in
this area.

28.  To aid companies in implementing an EMS, UNEP, the International
Chamber of Commerce (ICC), and the International Federation of
Consulting Engineers (FIDIC) produced "The Environmental Management
System Training Resource Kit".  This kit is a comprehensive tool to
help managers in private and public companies design and implement an
EMS specific to their needs and conditions.  The EMS kit is modular so
the sections can be used one at a time in a continuous training
process.  Moreover, it is designed to support the implementation of
the international standard ISO 14001.   Although implementation of an
EMS does not guarantee certification, it does help companies formulate
a systematic approach to environmental care in all aspects of
business.  The demand for the UNEP/ICC/FIDIC publication and its
translation into at least 9 languages illustrates the increasing
interest and belief of companies that a step by step approach to
environmental care is good business. 

 29. But this is not the end of the story: the ISO 14000 series is
only the "Swiss Army knife" in the tool box, regrouping a number of
tools in a standardized form that industry can use.  But the box
contains other tools that will need future development in the coming
years.

A.  What are environmental management tools?

30.  Environmental management tools are designed to help improve
decision-making or information management, or to effect changes in the
behaviour of others, with the overall aim of improving the
environmental performance of industry.  Thus, environmental management
tools can be used by companies to monitor, better manage or improve
their environmental performance, and by governments to influence the
environmental performance of groups of companies, whether they are
sectoral, regional, national or international.

31.  Environmental management tools discussed here cannot be rigidly
classified into different groups;  there are overlaps between many of
them, and most are still evolving. As the use of environment management
tools is still in its infancy, it will continue to evolve.  Moreover,
much work still needs to be done in the development of both concepts
and terminology.  For example, eco-audits, environmental audits, waste
and emission audits, and Cleaner Production assessment are conceptually
similar, but these terms are used in different parts of the world in
different ways for different purposes.


B.  History of environmental management tools     

32.  In parallel with the adoption by governments of emission
standards for industrial facilities, environmental impact assessment
(EIA) was one of the first specific environmental management tools to
be developed and used.  EIA enables decision-makers to predict the
impacts of a new industrial plant or an infrastructure project on the
local environment, and therefore, to take measures necessary to prevent
such impacts.  However, the limitations of EIA soon became clear. 
Industry managers discovered that a wider range of tools were needed to
support internal decision-making, and to communicate better with the
government and public at large.

33.  For these reasons, the "environmental management systems" toolbox
grew increasingly, and now includes specific tools that enables
companies to:

     --    evaluate and improve their processes and applications such
           as environmental audits, Cleaner Production assessments,
           safety and energy audits;
     --    design environmentally-sound products, using tools such as
           life cycle analysis and risk assessment;
     --    communicate with their stakeholders, employees,
           shareholders, customers, and suppliers through mission
           statements, environmental reporting and environmental
           purchasing and procurement; and
     --    monitor their progress and compare it with that of other
           companies, through benchmarking, cost accounting and
           performance indicators.

C.  Why use environmental management tools?

34.  It is clear that industry's adoption of more systematic
approaches to environmental management can have both environmental and
economic benefits.  Cleaner Production assessments, for example,
highlight opportunities for efficient use of raw materials and
pollution prevention, leading to cost savings.  Thousands of firms are
already benefiting from this approach and many examples have been
documented, as reported in particular in the UNEP International Cleaner
Production Information Clearinghouse (ICPIC).  More broadly, better
environmental management is being seen as a key source of competitive
advantage for industrial companies.  A whole range of benefits can
accrue from improved environmental performance, ranging from reduced
effluent charges to better community relations.  As environmental
protection plays a more central role in companies' operations, it is
also being recognized that better environmental management and better
management are the same thing: a company that manages its impacts on
the environment well is a well-managed company.

35.  There are also a number of more general advantages. 
Environmental management tools are supporting a needed change in
government-industry relationships to one of mutual support and
partnership.  Environmental management tools are also providing the
framework needed for continuous improvement, proactive action by
industry and creative partnerships to yield real and sustainable
improvements in environmental performance.

D.  Examples of Environmental Management Tools and their Contribution
to Sustainability

36.  Even though the following might seem somehow arbitrary,
environmental  management tools can roughly be divided into three
groups: 
     1)    tools for analysis and evaluation;
     2)    tools for action; and
     3)    tools for communication

37.  Following is a brief description of a few tools from each of the
three groups, to illustrate how environmental management tools can
contribute to Sustainability in industry.

Tools for analysis and evaluation

38.  Many ecotools fall in this cluster:  Environmental Impact
Assessment, Cleaner Production assessment, risk assessment,
environmental auditing, environmental accounting. Life Cycle Assessment
(LCA), whose use has been growing over recent years, is another example
of this cluster.

39.  Life Cycle Assessment is the process of evaluating the effects
that a product has over the entire period of its life cycle or "cradle-
to-grave".  This integrative approach avoids substituting one set of
environmental problems for a different set of problems.  The number of
applications for LCA is also growing: it is now being used in the
improvement of both products and processes, in setting criteria for
ecolabelling, and in decision making about purchasing.  LCA is thus
becoming increasingly important in the development of cleaner products. 
One example is LCA's use in the automobile industry.  In the car
industry, the environmental impacts of items such as engines, car
bumpers and paints has long been a matter of concern.  In a project to
demonstrate environmental-friendly design, one manufacturer chose a
dashboard as a product to improve.  A basic LCA was performed on
several improvement options.  Although there were some expected
outcomes (reductions in material use, number of materials used etc.)
the most remarkable outcome was that the improvement of the ventilation
system could result in less use of the fan and lead to a reduction in
fuel use.

40.  This and other examples as well as an increasing interest by
industry in LCA prompted UNEP to produce a report.  "Life Cycle
Assessment - what is it and how to do it".  The publication explains
the concept of LCA and examines the steps involved in making one.

41.  The increased use of LCA has shown the need to develop consensus
on quantification of the sub-elements to take into account when
preparing the LCA of a product. In other terms, there is a need to
quantify the "environmental content" of 1 tonne of steel, aluminium or
plastics, given the current state of production process.  Clearly,
analysis leads to action, and the analysis of ecotools has led to the
development of another set of tools.

42.  One of the important first steps in enabling companies and
society to make informed decisions is the ability to adequately compare
costs and benefits. To do so, one must be able to identify the value of
resources such as clean fresh water, air or  biodiversity and this
process is commonly called environmental accounting. Putting
quantitative figures on such factors is a very complex endeavour and
much research is already being undertaken on this mater. This is not a
process that can be accomplished overnight. Pressure for the
■immediate■ implementation of such accounting systems could lead to the
use of misleading figures. This could be worse than no figures at all. 
But the opposite attitude,  can be similarly damaging. The importance
of an accounting systems as one of the first building blocks necessary
to other efforts such as cost internalization, life cycle analysis and
eco-efficiency should make this a high priority for all groups
concerned.  

Tools for action
 
43.  The most important overarching tool for action is probably the
development of an EMS, which was already analysed above. Training and
education are key factors for it is people that make systems and
technology work. The degree and extent of an existing skilled labour
force is a determining factor in a countries■s ability to absorb and
develop new technologies. The same is true for management systems --
the more sophisticated and performing a system -- the greater is the
need to train personnel at all levels so that they can understand their
roles and responsibilities. In the same way, achieving sustainable
development depends on positive actions by a vast array of
professionals in their daily activities. For this to be possible,
universities and technical schools must review their curricula to
integrate the necessary courses and subject matters which their
students would need to perform their professional activities in a
sustainable manner.

44.  Ecodesign considers environmental aspects at all stages of the
product development process, striving for products which make the
lowest possible environmental impact throughout the life cycle. 
Ecodesign is an "action" tool, building on the results of the analysis
from LCA.  The UNEP manual "Ecodesign: A promising approach to
sustainable production and consumption", prepared by Delft University
with the support of the Netherlands government, allows companies to
develop their own ecodesign programme through a step-by-step approach.

Tools for Communication

45.  Further to ecodesign, "Ecolabelling" is a tool by which companies
can provide information on the environmental impact of their products. 
It should be used as the result of LCA to orient the consumer demand
towards environmentally friendly products.  To enhance such a demand, a
number of governments have now developed such ecolabelling schemes, as
reported in the recent UNEP Industry and Environment review ("Product
Development and the Environment", vol. 20, n■ 1-2).

46.  Corporate environmental reporting (CER) is the interplay between
three core themes of corporate environmental management:
responsibility, accountability and sustainability.  It is closely tied
to basic environmental issues such as regulatory compliance and
pollution control as well as to emerging concerns such as liability and
product stewardship.  External reporting is also closely associated
with other environmental management tools such as LCA and full-cost
accounting.  As a result, it appears highly likely that such reporting
will play a key role in driving the transition of companies and
industries towards the goal of sustainable production and consumption. 

47.  There is no hard and fast definition for the practice or scope of
CER.  It can be a simple document written for informal, internal
education or a detailed document for specific target audiences.  How a
CER is structured and what it contains is dependent on the company
preparing it.  Companies prepare reports to inform stockholders of
improvements in their environmental records.  Others use it to promote
greater corporate responsibility so as to off-set any new regulations
or tougher enforcement.

48.  To help stimulate individual companies (and industry associations
to help their members) begin reporting, UNEP and SustainAbility Ltd.
co-produced "Company Environmental Reporting - A Measure of the
Progress of Business and Industry towards Sustainable Development". 
This publication demonstrates how companies can use environmental
reporting as one tool for building dialogue and cooperation between
various partners.  Although there is no "blueprint" for CER, the
objective of the publication is to help companies decide whether, to
whom and how they should report on their current environmental
performance and on what their future targets should be. 

49.  Of  course, corporate environmental reporting goes hand in hand
with "environmental indicators", another tool to quantify various
aspects of environmental performance.  A number of organizations are
working together to harmonize and simplify indicators, and reduce their
number.  Such indicators, which first focussed on production processes,
are now looking at products and services.  In particular, MIPS (the
Material Intensity per unit of service), is clearly a crucial indicator
to measure dematerialization and monitor achievements towards the
Factor 10 goal of improvement in resource productivity.

IV.  CONCLUSION

50.  The growth and use of environmental management tools, despite
their imperfections, are hopeful signs for the future, and UNEP
strongly believes they should be used more widely.  We encourage their
worldwide dissemination, catalyze their improvement, and support their
harmonization through publications similar to those mentioned above. 
Ecotools enable companies and governments to take practical steps to
improve industry's environmental performance.  Just as importantly,
they improve the management of environmental performance, making gains
more sustainable.  Last, but not least, environmental management tools
are helping industry and governments replace confrontation with mutual
understanding and partnership.  That both are vital components of
sustainable development is stressed in Agenda 21, agreed at the 1992
Rio Earth Summit and has been reinforced at the Rio + 5 Special Session
of the UN General Assembly.



                                Notes

1/   See the report prepared by the UNCTAD secretariat (TD/B/COM.1/EM.4/2) and
the report of the Expert Meeting (TD/B/COM.1/10, TD/B/COM.1/EM.4/3)

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Date last posted: 8 December 1999 15:15:30
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