A call for dialogue

Former WBCSD chair and Rio Tinto executive director Lord Richard Holme sets out his strategy for better corporate performance

For the past two or three years the campaigning zeal of some NGOs has been directed at achieving the worldwide regulation of business, particularly transnational corporations. Their campaign attracts support from the feeling that large companies operating across the globe should be accountable – a good democratic argument – and that it is not enough for them to comply country by country with laws and standards, again a legitimate argument, even in the absence of trans-national governance.

While I accept the main premises of the campaign I question both the conclusions reached and some of the tactics employed. Let me deal first with the tactics. Too often, instead of relying on the excellent democratic arguments that those who have power should be accountable, adversarial campaigners prefer to base their arguments more emotionally on alleged instances of wrongdoing by companies. Thus their argument becomes: “Without regulation companies will get up to no good.” This leads to exaggeration and sometimes distortion of the instances where companies – as fallible human institutions – do get things wrong, and more damagingly, positions them firmly as being part of the problem of sustainable development rather than the solution.

A curious paradox

This approach also contains a curious paradox. In many instances large multinational companies are in the vanguard of responsible and accountable practice. The membership of the Global Compact or the World Business Council for Sustainable Development represents an historic commitment by companies – which are leaders in their sectors – to CSR and sustainable development. Yet the critics find themselves forced by the logic of their own campaign, in which big is bad and voluntary efforts worthless, to attack advances in corporate standards by these international leaders as mere greenwash, instead of being able to welcome them as, at least, partial and significant progress.

Unsurprisingly this produces a negative and defensive approach on the part of the companies, and in turn makes it more difficult to hold a rational discussion of the issues.

There could be more to agree on than first appears. More and more companies believe that they should report on their environmental and social performance as well as their economic results, and do so. They have accepted the need to be more transparent and accountable to stakeholders as well as to their shareholders. Initiatives such as the Global Reporting Initiative which are building a multi-stakeholder base for reporting, have received strong corporate buy-in. Independent authentication of reports is becoming more widespread. Companies are also acutely aware of the need to demonstrate that they do not permit themselves double standards in rich and poor countries. GRI has also focused attention on the need for differentiation in identifying what criteria and standards are meaningful. A construction company differs in its impacts from a confectionery company – so an undifferentiated global regime could be so lowest common denominator as to be meaningless.

Identifying acceptable standards

From ancient times industry has always been regulated to a greater or lesser extent. Therefore, what should be addressed is not an inflexible issue of principle but rather of identifying what most promotes socially acceptable standards without representing an impossible straightjacket for entrepreneurial providers of goods and services. The key is to promote a synthesis between sensitive voluntary responses to the market on the one hand and imposed regulation on the other. In a perfect world they would work together driving continuous improvement in performance.

Lord Haskin’s Task Force on Better Regulation concluded that heavy-handed regulation can be counter-productive. This is true internationally. To quote from the paper issued by the British, French and German governments on 26 January: “Inappropriate, uncertain or excessively burdensome regulation can act to deter enterprise and to inhibit the development and growth of new business ideas.”
Success through shared dialogue
The trap which campaigners should avoid is to extinguish the spirit of compliance-plus, born of a quest for comparative advantage by responsible companies attuned to their customers, communities and the environment, in the search for all-embracing compulsion.

The other pre-condition for sensible global regulation is a better formulation of shared global values and common understanding of issues. Laws and rules, without underlying social consensus, are houses built on sand.

The more this proceeds on a basis of shared dialogue the more successful it will be. These international norms need to include, as the Johannesburg Declaration did, an explicit recognition of the important contribution business can and does make to well-being around the world and to the possibility of higher standards all round.
As long as the call for regulation is primarily adversarial – even anti-business – in nature it will remain difficult to engender a proper debate or elicit a positive response. Yet that is what is now needed.

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