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CSR in Regional Trade Agreements: Setting Ourselves Up For Failure

Submitted by: Elaine Cohen

Posted: Oct 25, 2011 – 11:00 PM EST

Tags: csr, corporate social responsibility, finance, trade agreement, government

 
Elaine

By Elaine Cohen

Government-led Regional Trade Agreements can be a platform to promote the responsible practices of corporations, promising profitable and sustainable rewards. But wouldn't governments be advised to first promote corporate social responsibility at home?

Deborah Leipziger, a leading voice in sustainability frameworks, having authored the The Corporate Responsibility Code Book, and having been influential in advancing the SA8000 standard, has now turned her sights to another form of CSR framework: Regional Trade and Investment Agreements. 

Leipziger says, "For CSR and sustainability to become more integrated into corporate behavior, there needs to be many levers: voluntary initiatives, regulation, consumer pressure – and trade policy can be a lever too." This conclusion coincides with the UNEP publication, also co-authored by Leipziger, which discusses the current state of Corporate Social Responsibility and Regional Trade and Investment Agreements, and makes the argument that the "inclusion of CSR provisions might help promote CSR coherence, capacity building and adoption."

Ben Simmons, a UNEP co-author, said, "UNEP was motivated to undertake the study because CSR provisions build on environmental provisions found in many trade agreements." The UNEP paper goes on to provide a list of ways that Regional Trade Agreements [RTA] can advance CSR as part of trade agreements, moving from the soft (encouragement) to the hard (mandatory) motivations. For example, provisions could offer CSR training for businesses, funding for companies that are certified to CSR standards, impact assessment requirements, sustainability reporting and so on.

Until February 2010, 460 RTAs, designed to promote economic growth through trade between countries, and an additional 2,600 International Investment Agreements (IIAs), aimed at removing investment barriers, were signed by various governments around the world. Although governments provide the frameworks of such agreements, it is the corporations that do the work and, largely, enjoy the benefits. Therefore, incorporating CSR provisions at some level within such agreements can be a significant business case carrot for companies to beef up their CSR performance.

It can also be a stick, excluding companies from sharing the promised economic growth if they do not (voluntarily) comply.

What could be better than such a direct reward for CSR?

For most companies, CSR is a long-term investment, the fruits of which come after years of consistent sustainability performance investment and improvement. RTAs and IIAs promise a quick return by ensuring eligibility for inclusion in lucrative government and international trade opportunities. Sounds like an obvious win-win.

The benevolent nature of RTAs isn’t radically new. The earliest record of trade agreements encouraging aspects of CSR was in 1992 with NAFTA (North America Free Trade Agreement) between the U.S. and Canada. Several subsequent RTAs included similar provisions but it was the U.S.-Peru Trade Promotion Agreement in 2009, which explicitly made a reference to CSR, followed by a Canada-Peru RTA the same year, which went even further and provided for the creation of a CSR forum.

All these signs are most certainly encouraging; however, this is exactly the issue.

To date, the few RTAs that have explicitly mentioned CSR have done so by encouraging corporate social responsibility, not mandating. Such encouragement is not well-defined and carries no enforcement clout. For example, the UNEP report contains no indications this slow nudging has made any difference in the actual practices of companies operating under these RTAs.

Deborah Leipziger also admits: "Thus far the initiatives have been somewhat tentative – but they are on the radar, which is a sign of a policy change." But, without a more convincing commitment to CSR as an important factor in decision-making, the carrot for companies remains rather theoretical.

What also makes the situation more complicated is the fact that very few governments have comprehensive CSR policies in place at national level. To expect change to come in the direction of RTAs and IIAs then when there is so much still to be done by governments to promote CSR nationally is laughable.

Research by BSR in 2009 further confirmed that certain countries are developing a variety of policies in three broad areas: standards for CSR implementation; national campaigns that promote CSR and raise awareness, and government funds to support implementation of CSR practices. However, the case studies quoted (Peru and its "Mining Program of Solidarity with the People," which aims to help alleviate poverty for example) are hardly comprehensive, structured or forward-thinking approaches to national corporate sustainability. They end up coming across as project add-ons.

Perhaps Denmark, whose Prime Minister Helle Thorning-Schmidt opened parliament earlier this month by evincing a clear interest in promoting sustainable development and democratic societies and a proactive agenda in the field of green and sustainable growth, should be our role model? Denmark's 2020 goals are anchored in triple bottom line sustainability (including a goal to be one of the top three energy efficient countries in the world). Complete with its own CSR website and blog, the Danish government was one of the first to publish a governmental CSR Action Plan in 2008 and has required its largest publicly traded companies to submit sustainability reports since 2009. The Danish government is setting the stage for the success of these trade agreements by putting its corporations in order first. For the rest of the world, how can RTAs and IIAs that loosely "encourage" CSR be taken seriously?

The UNEP paper was written to give governments, as the stakeholders of corporations, a convincing nudge in leveraging their substantial influence to create greater sustainability in international trade, and to that objective, it is a welcome and even refreshing contribution to current thinking.

However, governments would be well advised to put the horse before the cart and get on with driving CSR as an integral part of national policies.

About Elaine Cohen

Elaine Cohen is a Sustainability Consultant and Reporter at Beyond Business and blogger on sustainability reporting and author of CSR for HR: A necessary business partnership to advance responsible business practices

This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.

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