A Shell oil spill in Ogoni. Loveday Fonsi looks into a polluted stream, formerly a source of drinking water photo: Sophia Evans/ NB pictures
'In some cases, the rhetoric and the reality are simply contradictory.'

Andy Jackson highlights the key findings from Christian Aid's new report on corporate social responsibility (CSR)

To coincide with the annual meeting of the major business leaders at the World Economic Forum in Switzerland, Christian Aid has published Behind the Mask - the Real Face of Corporate Social Responsibility', a 68-page report that looks at the emergence of CSR in the 1990s and how, over the past decade, companies have used an image of social responsibility to oppose regulation and convince governments in rich countries that business can put its own house in order.

The report concludes that the voluntary approach to improving corporate behaviour is wholly inadequate and that international legally binding standards are now needed.

'Behind the Mask' publishes case studies involving three multinational corporations: Shell, Coca-Cola and British American Tobacco. 'Each of these companies has a high profile commitment to socially responsible behaviour but, says the report, is failing to live up to those claims in some instances.

Examples

Shell says that it has turned over a new leaf in Nigeria and strives to be a 'good neighbour'. Yet it allegedly fails to quickly clean up oil spills that ruin villages, and runs 'community development' projects that are frequently ineffective and which sometimes divide communities living around the oilfields.

British American Tobacco stresses the importance of upholding high standards of health and safety among those working for it and claims to provide local farmers with the necessary training and protective clothing. But contract farmers in Kenya and Brazil claim this does not happen and report chronic ill heath related to tobacco cultivation.

People from communities living around Coca-Cola's bottling plant in Kerela, India, protesting about the company's use of their ground water. Photo: Christian Aid/Liz Stuart

Coca-Cola emphasises 'using natural resources responsibly'. Yet a wholly owned subsidiary in India is accused of depleting village wells in an area where water is notoriously scarce and has been told by an Indian court to stop drawing ground water.

CSR can sometimes become a branch of PR, the report says. It goes on to say that CSR is a completely inadequate response to the sometimes-devastating impact that multinational companies can have in an ever more globalised world and can be used to mask that impact. Those who suffer the most as a result, says Christian Aid, are the poor and vulnerable people in developing countries and the environments in which they live.

Regulation

The failure to follow and the inadequacy of existing voluntary codes on CSR means that legislation must now be introduced (see Sob Story below). Christian Aid is calling for a framework of international regulation, similar to the convention outlawing the bribery of foreign public officials by business people, to which 35 rich countries of the Organisation for Economic Cooperation and Development (OECD) have signed up. This new framework should be backed by national regulation to ensure the enforcement of real social responsibility on the corporate world.

Introducing the threat of prosecution and legal action, with resulting detailed disclosure of company documents, would create a powerful incentive for companies to behave responsibly.

Christian Aid goes further by asking for binding regulations to give companies' ethical commitments 'teeth'; a move towards corporate social accountability rather than CSR, so that companies have a legal obligation to uphold international standards.

Sob story

The Ethical Trading Initiative (ETI) is a UK tri-partite agreement between companies, trade unions and retail supply chains. Set up five years ago, ETI hit the headlines last year (2003) when high-street retailer Littlewoods disbanded its ethical trade team and withdrew from the ETI scheme.

And after offering to help the company monitor its supply chain, Christian Aid learned that its suppliers have been told not to admit people who turn up at their factories ad hoc, for fear of being investigated by Christian Aid or other NGOs.

The experience with Littlewoods clearly demonstrates that even the most rigorous of voluntary codes, like ETI, is no substitute for binding regulation - companies can walk away from voluntary codes, leaving their suppliers and communities in which they operate without the protection of any guarantees of behaviour.

Reasons to regulate

Polluted communities. Some claim that oil spills in the Niger delta are as frequent as one per day Photo: Sophia Evans

The report concludes with the reasons why international binding regulation is necessary.

• To protect human rights and the environment.

• Multinational companies need to be brought under international law because by definition they operate in more than one country.

• National legislation and regulation are insufficient as they can sometimes be patchy and only partially applied.

• Voluntary approaches are wholly inadequate (see above).

• Business needs a level playing field. International constraints would minimise the ability of companies to disregard fundamental values in order to undercut more scrupulous competitors and could provide companies with incentives to elevate their standards.

• The risk of legal action would motivate companies to comply.

• The growing power of multinationals needs to be checked - companies operating in countries desperate for foreign investment wield a huge amount of economic and political power.

• Developing countries need incentives to improve laws - in certain cases governments may ignore, or even commit, human rights abuses to ensure multinationals can operate in their countries.

• People harmed by corporate activity need redress.

Responses

All three companies featured in the case studies were interviewed about the findings of the report.

Shell disputes Christian Aid's findings saying that 94 per cent of spills are caused by sabotage, and that in 2002 93 per cent of its development projects were found in an external report to be functional and 75 per cent successful. Shell told Christian Aid: "We're not holding ourselves up on a pedestal in Nigeria. We think that we have made some changes both in the way that we operate and in the way that we interact with communities, and that those changes have been for the better. But we don't say it's been a complete success, far from it. And we're pretty open about some of the issues and some of the dilemmas and problems … that come from Nigeria."

BAT points out that the many of the farmers in Kenya work on farms not owned by BAT and are not employed by BAT and that the company issues them with protective clothing but it is the farmers' responsibility to ensure that it is used.

Coca-Cola denies it has depleted ground water in Kerala. In a statement emailed to Christian Aid, the company blamed lower than usual rainfall in the past two years for the lowering of the villagers' wells. Recently, the Kerala High Court ruled that Coca-Cola could no longer draw ground water from the area. The company is appealing against the ruling.

• Click here to download the full report