Soft Law in CSR

VOLUME VI, NUMBER 2 New York Luncheon Panel Soft Law in CSR: How Voluntary International Standards Frame CSR

Sponsor: Hunton & Williams, LLP

Speakers:

Kathy Robb, Partner, Hunton & Williams LLP

Ira Feldman, President & Senior Counsel, Greentrack Strategies

Usha Wright, ITT Corporation

I. Network Presentation Key Findings Perspectives

II. What’s New

III. The Women’s Network for a Sustainable Future

I. Network Presentation

WNSF’s NYC Luncheon Panel focused on the growing use of voluntary standards in corporate social responsibility (CSR). Voluntary standards are an example of ‘soft law.’ As applied to CSR, these standards respond to stakeholder expectations of environmental and social policies and practices for which companies are held accountable and which are becoming norms in their own right. The role of voluntary principles in advancing CSR is becoming increasingly important as a “social license to operate.” The creation of ISO 26000 is the current effort of an international multi-stakeholder process to develop guidance with respect to social responsibility principles and best practices, not only for corporations, but for all types of organizations. ISO, the International Organization for Standardization, has decided to launch the development of an International Standard providing guidelines for social responsibility. The guidance standard will be published in 2010 as ISO 26000 and be voluntary to use. WNSF panelists explored the evolution and impact of soft law in CSR, how the array of existing standards and corporate positions influence them, and how they, in turn, influence corporate behavior.

Key Findings

Corporations and their stakeholders are now leading socially responsible initiatives and are either creating or adhering to so-called “soft law.”
Soft law fills the void where government action and regulation may not have kept pace with globalization. Especially in new or innovative fields, such as CSR, soft law tends to precede – and perhaps pave the way for – hard law. While organizations have no formal liability for failure to adhere to soft law, their reputation is paramount, so even without any threat of legal consequences, companies that reject soft law may risk losing competitive advantage, market image or even financial strength. Soft laws are not necessarily a final solution, but can be a means to self-governance or self-regulation in a rapidly changing world. There are risks to the growth in popularity of soft law, especially in developing countries with a nascent legal system, or in complex, multi-stakeholder settings, where stronger regulations may be needed to protect some stakeholders. Still in development through a multi-stakeholder process, the ISO 26000 guidance may help to align various existing standards and protocols (Global Compact, ILO, Declaration of Human Rights, AA1000, SA8000 and the Global Reporting Initiative). Perspectives moderated by Kathy Robb

Kathy Robb (KR), partner at Hunton & Williams and head of its environmental practice; co-founder of WNSF and the current Chair of the Board

Ira Feldman (IF), founder, president and senior counsel of Greentrack Strategies, a consultancy focusing on strategic environmental management and sustainable business practices.

Usha Wright (UW), formerly Senior Vice President of Global Workforce Strategies at ITT Corporation, an engineering and manufacturing firm specializing in industrial products.

UW – The journey of the business sector through the world of hard law to soft is one of battling chaos to responsibility and proactive leadership. Lee Scott, of Wal-Mart, is an example of such proactive leadership. By pledging to cut energy by 25 per cent, holding suppliers to higher ethical standards and delivering good healthcare systems to employees of other business, Wal-Mart has not only exemplified proactive leadership – but delivered on the pledge. In selling millions of compact fluorescent light bulbs, they obviated the need for three coal power plants. That is a big impact entity which raises the question – is business going to solve problems that government cannot? This is a fundamental shift – business used to be the bad boys – restrained only by draconian laws. Now we look to them for leadership and activism. Historically, the relationship was that business was good and regulation was bad for business – the desire to fight any and all regulations is now changing. Why was it the case? Cost of compliance? Ignorance of impact? The hard laws were structured in such a way to command and control, to impose punitive monetary fines, which only served to validate the notion that regulation was bad. Remember “What is good for GM is good for the country?” Regulating for social and environmental good was perceived as bad due to the cost to business, which in turn was bad for society. There was no place for social good in pure capitalism. It was an outdated notion. The revolutionary concept is that now business addresses social problems and publicly pledges to contribute to improve society and the environment. The NGOs tried for so long to get corporations to move beyond compliance. The CERES principles – ITT being one of the subscribers – encouraged the beneficial association. Now ITT goes to NGOs to explore concepts – and understand how NGOs react – and vice versa. This association helps shape ITT strategies and ITT helps NGOs understand business drivers. The UN Global Compact, ISO 26000 and other loosely categorized soft laws are gaining prominence and threaten relevant hard laws on the books that have been unchanged for decades. This is worthy of our consideration.

IF – For the last 16 years I have worked exclusively in the “beyond compliance” niche – what I prefer to call strategic environmental management and sustainable business practices. Other related concepts are: “triple bottom line,” CSR, and (as the financial sector has come to call this same bundle) Environment, Social, Governance (“ESG”). If, as Usha mentioned, soft law threatens hard law – it is important to understand that some believe this is actually a positive development while others, unfamiliar with these emerging trends, feel threatened by it. In preparing with Kathy and Usha for this session, it is clear to us that no one is sure exactly what soft law is. In fact, many take the position that soft law is not law at all – but rather a set of social norms rather than legal norms. Others distinguish between treaty law and non-treaty law as applied to states, where international treaties and agreements are viewed as hard, but other pronouncements such as UN General Assembly resolutions are soft law. In this session we are taking a different approach to soft law in the context of CSR. What we are really talking about is change – a transition to sustainability. We have experienced rapid change in business and industry, in legal practice, and in the global economy – that is what is driving the evolution of soft law. In the U.S., the transition phase may last 30-50 years to move towards sustainability. But, we can not get there using the same tools, policies, institutions that we have now. What we have been seeing is a blurring of lines between the public sector and the private sector. We are all familiar with not-for-profits that deliver services similar to for-profit organizations. In this context we are seeing the emergence of soft law in the form of voluntary standards, codes of conducts, labeling, voluntary reporting and disclosure. The traditional dualistic view of regulator and regulated community is no longer adequate. Organizations no longer need just a regulatory permit, but also a “social license to operate.” With the use of soft law in CSR we are seeing a much more complex stakeholder dynamic, one in which multi-stakeholder dialogue and collaborative governance are important. One of the extraordinary aspects of soft law is the role it plays vis a vis hard law. It is useful to view soft law under CSR as the precursor or proving ground for hard law for future regulation; an equally valid perspective here is to envision a continuum of soft law to hard law. In the US we are still unfamiliar with concepts like self- regulation, private law and co-regulation, but there are already many examples in the EU that we can discuss further, such as EMAS and the Dutch sector-specific covenant approach. Closer to home, EPA’s Performance Track program can be seen as an example of voluntary regulation or co-regulation.

KR – I get worried as a lawyer about soft law. Law is something that when good is definable, it’s written down, with expectations everyone knows, put one on notice and enforced. Soft law is the opposite of all those things. Wonderful concepts in certain applications such as CSR or innovation areas with rapid change or climate change which has an unknown future and no legislative consensus – in these areas soft law could help. In practice, an example would be the Equator Principals which were used by banks for due diligence. That is a successful application of a group coming together to self-regulate. REACH – the EU regulations on chemicals and their safe use is another example. I worry about REACH – it’s a very comprehensive, complex, structure. The details are not fleshed out and those details will be in soft law. In the U.S., the laws surrounding the Colorado River – a compendium of treaties and opinions from courts, compacts and contracts all allocating water among seven States. The process went forward in 1920s, developing over time through a lot of different writings. In December, they announced adjustments to those allocations. The fundamental problem with the river is that they originally set the allocation based on what they thought was the norm. However, that amount of water they allocated was essentially flood levels. Now, they know that was not the norm, but it took time to reach consensus that drought was the norm, which came in part from the famous tree ring studies in the last 4 years. That’s what I think about when I think about soft law.

KR – Let’s talk about ISO 26000.

IF -There is a new draft of ISO 26000 which appeared last week and is currently in a comment period. There is at least another 18 months before the final product sees the light of day. The ISO standard is based on social responsibility as ISO Geneva decided early on to drop the “C” in CSR to make clear that social responsibility is applied to all stakeholders – not just corporations. The six defined categories of stakeholders are consumers, industry, NGOs, labor, government, and SSRO (service, support, research, other). The seven core issues are environment, human rights, labor practices, fair operating practices, organizational governance, consumer issues and community involvement/society development. Taken together, these seven issues are the core bundle of social responsibility obligations for organizations. In the latest draft, the ISO 26000 standards proposes the following as key principles for social responsibility: legal compliance, respect for intellectual instruments, recognition of stakeholders, accountability, transparency, sustainable development, ethical conduct, precautionary approach, respect for human rights and diversity. The ISO 26000 standard is not drafted as a management system standard; organizations will be able to select implementation options tailored to their own needs.

KR – What is the intent of the group putting this together and how is it to be used by those who get the document?

Adam Greene, U.S. Council for International Business – The general idea is to provide guidance and that’s essentially it. I would call it an awareness raising instrument more than anything else.

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II. What’s New

WNSF INTERNS WNSF welcomes college and university interns. Those who are interested should send a bio and writing sample to info@wnsf.org. Recent ‘graduating WNSF interns include:

Monika Kumar, WNSF’s former intern for two years, starts at the World Bank as Greening Coordinator, Corporate Environmental and Social Responsibility in a program responsible for identifying opportunities to reduce the environmental footprint of the Bank’s daily operations by managing carbon emissions, energy use, waste, water, and procurement, and for publicly reporting on that footprint annually.

Jen Peckman, another former WNSF intern, has spent the past year and a half as a consultant at the NYC office of Corporate Citizenship, a specialist corporate responsibility consulting firm. She manages US community investment related client projects and manages the LBG USA a group of companies working together to measure Corporate Community Investment (CCI).

Maria Hinostroza My new position is Program Manager for Sustainable Development at the UN Foundation.

NEXT WNSF EVENT The 2008 WNSF Businesswomen’s Sustainability Leadership Summit “Leading Change: How to Champion Sustainability in Your Company” will take place in New York City on October 2, 11:30 AM – 6:00 PM.

Please watch your email or go to the WNSF website (www.wnsf.org) for more information and to sign up for this and other upcoming events.

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III. The Women’s Network for a Sustainable Future

WNSF provides a forum for business and professional women to congregate, reflect, and act on the converging issues of corporate social responsibility and sustainable development. Through meetings and simple electronic support tools, the Network aims to facilitate the exchange of experiences and best practices on these vital workplace issues. By creating a new network of executive women, the Network seeks to improve responsible practices in workplaces; sensitize corporate culture more generally to issues of sustainability and social responsibility; and encourage a public commitment locally, nationally, and internationally to sustainability principles.

For more information, please contact: Ann Goodman, PhD Executive Director WNSF http://www.wnsf.org info@wnsf.org

Board of Directors CHAIR: Kathy Robb, Esq., Partner and Head of Environmental Practice, Hunton & Williams; Marlys Appleton, VP, Alternative Investments and Sustainability, AIG; Dianne Dillon Ridgley, Director, Interface Inc. Board; Karen Flanders, Director of Sustainability, Coca-Cola Co.; Joanne Fox-Przeworski, Director, Bard Center for Environmental Policy, Bard College; Ann Goodman, Executive Director, WNSF; Sarah Howell, Director, Corporate Communications, BP; Michele Kahane, Special Projects Director, Center for Corporate Citizenship, Boston College; Clair Krizov, Executive Director of Environmental and Social Responsibility, AT&T; Joyce La Valle, Senior Vice President, Interface Inc.; Anita Roper, Director of Sustainability, Alcoa Corp.; Deborah Sliter, Vice President of Programs, National Environmental Education & Training Foundation. The Women’s Network for a Sustainable Future is a 501c3 organization. This issue of Net Notes was written by Liza Pullman.

 

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