Corporate Social Responsibility and Human Rights in Asia

Robert J. Hanlon

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9781138069343
• eBook ISBN: 9781134503469
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Ética empresarial

As globalization has brought about new concerns and responsibilities for business, particularly in the realm of human rights, many multinational corporations (MNC) operating in Asia have argued that such rights are the responsibility of government. However, as globalization continues to improve market access for MNCs, it increasingly exposes them to new forms of transnational social movements, and as a result the private sector has emerged as one of the central stakeholders in the region's human rights dialogue.

Taking three of Asia's fastest emerging economies – Cambodia, China and Thailand – as its starting point, Corporate Social Responsibility and Human Rights in Asia explores the business case for corporate social responsibility, human rights and anti-corruption in the region. In doing so, it examines how industry perceives human rights and corruption within the corporate social responsibility (CSR) paradigm, and builds on the argument that the CSR regime is a socially constructed concept. Drawing on interviews with key stakeholders including business leaders, nongovernmental organizations, international organizations and government officials, Robert Hanlon argues that industry perceives human rights as outside their sphere of influence; that divergent stakeholder interests are side-lining the human rights debate; and that human rights are increasingly ignored in the quest for profit-maximization. This leads to the conclusion that human rights and corruption will remain peripheral business issues until stakeholders find new ways of creating space for CSR engagement, and business actors will continue to marginalize the human rights issue so long as governments in the region let them.

This interdisciplinary book draws on political science, business and sociological perspectives and as such, will be of great interest to students and scholars working across the fields of Asian business, corporate social responsibility and business ethics, human rights and international political economy.

1
The politics of corporate social responsibility

Multinational corporations (MNC) operating in Asia have often claimed neutrality regarding the protection of human rights, while contending such rights are the responsibility of government. With business entities void of any jurisdictional human rights mandate in international law, nation-states are the only actors capable of pursuing claims at the International Court of Justice (ICJ). However, globalization has brought new considerations and responsibilities for businesses, particularly in the realm of human rights (Goodhart, 2003: 936). As globalization improves market access for MNCs, it also exposes them to new forms of transnational social movements. Business actors have been slow in responding to these new demands, which are often proposed through environmental and human rights frameworks. Yet, as Wanandi (1994) notes, globalization has smashed any room for isolationist policies, calling on all actors to engage with the issue (cited in Christie and Roy, 2001: 13). The private sector is no exception, and has emerged as one of the central stakeholders in the region’s human rights dialogue. This book aims to understand how foreign direct investment and transnational business actors impact human rights within three of Asia’s fasted emerging economies, namely: Cambodia, China and Thailand. It also seeks to reveal how illiberal governance impacts business decisions that may undermine or ignore human rights. To this end, this book hopes to shed light on the similar challenges industry and the human rights movement experience in developing Asia. It also seeks to build on the emerging literature of corporate social responsibility (CSR) in the Asian context, while developing the business case for human rights.

While CSR has emerged as a tool for addressing the social impact of business actors, the idea is not new, as many Asian societies have seen similar concepts throughout their histories. For centuries, Asian perspectives on CSR have been documented in classical theological texts associated with Hindu, Confucius and Buddhist scripture (Godbole, 2007; Whelan, 2007; Zadek and Raynard, 2004). While the precise origins of CSR in Asia remain unclear, modern approaches to the concept have varied across jurisdictions (Chapple and Moon, 2005). For example, Thailand’s perspective on CSR has historically been focused on the phil-anthropic sector and the environment. Paiboon and Anuchat (1999: 55) argue that the business community needed to engage the community on the environment to prevent a social backlash. They write:

Awareness of environment and development issues in Thai society seems to have been defined as a middle-class phenomenon, in which the business sector has played an important role. The emergence of business organizations and businesspeople that were willing to take a public stand on the environment and sustainable development was clearly a new social phenomenon in recent years.

While concern for the environment and philanthropy has been the backbone of Thailand’s CSR movement, labour rights have dominated the discourse of other countries, such as Bangladesh and Cambodia. Yet divergent views of CSR are widespread. As one Hong Kong–based consultant noted, each of the 60 companies he works with in Mainland China have a different conceptualization of CSR (personal interview with the author, June 2009). One reason for this diversity is that CSR is a challenge for industry. Social issues are often considered outside management’s purview, and are therefore difficult to measure.

Furthermore, human rights and community engagement are difficult to gauge, especially since some firms may not see them as falling within their immediate sphere of responsibility or understanding. For example, a firm in Vietnam may have little exposure to, or experience with, child labour; however, a similar firm in Bangladesh may regularly deal with the issue. Regional views of, and approaches to, CSR may prevent the conceptualization of the entire supply chain, thereby also preventing the integration of a socially responsible business model. Moreover, business targets, such as the ambition to grow and seek out new markets while lowering costs, often contradict CSR. Informants throughout this research voiced similar concerns often pointing out that employee evaluations are based on performance and not ethics. Rewards for securing bottom-dollar prices outweigh risks associated with questionable labour standards. As Oki Matsumoto, President and CEO of Monex Inc., noted, although unethical decisions are probably made with hesitation, the betterment of the company often takes precedent (Whelan, 2007: 113). Yet such views are changing, with more prominent examples of community and individual grievances directly challenging the corporate power driving industry to think of new approaches to societal engagement.

For example, the US-based mining firm Freeport has long been criticised by human rights advocates for its close relationship with the Indonesian military. The company’s alleged disregard for human rights dates back decades, and has been subject to a review by the International Committee of the Red Cross (Leith, 2003). However, after it became clear that the firm had been implicated in human rights violations, the company took steps to teach rights and rule of law to local authorities (Handelsman, 2003: 130). Freeport’s complicity in rights violations pressured the company to implement community engagement projects that would not have likely been considered a legitimate business expense by earlier generations of management. Similarly in 2006, major US firms filed a direct appeal to the Philippines government to investigate extrajudicial killings and disappearances in the country. The unprecedented letter was signed by “the Gap, Polo Ralph Lauren, Wal-Mart, Liz Claiborne, American Eagle Outfitters, Jones Apparel Group, and Phillips-Van Heusen” (New York Times, 2006). While these firms proactively lobbied government to voice concerns, other companies have been thrown into the spotlight by civil society organizations that perceive industry as an influential source for social justice. For example, Human Rights Watch launched a campaign against corporate sponsors of the Beijing Olympics. The nongovernmental organization (NGO) encouraged activists to write letters to major Western brands, including McDonalds, Coca-Cola and General Electric, to use their influence to petition the Chinese government over rights abuse (Human Rights Watch, 2008). However, although these examples highlight the changing social demands placed on industry in Asia, sceptics often cite CSR as little more than a form of strategic business communications. Such arguments are especially contentious when the issue of business and human rights is considered. The fact is that many Asia-based companies see human rights as an increasingly important issue, yet industry still struggles to implement sound human rights policy while avoiding any meaningful public discourse. Given that industry is aware that complicity in human rights violations is a business issue, this study asks why the discourse between the private sector and civil society remains contentious.

To answer this question, the author attempts to address the issue using an interdisciplinary approach to conceptualizing CSR as an ideational structure. The aim is to bridge stakeholder theory, which is often associated with management studies or business ethics, with the international relations theory of constructivism. The author argues that elite actors from business, government and civil society are socially constructing a stakeholder approach to CSR that marginalizes the business and human rights discourse in Asia. This challenge is assessed through comparative case-study analysis, and three central claims are developed as to why the human rights movement struggles to gain ground within the Asia-based business community.

The first of these claims is that industry suffers from a self-perceived sense of corporate disempowerment when human rights enter the business discourse. MNCs often perceive human rights violations as outside their sphere of influence and responsibility. Perceived as political, business actors see themselves as unable to contribute to a meaningful solution, allowing industry to avoid the issues and claim disempowerment regarding anything political. Perceived corporate disempowerment compliments the private sector’s claim of political neutrality, while supporting arguments for investing in illiberal markets. Transnational firms can then shift functional business models to dysfunctional business environments, while claiming indifference in the name of economic development and trade, thereby effectively evading human rights discourse.

Second, divergent, elite stakeholders involved in the CSR movement are derailing the human rights dialogue through contentious perceptions of socially responsible business practice. Elite stakeholders promote narrow agendas that undermine sustainable approaches to the business and human rights dialogue. CSR programmes are often required to align within a company’s business strategy. Such strategies promote CSR as a single-issue scheme, as opposed to a holistic model, thereby indirectly sidelining controversial issues like human rights. Elite stakeholders outside the human rights discourse can then capitalize and market themselves as a sound ‘fit’ to a company’s business strategy. Less controversial groups are able to corner the CSR market, indirectly undermining issues promoted by non-profits perceived as sensitive, and marginalizing human rights organizations.

Third, embedded neoliberalism undermines CSR strategy through the structural promotion of capitalist regimes. MNCs are operating in a capitalist production system that demands profit-maximization and a division of labour. Performance evaluations of management are not based on social responsibility commitments; rather, managers are reviewed on their ability to generate shareholders wealth under intense pressure. The global trading system encourages competitive behaviour that may undermine CSR practices, such as the race to the bottom theory and deregulation. Neoliberal trade theory also demands that supply chains with extensive outsourcing and subcontracting networks cut costs, two strategies that are increasingly difficult to manage. In this sense, social responsibility plays a minor role when competing against values within business ideology. Yet Western governments also support this system, which is dependent on relationships with authoritarian economies that can provide weak regulation and cheap labour. Overall, shareholder pressure for economic growth, coupled with political assurances of sustaining an unregulated global trading system that engages illiberal regimes, is diminishing the importance of the business case for human rights.

Methodology and case study selection

This study draws on qualitative techniques, such as literature review, empirical observation and semi-structured interviews. Interdisciplinary literature is applied with a special focus on corporate social responsibility, human rights and corruption. The study begins with a general overview of key theoretical perspectives to provide context. The analysis then shifts from a ‘big picture’ point of view to a regionally relevant discourse. Findings have been analysed through an interdisciplinary lens with a strong focus on political science, business and sociological perspectives, while offering conclusions relevant to China and Southeast Asian area studies. Although this research largely focuses on foreign business in Asia, findings are derived from comparative analysis based on field work carried out in Cambodia, China and Thailand.

Case study selection began in 2006, a period that saw a dramatic increase in CSR dialogue within the Asian business community. At the time, the author was based in Hong Kong working for the Canadian Chamber of Commerce and the Asian Human Rights Commission. The three countries were chosen because each offers a unique glimpse of how foreign business actors operate in emerging Asian states. Each country holds similar institutional challenges such as weak rule of law, endemic corruption and high levels of human rights violations. China is not a democracy and has adopted an authoritarian system of governance while Cambodia and Thailand are semi-democracies that hold authoritarian tendencies. Each country has embraced free markets but is experiencing many of the social and environmental consequences associated with late industrialization.

In Cambodia, the US extractive firm Chevron announced the discovery of major oil deposits in 2005. This led many activists to speculate on how the authorities would manage the discovery, given Prime Minister Hun Sen’s (see Chapter 4) notorious reputation for corruption and human rights violations. Cambodia’s military had also been gaining international press coverage over land grabbing, a significant property rights violation that had a direct link to shadowy private sector entities. A damning 2007 report by Global Witness highlighted the nexus between corruption, the environment and human rights violations in Cambodia. At the same time in China, President Hu Jintao had just introduced the government’s ‘harmonious society policy’ (see Chapter 5), which directed state-owned enterprises to incorporate CSR strategies into their business models. Moreover, China was about to introduce its new Labour Contract Law, which was generating significant interest from the CSR community in Hong Kong and abroad. After the 2006 coup that ousted Prime Minister Thaksin Shinawatra, questions about Thailand’s business and society began to garner international attention. Foreign industry was questioning the risk of doing business in a country experiencing violent political divisions, with Thai business associations actively denouncing the government (see Chapter 6). The debate on how private industry should respond to the crisis grew with the international community’s concerns over economic stability. In summary, each of these three countries experienced significant events that increased the region’s CSR dialogue.

It also bears mentioning that each country is a developing state experiencing endemic corruption and extensive human rights violations. They face similar institutional challenges, including weak judiciaries, dysfunctional policing and authoritarian political structures. However, each government also continues to endorse free market principles and encourage foreign investment. These countries have managed to create what Robison (2004) calls ‘hybrid markets’, that is, authoritarian governance with neoliberal economics. A central claim of this research is that the business case for human rights can be made by identifying weak rule of law issues that hinder private sector growth and impact the bottom line. Offering a comparative analysis of rights violations and investment risk on account of weak legal institutions can provide valuable insight into the business case for human rights in each country. Comparative analysis can also offer new perspectives on how foreign business behaves in emerging economies with weak rule of law. More importantly, it will test whether CSR can serve as a mechanism for improving economic and social development in the region. As has been pointed out by Hopkins (2007) and Visser (2007), CSR is becoming a critical strategy in development studies.

Many other countries in Southeast Asia could equally have served as valuable case studies for this work. In fact, at the inception of this research, the author had planned to survey 10 Asian countries; however, a modest budget and logistical issues made this impossible. Subsequently, case study selection was narrowed to three countries for the reasons expressed earlier. Furthermore, the author is aware that China’s economy is substantially more complex than Thailand and Cambodia especially when demographic factors are considered. Indeed, comparing China with an equally complex society such as India or perhaps Indonesia would be valuable. This study however is concerned with understanding the CSR dynamics behind the three economies listed here in order to reflect the attitude towards CSR in Asia as experienced in Hong Kong. In 2007, Hong Kong’s business community perceived Cambodia, China and Thailand as top destinations for CSR projects given the socio-economic opportunities and challenges facing each society. Still, it would be interesting to conduct further research on other countries throughout the region to test whether the same results emerge, especially in regards to Indonesia, Myanmar and the Philippines. These countries experience similar institutional challenges and have also embraced neoliberal principles.

Case study conclusions are drawn from 60 semi-structured interviews carried out between June 2007 and January 2010. While the majority of interviews were conducted in the relevant country through face-to-face discussion, a small proportion were conducted by telephone. For the Cambodia study, findings are based on 14 formal interviews carried out with key stakeholders in Phnom Penh and Hong Kong. Key stakeholders include several senior level managers of foreign multinational firms, intermediaries, lawyers, academics, intergovernmental organization (IGO) and NGO representatives, as well as a former ambassador. The China case study is based on 26 in-depth discussions held in Hong Kong, Guangzhou and Kunming. Interviewees ranged from individuals representing major transnational corporations, international law firms and chambers of commerce, to small and medium sized business owners, academics and government officials. Similarly, 20 interviews were conducted in Bangkok with key stakeholders in Thailand, including business executives, representatives from IGOs and NGOs, as well as government officials. Out of the 60 interviews, one was conducted with an IGO in Singapore, while four interviews with key stakeholders were held in Vancouver. Moreover, as corruption and human rights are highly sensitive issues to the business community, none of the interviewees are identified other than through a broad description of their background. For a full list of interviewees please see Appendix 1.

Findings have also been guided through empirical observation and over 250 ‘off-the-record’ conversations with business leaders at six major industry conferences, including the 2008 Anti-Corruption South Asia Summit in Singapore; the 2009 Anti-Corruption Asia Congress in Hong Kong; the 2007 and 2008 CSR-Asia Summit conferences held in Hong Kong and Bangkok, respectively; the International Seminar on Business and Human Rights in Paris; and the 2009 Prime Source Forum: Annual Meeting Place for the Apparel Industry held in Hong Kong. While off-the-record evidence is not quoted in this study, these findings have been instrumental in shaping the direction of this work. Results are also based on five years of observed behaviour while working with several chambers of commerce, including the Canadian Chamber in Hong Kong, where the author has been an active member of the organization’s sustainable development committee. Finally between 2005 and 2007, the author also worked as an editor and fundraiser for the Asian Human Rights Commission, which has provided valuable context for research on human rights, corruption and rule of law.

Defining corporate social responsibility

With minimal political will to force industry to comply with human rights standards in developing Asia, business actors have enjoyed a system largely governed by voluntary self-regulation. Yet pressure from human rights organizations have played a role in forcing MNCs to consider how their business operations impact workers and the communities in which they operate. NGOs and activists regularly aim to challenge corporate misconduct. For example, in 2003 US apparel firm Nike reached a US$1.5 million settlement with consumer activist Marc Kasky for falsely advertising CSR policy. The plaintiff accused Nike of misleading the public by advertising a meaningless corporate commitment to improving labour standards. Kasky argued the company had acted deceitfully and was engaging in unfair competition practices (McBarnet, 2007: 25). Examples such as this demonstrate how MNCs are being called to account for their behaviour in the absence of regulatory directive. It also shows how industry can be held legally accountable for inaccurately reporting CSR strategies. Yet identifying a clear definition of CSR is, ironically, both obvious and complex, despite the concept’s extensive and cross-disciplinary scholarship base.

Still, most scholars agree that CSR must be thought of as a business model that incorporates economic, environmental and social considerations. In 1994, Elkington (2004) mainstreamed an approach through an innovative concept that became known as the ‘triple bottom line’ (TBL). ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Illustrations
• Preface
• List of Abbreviations
• 1 The politics of corporate social responsibility
• 2 The state, CSR and elite stakeholders
• 3 Business, the state and human rights in Asia
• 4 CSR, development and fragile stakeholder consolidation in Cambodia
• 5 CSR and the politics of stakeholder consolidation in China
• 6 CSR and weak stakeholder consolidation in Thailand
• 7 CSR and human rights in Asia: Achieving stakeholder consolidation
• Appendix 1 Personal interviews
• Appendix 2 Nepotism in the private sector: The case of a Hong Kong whistleblower
• References
• Index