Belling the Cheshire cat

Big business is scrambling to soothe public ire through social good initiatives. But self-policing gestures only underscore the need for real regulation.

September 4, 2019 — Picture a world in which the multinational corporation is a principled public citizen, offering sustainably derived products and services to consumers at fair prices through a global workforce earning a living wage, while taking active measures to protect the environment, share prosperity, and avoid harm to communities along supply and value chains.

This is the world we want — and we can have it, if the United Nations’ Sustainable Development Goals (SDGs) are fulfilled. When leaders gather in New York this month for the 74th United Nations General Assembly, discussions will converge around making good on the promise to ensure peace, planet, progress, and prosperity for all.

In the years since the SDGs were created, the notion of corporate social responsibility (CSR) has evolved from public-relations gambit to essential feature of modern business. Chastened by the fallout of the financial crisis, and facing mounting pressure to repair the frayed social compact, business has gone to pains to signal its embrace of the spirit of the goals.

These overtures reached something of an apex last month when, to perhaps as many eyerolls as drumrolls, the group of American corporate giants known as the Business Roundtable issued its updated Statement on the Purpose of a Corporation. The statement upended the Roundtable’s decades-long adherence to the view that corporations exist primarily to create value for shareholders, pledging instead to make prosperity more inclusive by committing to all ‘stakeholders’ — customers, employees, suppliers, communities, and shareholders.

Many of the statement’s signatories are also members of the UN Global Compact, the corporate sustainability initiative in which companies undertake to advance the SDGs through fair labor, environmental protection, and fighting corruption.

Observers have noted that outcomes of this gilded epiphany would be difficult to measure and impossible to enforce. The statement joins a pile of CSR initiatives proliferating around the world, all laudable, most voluntary.

When Nigeria enacted its corporate governance code last year, many hailed Africa’s largest economy for formally enshrining principles of ethics, transparency, environmental sustainability, and long-termism. Yet distant remains the day when a Nigerian citizen can use this instrument to block an oil company’s activity on ‘environmental sustainability’ grounds, or force it to the negotiating table to field community concerns.

Measures like these bear the funk of concession. Now that the public — not just frontline activists, but the consuming, investing, tweeting public — is demanding better corporate behavior, corporations are scrambling to ensure that the system that serves them bows, but does not break, under pressure.

Some are not coy about it. A group of influential lawyers has offered a ‘new paradigm’ for achieving sustainable long-term investment and growth, which baldly declares as its aim to avoid ‘potentially misdirected governmental intervention’. At no point in the 7,000-word manifesto is the primacy of the market ever called into question, or the inherent virtue of growth for growth’s sake.

What happens when people dare to bell the Cheshire cat of big business, grinning with a convert’s zeal through the ether of its new ethos? They discover that corporate forbearance ends where attempts to legislate good behavior begin.

Lawmakers in Switzerland have been struggling to enact a Responsible Business Initiative, which would impose liability on Swiss companies for violations of human rights and environmental standards. The initiative has been battling its way to either a parliamentary vote or a public referendum, suffering various corporate-backed dilutions along the way. By the time it becomes law — if ever — it may be weakened beyond recognition, with shrunken civil penalties and a clunky mandatory mediation process designed to drain resources, and wills.

Guatemala and Kyrgyzstan both have on the books what for many environmentalists remains a fever dream: the crime of ecocide, the willful or wanton destruction of the natural environment. In both countries, ecocide charges have been filed against companies (for river pollution and hazardous waste mismanagement, respectively), but no conviction has ever resulted. The challenges associated with national adjudication have caught the attention of the International Criminal Court, which has indicated a willingness to broaden its remit to hear cases of environmental destruction.

Who’s afraid of the ICC? Certainly not the members of the Business Roundtable, safe on American soil beyond the clutches of the Hague. That doesn’t mean their troubles are over.

The popularity of proposals like the Green New Deal is spurring top Democratic candidates Elizabeth Warren and Bernie Sanders to raise the stakes on corporate malfeasance. Warren has introduced legislation calling for more detailed financial reporting on climate risk exposure, potentially opening the door for legal action against reckless risk-takers. Sanders, for his part, has gone so far as to accuse the fossil fuel industry of ‘criminal activity’ for knowingly contributing to the climate catastrophe by promoting the use of fossil fuels.

The bitter irony is that this golden age of CSR is unfolding even as rogue leaders exploit weakened regulations and longstanding but unenforceable democratic norms to consolidate power unto themselves. They are proof from the top that self-policing is no substitute for legal protection against the forces of greed.

Confronting such brute cynicism in the corridors of the United Nations this September, may the good leaders of the world acknowledge a fact of which voters are increasingly aware: that the world we want, that most honorable pursuit, will take more than an honor system to achieve.

I'm a lawyer and global development strategist interested in corporate governance and social responsibility.