Corporate Social Responsibility
In recent years, corporate social responsibility issues have figured increasingly prominently on the business agendas of companies with transnational operations. Quite apart from basic ethical considerations underlying such programs, a failure to observe the basic norms of corporate social responsibility, including human rights and labour standards obligations in a company’s foreign operations, can lead in practical terms to significant financial and reputational damage.
Risk of litigation related to violations of corporate social responsibility norms is an emerging concern. There has been an increase in recent years in private litigation against companies with transnational operations for abuses allegedly committed by subsidiaries. Such cases have recently been allowed to proceed in Canada and are also possible in the United States and the UK. They can lead to significant legal costs, reputational damage and potentially significant damage awards depending on the outcome of the case. Failure to observe minimum CSR standards may also disqualify companies from winning contracts with large international businesses and international financial institutions such as the World Bank which require their suppliers to have adequate CSR programs in place.
Growth in shareholder activism on social responsibility and sustainability issues has increasingly included shareholder resolutions directing corporations to adopt policies and programs that help detect, mitigate and avoid human rights abuses. Failure to act in a socially responsible manner can also lead to social unrest, resulting in forced closings (temporary or otherwise) of company operations leading to large lost opportunity costs and financial losses.
In the retail and consumer goods area in particular, where discretionary purchases are often influenced by non-commercial considerations, companies find themselves under increasing pressure from both their customers as well as from shareholders and other stakeholders to ensure that minimum acceptable international standards are respected as part of a comprehensive system of ethical sourcing of products throughout their supply chains. A failure to do so can lead to consumer resistance, leading ultimately to lost sales and decreased market share.
A CSR program may include a number of steps such as:
• conducting risk assessments to determine areas where company operations may be having a detrimental impact on human rights;
• drafting codes of conduct and policies to ensure that appropriate obligations concerning compliance with human rights and labour standards as prescribed by the United Nations, particularly the UN Guiding Principles on Business, and by the International Labour Organization (“ILO”), are adhered to in company operations;
• conducting employee training and ongoing audits and monitoring to ensure compliance with relevant standards;
• when dealing with third party suppliers, ensuring that the relevant human rights and labour standards are incorporated in manufacturing and supply contracts as appropriate;
• drafting and enforcing supplier codes of conduct with appropriate sanctions for non-compliance;
• ensuring that factory audits are performed as required, to ensure compliance with codes of conduct in locations where suppliers have manufacturing facilities in developing countries where local regulatory regimes may not by themselves provide adequate protections for worker safety and other human rights;
• implementing traceability systems to monitor the sourcing of inputs for manufactured products throughout the supply chain; such traceability systems may be focused on issues such as labour standards, human rights, environmental and/or other desired standards such as safety and quality control at each stage in the supply chain and conflict minerals; and
• achieving acceptable resolution for issues of non-compliance or imposing appropriate sanctions on suppliers where warranted.
We can assist companies in determining what obligations must be met in this area and work with corporate staff to design a legal and institutional framework adequate to ensure CSR standards are met in a timely fashion.
Publications and Presentations:
- "Corporate Social Responsiblity and Corruption: Fulfilling CSR Goals without Violating Anti-Corruption Laws", Sills Egsgard LLP E-Bulletin
- "Meeting CSR Objectives without Inadvertently Violating Anti-Corruption Laws", powerpoint slides from J. Egsgard presentation to Canadian Institute Conference, "Anti-Corruption Compliance: Taking a Multidisciplinary Approach to Managing Corruption Risk", June 24, 2015
- "The Risks that Arise from Violating CSR Norms", Northern Miner Global Mining Newspaper, March 2, 2015
- "Corporate Social Responsibility: The Issues", Sills Egsgard LLP E-Bulletin
- "Risks Arising from Violation of CSR Norms: Litigation, Social License, and Reputational Damage", Sills Egsgard LLP Article
- Power Point Slides from J. Egsgard presentation at Ontario Bar Association panel discussion, "CSR and the Critical Role of the Lawyer", February 5, 2015
- "Supply Chain Due Diligence and the Growing Risks of Failing to Effectively Monitor Your Suppliers", Sills Egsgard LLP E-Bulletin
- “Ethical Supply Chains and Corporate Social Responsibility”, Sills Egsgard LLP