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 / Fourth Quarter 2002 / Issue 29(originally published by Booz & Company)


Globalism without Tears: A New Social Compact for CEOs

Agenda Item 2: Business leaders should expand the work of industry associations.

Consider the Fair Labor Association (FLA), a group formed by 11 leading apparel companies, including Nike, Patagonia, and Liz Claiborne; NGOs such as the Lawyers Committee for Human Rights and the National Consumers League; and several universities. The purpose of the FLA is to eliminate sweatshops around the world. The members have developed a code that prohibits forced labor and child labor and supports freedom of association, minimum wages, limits on working hours, clean bathrooms, and similar rights and amenities. The group monitors members’ facilities abroad. It conducts surprise inspections. Companies in compliance with the group’s code can put FLA labels on their products.

Few would say that the FLA is as thorough as it could be. But the template is a good one and ought to be extended to other industries. One sector ripe for this approach is mining, an industry in which many companies are realizing the advantages of improved images by setting minimal social and labor standards. Big mining companies are concerned that their access to financing could suffer because of banks’ fears that their own reputations could be dragged down by association with companies that are the targets of social resentment. In early 2002, an industry working group known as Mining, Minerals, and Sustainable Development met to consider industry guidelines on policies toward the environment, health and safety, ethical standards, and sharing information on best practices. The group is on the right course.

Another industry that is thinking hard about its broader challenges is biotechnology. In the summer of 2002, Carl Feldbaum, president of the Biotechnology Industry Organization, told his 15,000-member audience that the industry needed to develop a “foreign policy” because it risked being dragged into a morass of social and ethical controversies in the developing world. The industry needed to learn from the mistakes of others and avoid them, he said. “Biotechnology will need much closer and more trusting relationships with foreign governments, the World Health Organization, and NGOs,” he added. Mr. Feldbaum, too, is on the right track.

Numerous other industry groups could and should work together, for by acting collectively, they can ensure that they will not reduce the competitiveness of any one company, while working to enhance the overall welfare of society. As Roger L. Martin, dean of the Joseph L. Rotman School of Management at the University of Toronto, wrote in the Harvard Business Review, energy-producing companies could come together to create and implement a strategy to reduce greenhouse-gas emissions, and media companies could address the question of banning child pornography around the world.

Agenda Item 3: Business leaders should expand engagement with public and nonprofit institutions.

Business leaders need to step up their engagement with other organizations, public and private. A good case study is the Global Compact, initiated by United Nations Secretary-General Kofi Annan in July 2000 and signed by Nike, DaimlerChrysler, Royal Dutch/Shell, and dozens of other companies, together with 12 labor associations and public-interest groups. The compact is a voluntary code aimed at improving human rights, eliminating child labor, and protecting the environment. Critics complain that because there are no sanctions for violations, the agreement is just rhetoric. However, the signatories have committed themselves to important first steps, such as posting on their Web sites the progress made in implementing the principles and agreeing to a series of meetings to explore ways to promote the compact’s goals.

Another example of an essential coalition is the code called Voluntary Principles on Security and Human Rights. In December 2000, then-Secretary of State Madeleine Albright and British Foreign Minister Robin Cook brought together Chevron, Texaco, Royal Dutch/Shell, and BP with various human rights organizations. The issue was how to balance the determination of companies to meet real security threats in dangerous places with respect for human rights. The parties negotiated voluntary principles that companies can use to assess the impact of their activities on human rights; the relationship between companies and state security forces, both military and police; and corporate relationships with private security forces. “The voluntary principles address narrowly defined issues, and the commitment of their participants remains untested,” Bennett Freeman, who helped negotiate the arrangement for the State Department, has written. “But if this process continues and these principles stick … the negotiations may serve as a useful precedent as the old diplomacy of governments pushes into the still-virgin terrain of the diplomacy of globalization.”

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  1. Jeffrey E. Garten, “From New Economy to Siege Economy: Globalization, Foreign Policy, and the CEO Agenda,” s+b, First Quarter 2002; Click here.
  2. Amy Cortese, “The New Accountability: Tracking the Social Costs,” New York Times, March 24, 2002; Click here.
  3. Geoff Dyer, “Biotech Sector Urged to Focus on Problems of Poor Countries,” Financial Times, June 12, 2002; Click here.
  4. Alison Maitland, “Human Rights and Accountability,” Financial Times, June 13, 2002; Click here.
  5. Roger L. Martin, “The Virtue Matrix: Calculating the Return on Corporate Responsibility,” Harvard Business Review, March 2002; Click here. 
  6. Business Partners for Development, Putting Partnering to Work, April 2002; Click here.
  7. Global Reporting Initiative, Sustainability Reporting Guidelines on Economic, Environmental, and Social Performance, June 2000; Click here.
  8. Manufacturers Alliance and National Association of Manufacturers, U.S. Manufacturing Industry’s Impact on Ethical, Labor, and Environmental Standards in Developing Countries: A Survey of Current Practices, April 2001; Click here.
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