Ngo Strategies for Promoting Corporate Social Responsibility Sample

This study was carried out, as part of the MBA curriculum prescribed by the Bangalore University, after the 1st year of the MBA programme i. e. after the 2nd semester and before the commencement of the second year i. e. before the 3rd semester of the MBA programme. We had to undergo summer training in the corporate sector for hands on experience, where we get an opportunity to put into practice the knowledge gained during the entire first year. Hence, the organizational study was conducted at Shekar Agencies, Bangalore, for a period of 5 weeks. The organization was studied on an overall basis. The objective of our study was to:

* Understand the structure of Shekar Agencies and how it functions. * Understand the different facets of the environment in which the organization operates. * Understand the culture of Shekar Agencies. * Know about the decision-making processes in Shekar Agencies. The process or methodology used in this study was: * Learn about the working environment of Shekar Agencies. * Sketch the organizational hierarchy. * Assess the performance of Shekar Agencies. * Study the procedures, functions and activities of Shekar Agencies employees. * To examine the changes in the environment and how best Shekar Agencies can achieve its objectives.

1. 2 INDUSTRY PROFILE 1. 2. 1 Meaning of Lubricant The word ‘LUBRICANT’ means a substance such as grease or oil which reduces friction when applied as a surface coating to moving parts. It may also have the function of transporting foreign particles. The property of reducing friction is known as lubricity. 1. 2. 2 Manufacturing Process of Lubricating Oil Lube oil is extracted from crude oil, which undergoes a preliminary purification process (sedimentation) before it is pumped into fractionating towers. A typical high-efficiency fractionating tower, 25 to 35 feet (7. 6 to 10.

6 meters) in diameter and up to 400 feet (122 meters) tall, is constructed of high grade steels to resist the corrosive compounds present in crude oils; inside, it is fitted with an ascending series of condensate collecting trays. Within a tower, the thousands of hydrocarbons in crude oil are separated from each other by a process called fractional distillation. As the vapours rise up through the tower, the various fractions cool, condense, and return to liquid form at different rates determined by their respective boiling points (the lower the boiling point of the fraction, the higher it rises before condensing). Natural gas reaches

Crude oil distillation process A good lubricant possesses the following characteristics: * High boiling point. * Low freezing point. * High viscosity index. * Thermal stability. * Corrosion prevention. * High resistance to oxidation. The most important function of lubricants is the reduction of friction and wear and in some cases; the relative movement of two bearing surfaces is only possible if a lubricant is present. In times when saving energy and resources and cutting emission have become central environmental matters, lubricants are increasingly attracting public awareness. Scientific research has shown that 0.

4 % of gross domestic product could be saved in terms of energy in Western industrialized countries if current tribological knowledge, i. e. the science of friction, wear and lubrication, was just applied to lubricated processes. Apart from important applications in internal combustion engines, vehicle and industrial gearboxes, compressors, turbines or hydraulic systems, there are a vast number of other applications which mostly require specifically tailored lubricants. This is illustrated by the numerous types of greases or the different lubricants for chip-forming and chip-free metalworking operations which are available.

Between 5000 and 10 000 different lubricant formulations are necessary to satisfy more than 90 % of all lubricant applications. If one thinks of lubricants today, the first type to come to mind are mineral oil based. Mineral oil components continue to form the quantitatively most important foundation of lubricants. Petrochemical components and increasingly derivatives of natural, harvestable raw materials from the oleo-chemical industry are finding increasing acceptance because of their environmental compatibility and some technical advantages.

On average, lubricating oils, which quantitatively account for about 90 % of lubricant consumption, consist of about 93 % base oils and 7 % chemical additives and other components (between 0. 5 and 40 %). Worldwide, there are 1380 lubricant manufacturers ranging from large to small. On one hand there are vertically-integrated petroleum companies whose main business objective is the discovery, extraction and refining of crude oil. Lubricants account for only a very small part of their oil business.

At present, there are about 180 such national and multinational oil companies engaged in manufacturing lubricants. The 1200 independent lubricant companies mainly concentrate on the manufacturing and marketing of lubricants and view lubricants as their core business. While the large, integrated companies focus on high-volume lubricants such as engine, gear and hydraulic oils, many independent lube companies concentrate on specialties and niche business, where apart from some tailor-made lubricants, comprehensive and expert customer service is part of the package.

The top 1 % of the world’s manufacturers of finished lubricants (of which there are more than 1380) account for more than 60 % of global sales; the other 99 % share less than 40 %. World ranking of the largest manufacturers of lubricants (2005) 1. Shell Great Britain/The Netherlands 2. Exxon Mobil USA 3. BP (Castrol) UK 4. Petrochina/Sinopec China 5. Chevron USA 6. Lukoil Russia 7. Fuchs Germany 8. Nippon Oil Japan 9. Valvoline USA 10. Idemitsu Japan 11. Conoco Phillips USA 12. CPC Taiwan 13. PDVSA Venezuela 14. Repsol Spain 15.

Indian Oil India 16. Agip Italy 17. Yukos Russia T he current era of corporate globalization has not altered the fundamental nature of the struggle for human rights, but it has shifted its context and created new opportunities and challenges for the global human rights movement. Since the early 1990s this movement, which used to focus exclusively on the policies and practices of nation-states, has begun examining the role of multinational corporations and international financial institutions in the protection and promotion of human rights.

This article describes and evaluates the different strategies that have been employed by human rights nongovernmental organizations (NGOs) in attempting to in? uence the behavior of multinational corporations (MNCs). Within the NGO world, there is a basic divide on tactics for dealing with corporations: Engagers try to draw corporations into dialogue in order to persuade them by means of ethical and prudential arguments to adopt voluntary codes of conduct, while confronters believe that corporations will act only when their financial interests are threatened,and therefore take a more adversarial stance toward them.

The latter approach is more in line with traditional labor union strategies and tactics,and in fact is often motivated by a desire to maintain solidarity with union partners. Confrontational NGOs tend to employ moral stigmatization, or “naming and shaming,” as their primary tactic, while NGOs that favor engagement offer dialogue and limited forms of cooperation with willing MNCs. THE NEW FOCUS ON MNCs At least five factors have contributed to human rights NGOs’ interest in the business sector: • a perceived shift of power from nati on states to MNCs and international ?

nancial institutions such as the World Bank and the International Monetary Fund; • the lack of social and environmental accountability of MNCs under existing national and international laws; • the growing anti-corpora te – gl ob a l i z a ti on movement; • a conclusion on the part of large, international human rights organizations that they have been too focused on traditional categories of civil and political rights while neglecting economic, social, and cultu ra l rights; and • a desire on the part of some people in the NGO world to enlist MNCs and business *

An earlier version of this paper was presented at the meetings of the Comparative International Studies Section of the International Studies Association in Washington, D. C. , on August 29, 2000. The author gratefully acknowledges comments and suggestions provided by Christian Barry, Simon Billenness, Geoffrey Chandler, Gemma Crijns, George Frynas, Arvind Ganesan, Rebecca Johnson, Joshua Karliner, and Scott Pegg. The views presented in this article are solely those of the author acting in his private capacity as an independent scholar. 71

executives as allies and as potential levers for promoting human rights globally. Undoubtedly the most important factor is the perception that political and economic power has shifted away from governments and toward corporations, in particular MNCs. In the developed industrial nations of the North, mainly the United States, Canada, Europe, and Japan, state and national governments are often seen as doing the bidding of their major corporations. Increasingly, they resemble plutocracies in which corpora ti ons control the political agenda while also dominating the marketplace.

In the South, large Northernbased MNCs often have more economic power than governments, and nominally democratic crony-capitalist oligarchies continue to control access to most of the valuable natural resources while maintaining power over impoverished populations by force. Within NGOs,there is a widely held view that multinational corporations,already the dominant institutions in contemporary society, are increasing their influence over the economic, political, and cultural life of humanity while remaining almost completely

unaccountable to global civil society. The boards and chief executives who control MNCs are not democratically elected, and their delibera ti ons are not transparent. If they feel accountable to anyone,it is to market analysts and investors who, for the most part, wish simply to make a quick pro? t. MNCs play an influential role in major international ? nancial and trade organizations. One of the most signi? cant events of the past decade was the formation of the World Trade Organization (WTO) in 1995.

The most remarkable feature of the WTO is its dispute-resolution and enforcement powers, and the extent to which its rules could potentially deprive states of their ability to enforce, protect, and fulfill human 72 rights. Some view the aggressive effort to privilege the rights of investors, banks, and corporations over the wishes of consumers, workers, and national or subnational governments and communities as a threat not only to human rights implementation, but also to economic self-determination, development, transparency, and democracy itself.

Under the terms of the WTO, governments can invoke economic sanctions against other states that fail to protect the trade and intellectual property rights of corporations, but corporations are not in turn subject to any binding regulations, let alone formal sanctions, for failure to respect the human and labor rights of the people who live in those states. Indeed, there are currently no generally accepted international legal standards articulating labor, environmental, or human rights obligations that are directly binding on the operations or behavior of MNCs.

1 The only standards that do exist are found in the domestic laws of some countries, and they vary greatly in terms of what they require. By and large,these laws are not well enforced. In countries where such laws do exist and are enforced, MNCs can easily evade them by moving their capital, investments, and production facilities to other 1 International law standards governing labor and human rights, such as the ILO Conven ti ons and the International Covenant on Economic, Social and Cultural Rights, have sovereign states as their subjects.

There are only a handful of instances in which corporations have been assigned the status of legal personalities in international law. See Multinational Corporations and Human R ghts (Utrecht: Amnesty i International/Dutch Section and Pax Ch ri s ti , 1998), chap. II. For a more recent study of the potential for enforceable international legal standards governing MNCs, see “Beyond Voluntarism: Human Rights and the Developing Intern a ti onal Legal Obligations of Companies,” International Council on Human Rights Policy(January 2002); ordering information is available online at www.

ichrp. org. Morton Winston countries that have lower or non-enforced standards. Since developing countries compete with one another for foreign investment and hard currencies,MNC production and capital mobility can lead to a “race to the bottom” in which states compete to provide MNCs with the least demanding regulatory environment for business. 2 The inaction of governments has created a regulatory vacuum. Social activists have seized this opportunity to place human rights, labor rights, and global environmental concerns on the agenda of global business.

The popular demonstrations against “corporate-led globalization” that took place around the WTO meetings in Seattle in November 1999, and subsequent demonstrations against other multilateral economic institutions in New York, Washington, Prague, Quebec City, and Genoa, provide evidence of growing popular resistance to globalization in its current form. This “anticorporate activism” has provided some of the impetus for a number of human rights and environmental NGOs to become involved in debates over global economic, trade, and investment policies.

The recent growth of NGO interest in business reflects an interesting twist on globalization:the concerns of Northern and Southern NGOs are beginning to converge. Large Northern human rights NGOs such as Amnesty International and Human Rights Watch were founded in order to combat violations of trad i ti onal civil and political rights, such as abuses of freedom of expression, arbitrary imprisonment, and unfair trials.

Southern human rights activists are more keenly aware of the legacies of colonialism and imperialism, and they tend to see the most pressing human rights issues in economic and social rather than only in civil and political terms. For many years Southern human rights activists have complained that Northern human rights NGOs have shown little interest in combating abuses of economic, social, and cultural rights. 3 During the past decade at least some members of the Northern human ri gh t s establishment have found reason to agree with this cri ti qu e .

In its recent annual reports, Amnesty International has stressed the indivisibility and interdependence of human rights and has highlighted their relationship to globalization. 4 In the past several years Human Rights Watch has produced groundbreaking reports dealing with topics such as child bonded labor, mistreatment of maquiladora workers, and trafficking in women and girls. Both Amnesty International and Human Rights Watch have reported on human rights violations linked to the activities of major energy companies in countries such as Nigeria, Burma, India, Colombia,and Sudan. There is now a grow2

There has been a lot written about the so-called race to the bottom. See especially Terry Collingsworth, “An Enforceable Social Clause,” Foreign Policy in F cus 3, o no. 28 (October 1998); Debora Spar and David Yoffe, “Multinational Enterprises and the Prospects for Justice,” Journal of International Affairs 52 (Spring 1999). See also the more extended treatment by William H. Meyer on the question of whether foreign investment helps or hurts human rights in developing countries in his Human Rights and International Political Economy in Third World Nations: Multinational Corporations, Foreign Aid, and Repression (Westport, Conn.

: Praeger, 1998). 3 This critique was persuasively voiced at a conference organized by Henry J. Steiner of Harvard Law School in 1990 that was attended by representatives of Northern international NGOs and several Southern NGOs. See Henry J. Steiner, “Diverse Partners: Non-Governmental Organizations in the Human Rights Movement. The Report of a Retreat of Human Rights Activists,” Harvard Law School Human Rights Program and Human Rights Internet (1991), p. 25. 4 See Amnesty International Report 2001, especially the foreword by Pierre Sane, pp. 5-10.

At its 25th International Council Meeting in Dakar, Senegal, in August 2001, Amnesty revised its organizational statute so as to allow it to undertake signi? cantly more research and campaigning on economic, social, and cultural rights. NGO Strategies for Promoting Corporate Social Responsibility 73 ing sense within the human rights community that the major human rights NGOs must find ways of effectively addressing abuses of economic and social rights. The recent focus of many human rights NGOs on the activities of MNCs in developing countries has emerged as one way in which this demand is being met.

Another important reason for many human rights NGOs’ increased focus on MNCs is a desire to ? nd new allies. Human rights NGOs have traditionally drawn most of their membership and ? nancial support from the better-educated, better-travel ed , more cosmopolitan segments of society. Many executives of MNCs fit this profile, and many businesspeople are pers on a lly supportive of NGO activities in a variety of ? elds. Just as NGOs attempt to attract support and expertise from other professional groups, some within the NGO community are actively trying to enlist support from people in the business world.

In some cases there may be a role for business executives as potential agents of political influence, for instance, by interceding with host governments to raise human rights issues. Some even think that corporations themselves can be used as levers for progressive social and economic change, rather than just being engines of profit. 5 Several recent studies have cautiously suggested that multinational corporations may have a constructive role to play in conflict prevention and conflict resolution in the world’s troubled countries. 6 A contrary view is also widely held.

As Maria Ottaway notes, during an earlier era of globalization—empire building—charter companies played a major role in bringing “civilization” to the South. She warns against allowing private corporations to combine their entrepreneurial activities with the role of political and moral reformers. 7 Likewise, not all NGOs believe that MNCs can or 74 should function as agents for the promotion of human rights. NGOs are diverse in terms of their missions, strategies, m et h od s , and organizational forms,and the NGO world as a whole is anarchic.

Quite appropriately, there are a number of distinguishable views and approaches within the NGO world about the appropriate goals, strategies, and tactics for dealing with transnational corporations. ENGAGING MNCs: THE C O R P O R ATE SOCIAL RESPONSIBILITY MOVEMENT While MNCs do not generally commit violations of traditional categories of civil and political rights (with some notorious exceptions), they are often indirectly complicit in such abuses, and they are directly and routinely implicated in abuses of many important social and economic rights.

MNC managers control employment for millions of people around the world and are in a position to in? uence directly the enjoyment of the labor rights and economic rights of their own employees, and to in? uence indirectly those of the employees of their subcontractors and suppliers. Companies also have direct control over health and safety issues in 5 Debora L. Spar, “The Spotlight and the Bottom Line,” Foreign Affairs77 (March/April 1998), pp. 7-12. 6 Jane Nelson, The Business o Peace: The Private Sector f as a Partner in Con? ict P revention and Res lution (Lono don: Prince of Wales Business Leaders Forum, 2000).

See also Virginia Hau? er, “Is There a Role for Business in Con? ict Management? ” in Chester A. Crocker, Fen Osler Hampson,and Pamela Aall, eds. ,Turbulent Peace: The Chall en ges of Managing International Conflict (Washington, D. C. : United States Institute of Peace, 2001), pp. 659-76. 7 Marina Ottaway, “Reluctant Missionaries,” Foreign Policy (July/August 2001), available online at www. foreignpolicy. com/issue_julyaug_2001/ottawayprint. html. Morton Winston the workplace, worker compensation, and rights to organize and bargain collectively.

Over the past several decades there has been a gradual but steady evolution of the idea that corporations have certain ethical responsibilities toward society. Prior to the 1970s the dominant view was that the only responsibility of businesses is to increase profits for owners and investors. This is a legal obligation only. 8 In the 1970s, in the wake of the Lockheed, ITT, Ford Pinto, and other scandals, the view that businesses must not engage in bribery, fraud, or collusive practices, nor may they interfere in the political affairs of host states, gained acceptance.

This led to passage of the Foreign Corrupt Practices Act in the United States, and to the ? rst wave of attempts by the UN Economic and Social Council and other international organizations to regulate MNC behavior. In the 1980s the corporate social responsibility (CSR) agenda was signi? cantly broadened when, in the wake of Bhopal, Exxon Valdez, and other highly publicized environmental disasters, the NGO environmental movement pressed home the idea that MNCs must also protect the environment, thus further expanding the notion that corporations have social responsibilities.

From the early 1990s on, human rights NGOs and other voices within civil society have been calling upon corporations to accept responsibility for promoting labor rights, human rights,environmental quality, and sustainable development. The contemporary CSR movement aims to persuade MNCs to adopt voluntary codes of conduct and implement business practices that incorporate commitments to respect and protect labor rights and human rights as well as the environment. Those who favor the voluntary CSR approach talk a bo ut companies paying atten ti on to the “triple bottom line”—the ?

nancial account, the environmental account, and the social account—and urge MNCs to embrace these new kinds of ethical responsibilities voluntarily. The voluntary CSR approach is seen by its boosters as a practical response to the current lack of MNC accountability, not as an alternative to government regulation or enforceable international legal standards. At the present time, however, there is no universal agreement as to exactly what the social and environmental responsibilities of corporations are.

In the past decade there has been a proliferation of voluntary codes and guidelines, including the Global Sullivan Principles, the Caux Principles, the Ceres Principles, and others, as well as numerous company codes delineating socially responsible business practices. 9 Recently, the UN Subcommission on the Protection and Promotion of Human Rights has published a set of principles that may become the benchmark for articulating a comprehensive and widely acknowledged set of ethical and legal obligations for MNCs.

10 But none of these guidelines or codes has yet received universal acceptance. CONFRONTING MNCs: ENACTING ENFORCEABLE LEGAL STA N DARDS The voluntary CSR approach is not the only NGO strategy. Another in? uential school of 8 See Milton Friedman, “The Social Responsibility of Business Is to Increase Its Pro? ts,”New York Times Mag azine, September 13, 1970. 9 For a c omprehensive review of codes of conduct see Oliver F. Williams, ed. , Global Codes o Conduct:An Idea f Whose Time Has Come(Notre Dame,Ind. : University of Notre Dame Press, 2000).

10 Proposed Draft Human Rights Code of Conduct for Companies, U. N. Doc. E/CN. 4/Sub. 2/2000/XX (2001), available online at www1. umn. edu/humanrts/links/ principles11-18-2001. htm. NGO Strategies for Promoting Corporate Social Responsibility 75 thought within the NGO world views MNCs as constitutionally unredeemable and incapable of voluntarily acting in a socially responsible fashion; companies can only be made to be socially and environmentally accountable by means of economic coercion or through binding legal obligations.

Those who take this view look toward the development of a mass social movement that will compel governments to enact enforceable international legal standards (EILS) that will make MNCs legally accountable to global society. Private voluntary CSR initiatives are viewed as exercises in corporate public relations and as poor substitutes for strict legal regulation. Often allied philosophically and strategically with unions, NGO activists who take this view may seek to support trad i ti onal union organizing efforts to win rights and fair compensation for workers worldwide through collective bargaining agreements with free labor unions.

The strategic split between NGOs that see themselves as primarily working for voluntary CSR and those that favor moving immediately to EILS creates some tensions within the NGO community, but the combination of the two strategies has shown itself to be effective in at least some cases. Many NGOs see EILS as the ultimate goal, but believe that the widespread adoption of voluntary CSR standards by many large MNCs is a necessary way station on the route to that goal.

NGOs following the voluntary CSR approach believe that while enforceable international legal standards for MNCs are desirable and in principle are preferable to voluntary ones,in practice they are not achievable in the present or near future. Many in the NGO world share the view of Noam Chomsky, who told me: You can force corporations to reform. They don’t care about the arguments; they care about the threats. You know like Monsanto started reforming when their stock started going down . . .

. It’s like dictatorships. You can threaten a dictatorship so that it becomes more benevolent . . . that’s good for two reasons: for one thing it helps people, and that’s good, but for another it is very educational; it tells you just how far you can go. Take, for instance, slaveowners. You can tell them to treat their slaves more nicely. But if you tell them they have to give up their slave s ,t h en you’ve hit the limit. And it’s important to understand that 11 limit. It’s the same with corporations.

While some companies are now willing to accept voluntarily their human rights,labor, and environmental responsibilities, at the present time the limit that Chomsky talks a bo ut is reached when one demands that companies give up their freedom of action and submit to enforceable legal standards. Supporters of the voluntary CSR approach generally believe that fear of public shaming will con ti nue to work as an effective means of moving more companies to embrace voluntary CSR. They worry that working directly for EILS at this stage will lead to a corporate backlash that will undermine efforts to establish a critical mass of CSR companies.

Many NGOs also believe that voluntary standards should not be seen as a substitute for enforceable international legal standards, but as a complement to them, since any conceivable future global enforcement system would need to rely in great part on companies monitoring and regulating their own behavior. In this view, voluntary CSR is not just a ? rst step toward legally enforceable standards,it is also a necessary component of any future global compliance regime. Many NGOs believe that MNCs may now be somewhat more willing to cooperate in World ranking of the largest manufacturers of industrial lubricants (2005)

1. Exxon Mobil USA 2. Shell Great Britain/Netherlands 3. Petrochina/Sinopec China 4. Chevron USA 5. BP (Castrol) UK 6. Fuchs Germany 7. Nippon Oil Japan 8. Idemitsu Japan 9. Total France 10. Lukoil Russia 11. PDVSA Venezuela 12. Yukos Russia 13. Repsol Spain 14. Agip Italy 15. Valvoline USA 16. Conoco Phillips USA 1. 2. 3 Global Scenario Declining demand growth of automotive lubricants, increasing competition on account of the presence of a large number of players, and increasing raw material costs and marketing expenditure are leading to declining player margins in the lubricant industry.

Global demand for lubricants in the world is estimated at around 41 million (mn) KL. Automotive lubricants account for around 54%, Industrial lubricants for around 41% and Marine lubricants for the balance. Globally, the lubricants industry has been growing at 2. 0-2. 5% per annum in the past five years. In developed countries, automotive lubricants have been growing at a slower rate of 1. 0% per annum on account of the saturation of vehicle population, improved engine technology and better quality of oil.