Monday, 2 June 2014

NGOs and business: critics to capacity-builders

The promotion of responsible business practices in Africa will benefit from NGOs not just criticising firms but engaging with them along the value-chain.

Last week the deadline passed for US-listed companies whose supply chains may involve so-called 'conflict minerals' to submit certain plans to the stock exchanges regulator. These plans explain how they intend to ensure that their products will not use minerals mined in conflict-affected areas marked by force-based labour methods and serious systematic human rights abuse. For an accessible overview, see this BBC report.

That these regulations exist at all (*) is largely the result of long-running, intensive campaigning by groups such as Global Witness. Often this has involved exposing firms who know of (or unreasonably undertake no due diligence in relation to) the problematic social context of their supply-chain inputs.

In an open, democratic society where much of the aggregate of social power is wielded by private individuals and entities (and where state regulatory capacity is stretched or distracted) there must always be a place for organisations committed to critical monitoring and advocacy around corporate responsibility for enviro, social and governance impacts.

So critical advocacy, shaming and boycotting have their place. However, they do not necessarily result in solving the underlying problem.

In particular, these are strategies that tend to assume nefarious motives or indifference on the part of firms. These strategies do not account for the possibility that corporate non-compliance with responsible business standards may be a result of lack of capacity and/or understanding, not a lack of will.

In the same way, an advanced society needs a capacity and will to punish certain criminal conduct, yet acknowledges that a more constructive, problem-solving, restorative approach is needed to change behaviours. Regulatory theory tells us that the best-adapted and appropriate systems are those that not only tell or incentivise regulatees to comply, but also devote time and resources to helping them understand what counts as 'compliance' and how to achieve it (or indeed to go beyond compliance, through continuous improvement).

Of course, NGOs have for years (and increasingly in the last decade) engaged more closely with business in pursuit of shared objectives. The Aspen Institute report on the future of non-profits' ties to business pointed out the merits and drivers of this trend over a decade ago. (For a recent overview of these trends, see here and see FSG's report 'Ahead of the Curve' on the international NGO of the future, including its need to engage business more readily in achieving civic aims).

What is different, and to be welcomed, is the greater recognition by NGOs and civil society coalitions that compliance with supply-chain integrity issues is often complex, and that many firms may need advice as much as criticism. This is true, as said, of regulation generally as an activity.

The greater the degree of engagement and cooperation by a non-profit, the greater the risk (from the non-profit's perspective) of 'capture' by corporate interests, or the loss of authority credibly to assess business compliance. Where engagement is intended to help overcome obstacles to compliance, these are manageable and acceptable risks considering the nature and scale of challenges at stake, and the convergence of corporate and civil society interests in addressing these.

One recent primer in this regard is Corporate Responsibility Coalitions, co-authored by Jane Nelson, on new forms of alliance for more sustainable capitalism.

Firms across sectors and up/down supply chains are seeking alignment of responsible and sustainable practices -- and often NGOs can help catalyse these inter-firm relationships; indeed, many firms learned from their tentative relationships with civil society partners how also to reach out to ostensible competitors or other firms on shared issues.

Firms can, strictly speaking, point out that it is for the governments of developing countries to regulate social (etc) impact issues, such that compliance failures ultimately reflect the state's failure. However, such a response is unlikely to satisfy critics -- or increasingly discerning consumers, financiers and insurers, at least in the West.

Yet as an Economist article noted last year, NGO-business partnerships and collaboration is good for society (and business), but these relationships are often messy, tricky, difficult, unsatisfying.


(*) Note, the US Supreme Court recently ruled on the application of the Dodd-Frank Act in relation to the regulation of conflict minerals in US-linked firms.

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