ROLE OF INTERNATIONAL LAW IN PROMOTING CORPORATE SOCIAL RESPONSIBILITY

This article is written by Suhani Bahety of O.P. Jindal Global University, Sonipat, Haryana, an intern under Legal Vidhiya

ABSTRACT

The role of international law in the encouragement of corporate social responsibility has received great attention given the slowly but progressively growing realization among businesses worldwide of the need for ethical conduct in an increasingly globalized world. This article researches the contribution of international legal frameworks, treaties, and stakeholder expectations to the attainment of CSR through corporations. By examining a slew of elaborate treaties, such as the UN Global Compact, OECD Guidelines, ILO’s guidelines and investment treaties, this article shows how international law defines standards for corporate behaviour and holds them culpable for social and environmental impacts. In essence, the paper argues that international law (especially human rights law, environmental law, and labour law) is tremendously useful in developing a corporate culture of responsibility that all the same enhances their contribution to the sustainable development of societal well-being.

KEYWORDS 

International Law, Corporate Social Responsibility, Human Rights, Environmental Law, Sustainability, Soft Law Frameworks, Transnational corporations, Business and Ethics. 

INTRODUCTION

CSR is an initiative that has been touted as a possible remedy for the ills of globalization that hinder the realization of sustainable development, that is, inequities in wealth, environmental degradation, and unfair labour practices that are endemic to globalization. It can be traced back to the 18th and 19th centuries, wherein initial talks on the moral and social obligations of commercial actors took shape. However, the formal study of CSR in itself is considered to have started in the year 1953 with Howard Bowen’s Social Responsibilities of the Businessman, wherein he pronounced it a corporate responsibility to pursue any and all policy decisions in the best interest of societal goals and values. The idea of sustainability came to the fore in the 1990s, encompassing environmental matters along with the social and economic dimensions that had evolved to inform CSR’s wider perspective. This led to the emergence of the triple bottom line, designated as economic, social, and environmental performance. In addition to all that, corporate citizenship concepts, which referred to the roles of business in society, came into fashion as an alternative language or narrative for framing CSR. 

How does international law support this concept?

Corporate Social Responsibility (CSR) and international law are showing increasingly evident interconnectedness as global businesses are confronted with ethical conduct comporting under diverse and often adverse terrains. International law provides a backdrop that supports CSR by embedding principles related to human rights, labour standards, and environmental protection into the very fabric of corporate operations. Human rights law exemplifies this by stressing corporations’ duty to respect fundamental rights, thus driving them to think about the social consequences of their operations. Labour law also sets the standards for fair treatment and working conditions, insisting that companies respect workers’ dignity throughout their supply chains. Environmental law connects further, requiring businesses to behave sustainably and reduce their ecological footprint. These together undergird a solid framework directing corporate behaviour and holding companies accountable for their action, establishing a culture of responsibility and ethical governance in the global market. As such, international law is therefore a key ally in driving CSR initiatives forward, assuring that the positive contributions of businesses to society are not forsaken in contrast with the ends of business economic power. 

THE COMMON GUIDING THEORIES  BETWEEN INTERNATIONAL LAW AND CORPORATE SOCIAL RESPONSIBILITY

International law and corporate social responsibility harbour similar guiding principles that express the growing positive consensus on the responsibilities of businesses in the global arena.

Theory of rights and justice ( International humanitarian law)-

The theory of rights pointedly bolstered by international human rights law strongly emphasizes the significant role played by human rights in business ethics. In other words, international human rights law as encapsulated in the Universal Declaration of Human Rights (UDHR) and other such conventions lays down foundational rights and freedoms that every single individual is entitled to. CSR recalls all these principles, obligating corporations to respect human rights in all their endeavours and ensuring that their business practices do not contribute to any human rights violations.

For instance- The UN Guiding Principles on Business and Human Rights confers a robust framework that offers interrelated state obligations to safeguard human rights and that captures corporate respect for the same. In 2011, the UN Guidelines related to Business and Human Rights (UNGPs) were unanimously approved by the UN Human Rights Council. The UNGPs offer a normative and authoritative framework for directing moral business practices in the face of violations of human rights in corporate operations, especially in global supply chains.  The 31 guiding principles of the UNGP are based on three pillars: Protect, Respect, and Remedy. The three pillars outline the obligations that governments and corporations have to uphold human rights. Every pillar offers a series of doable actions to guarantee human rights are upheld in the course of corporate operations. 

The UN Norms on the Responsibilities of Transnational Corporations also highlight the corporate obligation to promote, secure, and protect human rights. It is noted that the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (the Norms) seek to make TNCs accountable for human rights violations much like states are. The definition of human rights used in the Norms encompasses a broad range of civil, cultural, economic, political, and social rights. This includes the right to an adequate standard of living, including food, water, and housing. The Norms also aim to make all these rights legally effective through the private law of TNCs, seeking to end-run states that have not ratified certain human rights conventions. These norms also introduce the concept of due diligence, implying that TNCs must take measures to avoid contributing to or benefitting from human rights abuses. This has implications for their operations, supply chains, and general practices. For example, the commentary on compulsory labour prohibition suggests that TNCs must prevent workers from falling into debt bondage.

Theory of environmental justice (International environmental law)-

This theory within international environmental law postulates that environmental benefits and burdens should be distributed fairly. It aims to address the imbalance in environmental disasters that affect more disadvantaged sections of society without compromising everyone else’s right to a healthy environment. This theory feeds into Corporate Social Responsibility (CSR) by asking businesses to conduct their operations in ways that don’t harm the communities they operate in, including developing ones.  CSR and International Environmental Law integrate through this basic framework, which encourages enterprises to go beyond legal compliance in the traditional sense and instead pursue ethical approaches that promote sustainability and fairness.

Transboundary Environmental Harm: International law recognizes that environmental damage does not always follow national boundaries. For example, in Nigeria, Shell’s actions caused massive environmental damage, resulting in several human rights breaches. It suggests that it is past time for corporations to be held legally accountable for the environmental damage produced by their operations in other countries. This prompted an update of Shell’s General Business Principles to encourage CSR activity. Additionally, several International Standards and Certifications for environmental management systems have emerged, including ISO 14001 (International Standardization Organization) and SA 8000 (Social Accountability), which have led to an international push for responsible corporate practices. 

Theory of ethics (International labour law)-

The International Labour Organization (ILO) is responsible for establishing core labour standards under international labour law. These essential norms include freedom of association, the right to collective bargaining, the prohibition of forced labour, the abolition of child labour, and the elimination of employment discrimination. Most CSR activities are based on these sets of norms and business commitments to take mass action in support of the principles of fair labour, good working environments, and employee rights. The ILO Tripartite Declaration of Principles on Multinational Enterprises and Social Policy establishes labour standards for multinationals. These include labour regulations that prohibit forced employment, child labour, and discrimination. There is some overlap with human rights regulations. 

Various countries, including Germany, France, the United Kingdom, India, and others, have implemented supply chain laws to guarantee that corporations address human rights and environmental concerns in their supply chains. Such rules are directly derived from the UN Guiding Principles on Business and Human Rights and represent a shift from voluntary to mandatory CSR. Such legislation includes the French Supplier Chain Law of 2017 and the one proposed by the European Parliament in 2015 which would require over 800,000 European enterprises to disclose information about their supplier networks. Similarly, The United Kingdom’s supply chain transparency legislation was built after the 2012 California Transparency in Supply Chains Act (CTSCA). 

INTERNATIONAL SOFT LAW FRAMEWORKS

Several international soft law instruments and principles promote CSR by establishing expectations and guidelines for corporate behaviour, even though they will not traditionally bear the weight of legally binding obligations. These instruments generally address issues of human rights, labour rights, environmental protection, and corruption prevention and are effective in shaping the practices of companies:

UN Global Compact Programme-

An initiative by the UN Secretary-General was established as an enduring platform to promote ten principles in the areas of human rights, labour, environment, and anti-corruption. Business leaders from across the world are invited to voluntarily adopt and implement these principles in their corporate practices and to advocate for complementary public policy initiatives. The Global Compact’s principles are drawn from:

• The Universal Declaration of Human Rights.
• The International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.
• The Rio Declaration on Environment and Development.

The UN Global Compact has served as a powerful force for CSR implementation in India, mainly because of the Companies Act of 2013 which mandates specific types of companies set aside a certain profit percentage for community initiatives. Many Indian industrialists are embracing the UNGC framework to further their CSR aspirations. The Tata Group- one of India’s largest conglomerates- has been socially responsible and environmentally sustainable since its inception. Tata focuses on education, health, and rural development by aligning its initiatives with the UNGC principles. This showcases how compliance with global standards can drive local impact. 

OECD Guidelines for MNEs-

This is a set of non-binding recommendations addressed by governments to multinational corporations (MNCs) whose business operations are often based in countries that have common guidelines. While recognising that the guidelines are not legally binding, member countries have nevertheless undertaken to promote them wherever their companies operate. The guidelines identify voluntary principles and standards related to responsible business conduct for: Employment and industrial relations; Human rights; The environment; Information disclosure; Combating bribery; Consumer interests; Science and technology; Competition; and Taxation. 

Germany has been proactive in implementing the OECD’s CSR guidelines for enhancing corporate governance and sustainability. The German government encouraged companies to apply CSR measures consistent with international standards. For instance, the German Sustainability Code (Deutscher Nachhaltigkeitskodex), which restates principles of the OECD guidelines, demands companies to report their sustainability efforts and impacts. To assist further the Federal Ministry of Labour and Social Affairs likewise holds sector dialogues under the banner of the National Action Plan for Business and Human Rights. The purpose of dialogues is to give guidance to companies operating in sectors that have special human rights challenges, to subsequently assist such companies in the adequate implementation of the requirements concerning their human rights due diligence obligations. As a result, in the face of CSR initiatives being heartily embraced by German firms, a culture of responsibility has emerged, resonating well with stakeholders. 

International Labour Organization’s Tripartite Declaration-

The tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy of the ILO provides principles for the guidance of the governments, employers, and workers’ organisations regarding employment, training, working and employment conditions, and industrial relations. It is a key reference for labour rights within the wider context of the CSR agenda. The principles highlight the right to not only create and join a trade union but also to practice association.

Take, for instance, The garment industry in Bangladesh has faced criticism over poor working conditions and the violation of labour rights. The ILO has played an important role in CSR promotion after the Rana Plaza disaster in 2013 (Bangladesh), ILO stepped in with initiatives to improve working conditions and labour rights in Bangladeshi garment factories. With the cooperation of the International Finance Corporation (IFC), the ILO has set guiding principles, support, and training through its program on Better Work to the factories for better compliance with labour standards. In response to this, Global brands that source from Bangladesh, such as H&M and Gap, have further introduced CSR policies based on ILO standards to pledge for a safer working environment and better wages for their workers. 

International investment law and its influence to adhere to CSR policies-

International investment law is increasingly integrating corporate social responsibility in itself through several mechanisms and moving away from its traditional focus on investor protection. Canada, Brazil, and the EU have already begun to include CSR provisions in their investment agreements, although their approaches vary. For example, Canadian treaties often recommend that firms adopt internationally recognized CSR standards, while Brazilian agreements tend to impose CSR obligations directly on investors. The obligations are related to labour rights, environmental protection, human rights, community relations, and anti-corruption. 

Investment tribunals are asked to provide more balanced interpretations of international investment obligations, taking CSR policies into account within non-discrimination, fair and equitable treatment (FET), and indirect expropriation tests. For instance, non-economic factors such as social and environmental impacts should be weighed when portfolio investors are found to be in ‘like circumstances’, allowing for differentiation based on legitimate CSR policies. FET examinations seek a balance between investment environment stability and evolving CSR regulations. Furthermore, when analyzing indirect expropriation, tribunals are encouraged to take the sovereign right of the host state to regulate CSR into account. Modern investment treaties also incorporate preambles with social and environmental protections, along with ‘no lowering of standards’ clauses which inhibit states from lowering their environmental or labour standards to attract investment. 

CHALLENGES

1. Voluntary Nature of CSR: Much of the CSR initiatives are collective efforts that depend entirely upon the voluntary action of a company. CSR emerges to be a concept where companies set themselves voluntarily to assist and contribute towards the betterment of society and the environment. Many companies, while giving voluntary statements of CSR activities, would shy away from engaging in such activities unless compelled to do so by law. The nonexistence of internationally binding standards of law allows the firm itself to gauge its extent of dealings with CSR and may lead it to “window-dress” instead of fulfilling its commitment to social responsibility.
2. Defining CSR: There are different scholarly definitions and interpretations of the concept of CSR, which entails difficulties in developing and implementing a uniform standard of CSR. The concept of CSR is termed “opalescent” since it appears in multiple forms and is expressed in various words across cultural contexts and specific organizations. There are many different and diverse origins of CSR, hence the consolidation under one theory or measuring stands a little difficult. An unclear definition of CSR in investment treaties complicates their interpretation and enforcement.
3. Conflict Between Investor Protection and Host State Regulation: International investment law mainly seeks to protect foreign investments. This inherently can be in conflict with attempts by the host state to regulate corporate behaviour for social and environmental purposes. The tension lies between the social dimension of MNE regulation and the investor protection of international investment law. Such regulations by a host state regarding CSR may be construed as violations of international investment law when one views them as discriminatory, frustrated expectations on behalf of an investor or under the mode of indirect expropriation.
4. Different National Perspectives: Implementation of CSR varies greatly depending on the governance and economic systems employed. Whereas liberal economies might favour explicit CSR policies, coordinated market economies tend to build responsibility into broader norms and regulations. This variation makes it hard to patch a single universal standard of CSR because social responsibility itself can differ from regulatory environment to environment.
5. Limited Applicability of International Law to Business: Historically, international law does not apply to corporations, as they are not the objects of laws but states themselves. While recognition as responsible actors goes beyond the corporation itself, the legal structures towards acknowledgement of their accountability on an international scale remain in the process of being clarified. Consensus among the national governments on vital social objectives suited to support international accords with standards of business conduct remains nonexistent. Consequently, many CSR provisions in international treaties are nomenclature “soft law,” meaning not legally binding. In contradistinction stands the notion of hard law, creating solid obligations. This is particularly so because many international investment agreements treat the investor as a third-party beneficiary rendering it difficult to map responsibilities on them directly.

REMEDIES 

• Establishment of national courts and tribunals to enact CSR in a coordinated manner.

Alien Tort Claims Act (ATCA): The ATCA has been utilized in the US for cases against corporations for human rights violations conducted abroad. A handful of these cases have been withdrawn, settled, or are still open, demonstrating the hurdles associated with this tool. The chief effect of the ATCA has been “existential”, that is, by making the possibility of redress available, it has made some difference. 

Jurisdiction Difficulty: Very often, suits against subsidiaries do not enjoy the protection of the court; they are, however, complicated by jurisdiction issues, including the doctrine of forum non conveniens, allowing the court to decline jurisdiction in favour of a forum that is more appropriate. The Brussels Convention on Jurisdiction and the Enforcement of Judgments does provide that MNEs can be sued in the forum of the parent, thereby rendering forum non-conveniens claims within the EU redundant. 

• Civil Society Action:

From monitoring corporate behaviour and exposing abuse to advocating for change, NGOs and activist groups play a central role. NGOs like Amnesty International, Human Rights Watch, and Global Witness can more actively monitor and report on human rights violations by corporations. Public campaigns can be used to put a passive burden on corporations, possibly influencing their reputation and finances. For instance, McDonald’s, Nestlé, and Nike have all faced social pressure campaigns regarding issues like animal rights, infant milk formula, and sweatshops. 

• Socially Responsible Investing:

This formula may lead Investors to elect to invest in or divest out of a business based on that corporation’s social/environmental performance. In addition to that, Shareholders can exercise their rights to influence corporate social behaviours through voting resolutions and engagement with management. As noticed, Ethical investment funds often avoid investing in companies involved in tobacco, weapons, or activities that harm the environment.

CONCLUSION

International law contributes largely to CSR by outlining clear sets of structures that steer corporate acts toward ethicality and respectability for sustainable conduct. Through instruments like the UN Global Compact, OECD Guidelines, and ILO standards, international law sets limits for businesses with respect to human rights, labour rights, environmental sustainability, etc. These frameworks always ameliorate corporate accountability while inculcating a culture of active responsibility among companies worldwide.

As businesses are more willing to embrace a supportive role towards society, the incorporation of CSR principles within international legal frameworks becomes a sine qua non. It allows a channelling model whereby corporations would be conducting themselves in an ethical manner in pursuit of their economic motives. Consequently, international law is an ally that rests on the promotion of CSR and strives for an equitable, sustainable future for all stakeholders involved. 

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