ON CORPORATE ACCOUNTABILITY IMPLEMENTING #1 PRINCIPLE OF CORPORATE SOCIAL RESPONSIBILITY Jalal Lingkar Studi CSR/A+ CSR Indonesia www.csrindonesia.com IESR Forum Dialogue: Developing a Regional Platform in Natural Resource Governance Jakarta, 29 October 2012

AGENDA (Corporate) Social Responsibility Literature on Corporate Accountability Concluding Remarks AGENDA

ISO 26000:2010 Guidance on Social Responsibility

Definition of Social Responsibility “Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that contributes to sustainable development, health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organization and practiced in its relationships.” (ISO 26000: 2010 Guidance on Social Responsibility)

Schematic Overview of IS 26000:2010

Priciples of Social responsibility Accountability Transparency Ethical behaviour Respect for Stakeholder’s interest Respect for rule of law Respect for international norms of behaviour Respect for human rights Accountability: “state of being answerable for decisions and activities to the organization's governing bodies, legal authorities and, more broadly, its stakeholders.”

Principle #1: Accountability The principle is: “an organization should be accountable for its impacts on society, the economy and the environment.” This principle suggests that an organization should accept appropriate scrutiny and also accept a duty to respond to this scrutiny. Accountability involves an obligation on management to be answerable to the controlling interests of the organization; to legal authorities with regard to laws and regulations; and to those affected by its decisions and activities, as well as to society in general, varies according to the nature of the impact and the circumstances.

Principle #1 (cont.) The degree of accountability may vary, but should always correspond to the amount or extent of authority. Those organizations with ultimate authority are likely to take greater care for the quality of their decisions and oversight. Accountability also encompasses accepting responsibility where wrongdoing has occurred, taking the appropriate measures to remedy the wrongdoing and taking action to prevent it from being repeated.

Keith (2010). Evolution of Corporate Accountability: From Moral Panic to CSR Business Law International Vo. 11/3 “Given the important and complex role that corporations play in modern society, there is a strong argument that corporate accountability requires a new approach. The prosecution and sentencing of corporations ought to encourage the principles of CSR through appropriate legislation and a mandatory ADR process.” “One of the first steps towards establishing legal recognition of the principles of CSR ... making it mandatory for the largest companies ... to include information on CSR in their financial reports.”

Morgera (2009). Corporate Accountability in International Environmental Law Oxford University Press “...‘accountability’ refers in general to the way in which public and private actors are considered answerable for their decisions and operations, and are expected to explain them when they are asked by stakeholders. They are required to be open in their decision-making processes to be examined and judged by other interested parties.” “Consequently, corporate accountability implies ... widening the scope of stakeholders within a company beyond shareholders, so as to include all interest groups affected by the company’s activities, such as: governments, employees, boards of directors, investors, consumers, suppliers, local communities situated where the company operates, civil society, and the public at large.”

Newell (2005). Citizenship, Accountability, and Community: the Limits of CSR Agenda International Affairs, Vol. 81/3 “Most CSR initiatives are not intended to tackle questions of poverty and social exclusion. They aim at less ambitious goals of performance enhancement and image management,...” “Voluntarism and self-regulation suggest dangerous precedents where state regulation remains unenforced or actively subverted, where compliance needs to be established before ‘beyond compliance’ initiatives can sensibly be contemplated.” “... the role of a strong state ..., an active and well-mobilized civil society and a private sector willing and able to respond to CSR priorities emerge as prerequisites for the success of CSR initiatives.”

Valor (2005). CSR and Corporate Citizenship: Towards Corporate Accountability Business and Society Review, Vol. 110/2 “There are two conditions for the advancement of the social control of companies. First is the stakeholders’ pressure through their economic decisions. Companies will only incorporate social and environmental objectives in their agenda when economic agents show that they also seek these values by incorporating them into their economic decisions.” “... a second condition to ensure corporate accountability: a system change. To put it in a nutshell, this change implies accepting that the common good is more important than the right to receive a dividend, and that social and environmental performance must be balanced with economic performance. This paradigm of the firm should be adopted by economic agents (especially shareholders), by managers, and by regulators.”

Bendell (2004). Barricades and Boardrooms: A Contemporary History of Corporate Accountability Movement. UNRISD Technology, Business and Society “Previous efforts at corporate accountability had failed because of corporate power, and by the turn of the millennium that corporate power was greater than ever before. If civil groups chose to continue boxing with corporate power, they might win a few rounds, but past form suggested that they would lose the fight. “ “Progress therefore relied on people in civil groups and companies transcending the real and metaphorical barricades that separated them, and identifying with a collective movement for reshaping the relationship of corporations with society.”

Schrege (2003). Judging Corporate Accountability in the Global Economy Columbia Journal of Transnational Law, Vol. 42/1 “... three pillars on which a strategy to promote accountability should be based. First, ... encourage local accountability and promote resolution of disputes in the jurisdictions where alleges abuses have occurred. Second, ... create soft law “safe harbors” to shield companies that take effective action to prevent abuses or correct them when they are discovered. Finally, ... support the development of multilateral efforts to create accountability, ...”

Concluding Remarks Accountability is now understood as principle of social responsibility. Corporate accountability is #1 principle of CSR. CSR is responsibility of a company for its impacts on society and the environment, both within and beyond regulations. Companies are considered answerable for their decisions and operations, and are expected to explain them when they are asked by stakeholders. They are required to be open in their decision-making processes to be examined and judged by other interested parties Accountability also encompasses accepting responsibility where wrongdoing has occurred, taking the appropriate measures to remedy the wrongdoing and taking action to prevent it from being repeated.

Concluding ... (cont.) Corporate accountability implies widening the scope of stakeholders within a company beyond shareholders, so as to include all interest groups affected by the company’s activities. Partnership among government bodies, civil society groups and progressive companies is considered as key to promote corporate accountability. Law enforcement, mandatory CSR (sustainability) reporting, alternative dispute resolution, and multilateral efforts are chief among ways suggested by corporate accountability experts.

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