• Understand what different types of CSR standards exist.
• Explain how to judge the democratic legitimacy of CSR standards.
• Discuss in what ways CSR standards can impact firms and consumers.
• Distinguish different types of critique raised against CSR standards.
• Understand the problems and benefits created by the UN Global Compact.
Introduction: The Emergence of Private Regulation
In the 1980s, a number of non-governmental organisations (NGOs) organised consumer boycotts against major retailers that were selling products based on tropical woods. The main goal was to tackle deforestation and associated problems (e.g. carbon sequestration). Some NGOs, such as Friends of the Earth, even started to introduce their own labelling and certification schemes. However, as the sourcing of tropical woods is based on long and complex commodity chains, these first attempts to regulate deforestation through voluntary measures remained without much impact. NGOs were convinced that intergovernmental action was needed; they lobbied the International Tropical Timber Organization (ITTO) to adopt a legally binding and government-sanctioned certification scheme. Some hoped that negotiations at the 1992 Earth Summit in Rio de Janeiro would produce such an intergovernmental agreement. Yet, governments showed little interest in adopting a legally binding forest convention that would have helped to tackle the negative effects of deforestation (Gulbrandsen, 2012). As a response, some environmental NGOs (most notably World Wide Fund for Nature (WWF)) were convinced that without the voluntary participation of major industry players (e.g. retailers and manufacturers), a wide-ranging certification programme could not be established. In 1993, a number of parties, including social and environmental NGOs, industry representatives and auditors, met in Toronto to launch the first voluntary certification standard to regulate deforestation: the Forest Stewardship Council (FSC) was born.
The FSC example points to one consequence of the globalisation of business activity. While companies can split their value chain activities across countries (e.g. to reap the benefits of low wages and access to natural resources), governmental regulation is often still bound to national borders, impeding the effective regulation of transnational social and environmental problems. The emergence of such governance gaps (i.e. areas in which governments and intergovernmental institutions do not contribute much, if at all, to problem solutions) has spurred the proliferation of private global business regulation. Such regulation is usually based on the adoption of voluntary CSR standards, including principles, certification, reporting and process standards, which firms voluntarily join.