CSR and Developing Countries

What scope for government action?

Halina Ward, Tom Fox, Emma Wilson, Lyuba Zarsky

1. What CSR is and how it impacts middle and low income countries
From the individual street hawker to the complex multinational enterprise, every
business entity has its stakeholders and its impacts on society; both positive and
negative. The concept of corporate social responsibility aims both to examine the role
of business in society, and to maximise the positive societal outcomes of business
activity.

This paper focuses on the role of public policy and of public sector actors in middle
and low-income countries in CSR. It offers a framework for considering the range of
potential roles and opportunities that exist for them not only to mitigate negative
impacts of CSR but also to harness its potential positive benefits for public policy. As
a call to action, CSR has mostly been directed to businesses themselves. The
strategic challenge for government at national and local level is how best to adapt
and shape an agenda that has been largely market-driven and market-oriented.

At its broadest, CSR can be defined as the overall contribution of business to

sustainable development – it is in that sense that we apply it here. Defining corporate
social responsibility in more detail than this remains a vexed issue. A minimum
standard for CSR might be that businesses fulfil their legal obligations or, if laws or
enforcement are lacking, that they ‘do no harm’. A median approach goes beyond
compliance, calling for businesses to do their best, where a ‘business case’ can be
made, to contribute positively to sustainable development by addressing their
business impacts, and potentially also through social or community investment
actions. A maximum standard points toward the active alignment of internal business
goals with externally set societal goals (those that support sustainable development).

In practice, much of the business activity that has so far been labelled ‘CSR’ has
been driven by the concerns of investors, companies, campaign groups and
consumers based in the world’s richest countries. The result has been CSR practices
that are largely framed in rich countries, then internationalised and transferred to
other businesses and social settings through international trade, investment, and
development assistance.

This is not to say that ‘CSR’ has not previously existed in other countries. Rather,
national CSR agendas in middle and low-income countries have been less visible
internationally, and have often not been labelled ‘CSR’. Over the past five years or
so, governments, companies and NGOs in many middle-and-low-income countries
have accelerated a process of adjustment in the OECD-driven CSR agenda through
greater direct engagement. CSR movements and initiatives have emerged in
countries such as China, India, South Africa, the Philippines and Brazil, among
others. In many cases these have built on long-standing traditions of philanthropy
and concerns for social justice. Governments of some middle-income countries
facing major social challenges have explicitly sought to engage business in meeting
those challenges, as with Black Economic Empowerment in South Africa, or
Presidential encouragement of business efforts to tackle poverty in the Philippines.

Defensively, governments of some major middle-income economic powerhouses

such as China have undertaken a variety of initiatives to ensure that CSR practices

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with impact in their countries are tailored to national economic and social interests.
The challenge is to do so in ways that actively support sustainable development.

In OECD countries too, there is increasingly recognition among companies that a

‘one-size fits all’ approach to CSR in operations around the world is ineffective in
responding to the business ‘drivers’ of socially responsible behaviour. The result has
been reinvigorated focus on themes of greater importance in middle and low-income
countries – including the value of sustainable local enterprise and the role of
business in poverty reduction.

2. Why should developing country governments be interested in CSR?

Public governance underpins CSR, no matter what definition of CSR is adopted. If
the practices of CSR have reached a stage where it is clear that they need to be
more closely locally owned, and aligned to public policy goals, public sector actors in
middle-income countries will need both to engage, and sometimes actively to lead
the way.

There are two broad sets of justifications for public sector actors in middle and low-
income countries to engage with CSR: defensive and proactive. The two are not
mutually exclusive: a policy initiative that initially has a defensive justification may
quickly become part of a proactive strategy of engagement.
• The defensive justification relates to minimizing the potential adverse effects
of CSR on local communities, environments and markets when it is imposed
through international supply chains and investment.
• The proactive justification is provided by the opportunity to increase the
domestic public benefits of CSR practices in economic, social and
environmental terms.

Defensive justifications for public sector engagement

1. CSR in international trade
Codes of corporate conduct and certification schemes applied in international trade
have become particular areas of concern. Codes of conduct implemented through
supply chain requirements and enforced through audits can provide positive
opportunities for niche marketing by producers and suppliers based in middle and
low income countries. But they can also act as a barrier to market access.

The experience of business-to-business standards is that costs and benefits tend not
to be equitably distributed along value chains, with costs of private standards borne
by producers whereas benefits accrue to the retailer (Bass, Roe, Vorley 2002).
These issues are partly rooted in power disparities between producers and buyers in
which standards are one factor in a cost-price squeeze on producers worldwide
(Tallontire and Vorley 2005). Similarly, assurance schemes say very little about the
responsibilities of sourcing companies; the onus is on the producer to comply.
Further problems arise for those supplier firms that have to comply with multiple
codes, or that face conflicting requirements from different buyers.

Another concern is that CSR standards imposed through supply chains can supplant
domestic legislation. This may be because they are more closely linked to
commercial outcomes (market access) than domestic legislation that reflects less
stringent standards, or because where there is weak public sector capacity, they are
more likely to be monitored and enforced than domestic legislation.

Tensions can also arise because CSR standards are frequently designed and
applied with little or no input from governments or firms in supplier countries. As a
result, standards may do little to achieve social and environmental goals in exporting

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countries. For example, EU Ecolabelling Regulation criteria for paper products
became controversial in the 1990s because they favoured energy efficiency, not use
of renewable energy sources such as hydropower which were important for
producers in Brazil.

2. CSR in direct investment

On the direct investment side, CSR may help multinational corporations adopt global
best practices, as well as to comply with the laws of host countries. But ill-thought-out
CSR activities on the ground have the potential to generate or exacerbate social
tensions at local level. For example, social investment programmes that focus
exclusively on indigenous people may serve to heighten social tensions between
indigenous and non-indigenous members of mixed communities; and they might
prioritise those issues that are most subject to international campaign pressure. For
example, community action groups have complained that multinationals working on
Sakhalin have prioritised spending on research into the endangered Western Pacific
grey whale over and above support for local socio-economic development.

Proactive justifications for public sector engagement

There are also positive justifications for public sector actors to engage with CSR.

1. CSR in international trade

In those countries whose export sectors are closely associated with social, health or
environmental consumer concerns (e.g. including agriculture or textiles), there may
be positive opportunities for governments to facilitate market access gains for their
producers. For example, the government of Zambia is working with the
WTO/UNCTAD International Trade Centre and the Utz Kapeh Foundation to improve
access to high value markets for Zambian coffee growers, in part through the
creation of local inspection capacity intended to reduce the cost of certification
needed in those markets. And Colombia’s Mercados Verdes programme, which is
designed to incentives production of environmentally friendly goods and services that
are competitive in international markets (see Fox et al 2002) is seen by
commentators as a leading example of public sector support for sustainable markets
in Latin America.

2. CSR in direct investment

There is real scope for public sector actors in middle and low-income countries to
harness enthusiasm for CSR to help deliver public policy goals and priorities. For
example, foreign investment offers potential to transfer technical expertise to local
enterprises. Many large companies (as well as governments) are interested in
exploring practical mechanisms for enhancing the input of local enterprises, and
locally hired workers, into their projects. In some cases, this is mandated through
government legislation on ‘local content’ (e.g. in Nigeria) or the terms of foreign
investment contracts (e.g. with oil industry investors in Azerbaijan). In others, various
kinds of partnership initiative – sometimes with the involvement of public sector
actors – seek to transfer knowledge and expertise – including on environmental and
social issues – between large and small companies.

Finally, a number of analysts (Zadek et al, 2005) and governments are also
beginning to develop approaches which explore the hypothesis that promotion of
CSR in the domestic economy can bring benefits for competitiveness as a whole.
The potential for positive CSR-competitiveness links at the national level offer an
important avenue for exploration; but as with CSR as a whole, they are likely to be
positive only for some sectors and countries, some of the time.

3. What can governments do to engage with CSR?

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If these are the justifications for governments to play a role in promoting CSR and
enhancing the public policy contribution of CSR practices, what goals might they
adopt in doing so? In other words, what might they seek to achieve?

The goals of public sector engagement in CSR are potentially as varied as the goals
of CSR itself. They will differ from country to country. Thematically, from a
sustainable development perspective, public sector engagement with CSR potentially
spans social, economic and environmental spheres, including issues of corruption,
poverty reduction and human rights. At an overall level, however, given the nature of
the justifications for public sector engagement, what governments choose to do might
be structured in relation to the underlying drivers for their engagement in CSR:
• Enhancing the positive benefits of foreign direct investment
• Addressing market access for domestic enterprise
• Promoting adoption of responsible practices by domestic enterprises, and
• Aligning business activities and public policy to achieve social goals

Enhancing the positive benefits of foreign investment

Governments may seek to align national investment promotion strategies with
‘responsible’ foreign investors (see Box 1 below). In foreign investment contract
negotiations, public sector negotiators may seek to make the most of foreign
investors’ expertise in social investment, education or training.

Box 1: Investment promotion agencies and responsible business

In Peru, the responsibilities of Pro Inversion, the private investment promotion agency, include “To
attract investors able to transfer state-of-the-art technology and to take responsibilities respect to the
development of their social environment” … and ”To assist in the disclosure, among potential investors,
of the role and social commitment they have with the environment and people”. The goal of the agency’s
work is expressed as being: “to foster competitiveness and sustainable development in Peru to improve
the welfare of Peruvian people”. ([Link] )

Addressing market access for domestic enterprise

One response to divergent views on the local relevance of environmental or social
criteria in labelling or certification schemes is to develop practical mechanisms for
‘mutual recognition’ of different codes and standards. But governments can also work
to raise the CSR content and profile of major exported products and services, or work
to develop their own schemes.

The ability to meet rising environmental standards is increasingly required to export

to OECD markets, especially the EU. In addition, some OECD-based multinationals,
for example, in the chemicals industry, require ISO 14000 certification of all their
suppliers. Governments can facilitate these processes by providing support to
domestic SMEs in meeting these requirements – sometimes in partnership with
larger companies.

The government of Cambodia is focusing its national strategy for development of the
textiles sector on creation of a niche market for the country by establishing a national
reputation as a trade and investment location that is associated with good labour
practices (Ward, 2004). The Vietnamese government has also been experimenting to
this end (Box 2).

Box 2: Increasing national competitiveness by stimulating CSR performance in the Vietnamese

garment and footwear industries
In efforts to increase national competitiveness through improved CSR practice, the Vietnamese
Government assigned the Vietnamese Chamber of Commerce and Industry (VCCI) to provide CSR-
related support services to businesses. ActionAid Vietnam (AAV) has been raising awareness and
developing employees’ CSR skills as well as promoting good CSR practice among employers. Following
an initial pilot with the footwear industry in 2005, AAV, together with VCCI, the Ministry of Labour,

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Invalids and Social Affairs (MOLISA) and other government ministries, organised the ‘Corporate Social
Responsibility Award 2006’ for the footwear and garment industries. The award aims to increase the
competitiveness of Vietnamese businesses by providing an incentive for them to enhance their
reputation for good CSR performance.
([Link]
see also Twose and Rao 2003, MOLISA 2004)

Promoting and supporting socially desirable business practices by domestic

enterprises
Governments can choose to draw inspiration from the CSR agenda to promote
socially responsible forms of business practices by domestic enterprises, regardless
of their engagement with the international economy. Many governments around the
world, in collaboration with donor agencies, support enterprise development activities
designed to promote healthy local enterprise, building skills and supporting
formalisation of those that are informal. The shape and subject matter of those
interventions is increasingly shaped by new CSR-related concerns.

For example, concerns are increasing among civil society internationally over the
impacts of market concentration on domestic suppliers. Competition policy and equity
considerations in supply chain management are increasingly becoming part of the
CSR agenda. Against this background, government efforts to support small
enterprises can increasingly be understood as responses to negative impacts of
economic globalisation within the CSR arena. Box 3 offers one example.

Box 3: Thailand’s Ministry of Commerce assists small food stores

In Thailand, the impact of supermarkets and convenience stores on the survival of small
independent stores became a controversial issue in 2000, triggering a variety of policy
initiatives including a loan to a cooperative of small retailers to allow it to pool the purchasing
power of its members so as to achieve economies of scale and compete more effectively with
larger stores. In October 2006 the Ministry of Commerce established a special committee to
establish new rules, principles and guidelines for the expansion of retailers prohibiting them
from ‘unfair practices’ such as selling products below cost, or asking suppliers for large
discounts, demanding higher ‘introduction fees’ for new products.
See [Link] and [Link]/gx/eng/about/ind/retail/growth/[Link])

One under-explored area is the potential for governments to develop initiatives to

help transfer positive learning and capacity-building on environmental and social
issues from export-oriented domestic enterprises or foreign investors to those that
are non export-oriented.

Alignment of business activities and public policy to achieve societal goals

Governments that are able to provide clear public policy statements and frameworks
for addressing issues where there are potential trade-offs between economic, social
and environmental considerations will be better placed to channel business’s
strategic decision-making. Since many of the overall drivers of CSR practices by
businesses originate in the concerns of stakeholders based in the world’s richest
countries, one aim is to increase the chances of public policy frameworks in middle
and low-income countries competing with these other stakeholders to play a greater
role in shaping CSR.

National sustainable development or regional economic development strategies offer

an opportunity for public policy actors to offer clear signals, as do negotiated
contracts or concessions between foreign investors and host country governments.
Such strategies can provide a basis for productive partnerships between businesses
and governments in areas linked to core business activities (Box 4). And
philanthropic spending, which is derided by some CSR commentators as a public

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relations ‘add-on’, also has an important role to play in supporting socially beneficial
activities in many parts of the world. There are opportunities for public sector actors
to seek to encourage businesses to put it to maximum productive use in achieving
public policy goals through alignment.

Box 4: BP and enterprise development in Trinidad and Tobago

In Trinidad and Tobago, BP, the government and the local Centre for Energy Enterprise Development
(CEED) have identified a number of upstream activities which offered both sustainable business
opportunities for smaller companies and provided a high impact on national development through the
transfer of skills and technologies used in extraction operations. BP agreed to purchase the required
services from local suppliers rather than to import them.

The public policy context for this initiative lies with the government’s 2005 documents Vision 2020 and
the Strategic Development Plan for the country’s energy sector. A representative of CEED has
suggested that if this kind of corporate contribution to national development were to succeed, will have
been largely the result of a clear government vision for the use of the country’s resource endowment for
socio-economic development.
Source: [Link]

4. What instruments do governments have at their disposal?

Thus far, we have considered why governments in middle and low income countries
should take an interest in CSR and, in broad terms, what they might do. But how
could they go about meeting the various possible goals of engagement in the
agenda?
Work carried out by IIED for the World Bank Group’s CSR Practice has identified five
distinctive (if generic) roles for public sector engagement with CSR. In slightly
amended form, these are: 1) regulating; 2) facilitating; 3) partnering; 4) endorsing;
and 5) demonstrating. Box 5 below introduces these different roles. In practice, there
are no bright lines between them – their value is to facilitate thinking about the full
range of activities that could be undertaken.
Box 5: Overview of public sector roles in strengthening responsible business
Regulation – the role of governments at different levels in a) defining minimum legal standards and
regulations for business performance and b) the implementation and enforcement of these standards
and regulations. The regulating role also encompasses efforts to strengthen public sector institutions
with responsibilities in these areas.
Facilitation – including through the adoption of policy frameworks and non-binding guidance addressing
business; adoption of ‘information-based’ laws and regulations that facilitate and incentivize responsible
business by mandating transparency or disclosure on various issues; adoption of laws or guidance that
promote dialogue and engagement between companies and local communities or employers; provision
of tax incentives for socially responsible business behaviour of different kinds (including philanthropic
donations); investment in awareness raising and research; facilitating processes of stakeholder
dialogue.

Partnership – combining public resources with those of business and other actors to leverage
complementary skills and resources to tackle issues within the responsible business agenda – whether
as participants, convenors or catalysts. ‘Partnering’ is a central tool of CSR.
Endorsement – through public support for particular kinds of responsible business practice in the
marketplace, for CSR as a whole, or for individual companies; endorsement of specific non-
governmental metrics, indicators, guidelines and standards or award schemes.
Demonstration – demonstrating social responsibility in the way in which public sector actors engage
with stakeholders, uphold respect for fundamental human rights, or practice transparency and
accountability. In a business environment where corruption is endemic or enforcement of legislative
norms biased, the playing field on which enterprises compete is anything but level. Leadership by
example – even if isolated - can help to encourage those businesses that already have an interest in
CSR, whilst stimulating further action by those that do not. A further important dimension of this
‘demonstrating’ role concerns the role of governments as market actors in their own right, including
through the inclusion of considerations related to socially responsible business practices in public
procurement.

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 Adapted and updated from Ward (2004) and Fox et al. (2002)

The remainder of this section considers a few of the different policy instruments that
could be applied. In practice, many could be considered as expressions of more than
one of the government ‘roles’. So the instruments are roughly grouped instead on a
broad scale from more to less ‘interventionist’ in terms of their market impacts.

Some governments may prefer interventionist approaches. Others may prefer to

work with the grain of market drivers, including consumer interest or civil society
pressure. The factors that may determine the course of action taken by any individual
government include capacity constraints; the size of domestic markets for products
potentially affected by CSR concerns; the degree of export orientation of the
economy in sectors affected by international CSR drivers (e.g. textiles,
pharmaceuticals); the presence of enterprises willing to champion change, and the
degree to which different stakeholders are comfortable working in partnership for
commonly defined outcomes.

Governments should avoid the tendency to over-engineer policy responses –

particularly in countries where public sector intervention is viewed by businesses as
‘interference’. In such cases, the best approach might be to keep interventions to a
minimum, but to give CSR a level of political support.

More generally, there is a need to ensure that CSR-related interventions are seen as
contributing to an enabling and predictable environment for private sector activity. If
they are ill-conceived or represent an extra burden for business that is not justified by
the business benefits, they are unlikely to succeed.

Public policy-makers also need to think about how best to adopt combinations of
different instruments over time. For example, in the case of Citizens’ Economic
Empowerment in Zambia (Box 6), reporting against sectoral scorecards alone is
unlikely to be enough to achieve the desired outcomes of the Act in terms of
stimulating local enterprise. As it develops, the policy could go further, creating
further incentives for companies to invest in their employees or develop local
suppliers, and using companies which successfully do so to demonstrate how
businesses can contribute to the CEE agenda.

Box 6: ‘Citizen’s Economic Empowerment’ in Zambia

An important new development in Zambia is the government’s promotion of ‘Citizens’ Economic
Empowerment’ (CEE). Inspired by South Africa’s Black Economic Empowerment legislation, CEE
focuses on broad-based economic empowerment and is intended to broaden participation among
Zambian citizens in the economy. The Zambian parliament has passed an Act, which refers inter alia to
business ownership, employment, procurement and training, as well as reporting by businesses using a
CEE scorecard, which is to be developed at sectoral level.

The challenge for the government is to implement the Act without harming investor confidence or
increasing undue administrative burdens for businesses in terms of implementation and reporting and
for the government in terms of monitoring. There are opportunities to do so, for example in relation to
procurement. Increasing local procurement is already on the agendas of some businesses operating in
Zambia, primarily to improve access to supply and to reduce costs. The government has already
created positive incentives in some areas, e.g. through tax breaks for certain products with high local
content.

Regulation and self-regulation

In the broadest sense of CSR, the entire body or social and environmental legislation
in any country can be seen as an expression of public sector engagement with CSR.
Other areas of legislation – including competition policy, basic investment and
enterprise frameworks, and rights of access to information and public participation in

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decision-making are also important parts of the ‘enabling environment’ for CSR.
Governments are also increasingly engaged in shaping the ‘self-regulatory’ tools of
CSR, including through engagement in industry-led labelling or certification schemes.

a) Minimum legal requirements

From command and control legislation, an emerging contemporary emphasis is on
regulation that incorporates built-in incentives for firm-level innovation, for example
by requiring polluting industries to apply the ‘best available techniques’ to achieve
desired environmental outcomes.

The dominant notion of CSR as being principally market-driven and voluntary in

nature can on occasion hamper government progress in setting minimum
requirements for business behaviour. For example, in China, multinational
corporations have lobbied heavily against current moves to tighten labour legislation;
a government response to concerns that social unrest could result from widening
income disparities.1

b) Taxes, charges and payment schemes

A variety of taxes, charges and payments schemes are well-established in the
environmental field (for example, through the adoption of regulations addressing
charges for polluting emissions by industry). Such approaches have considerable
potential to change company behaviour, but they rely on public sector capacity to
collect payments.

A range of tax mechanisms have also found their way into national approaches for
incentivising socially desirable business practices of various kinds. For example, in
both Uganda and Zambia, reduced excise duty rates were granted for a beer
produced with locally sourced smallholder-produced sorghum rather than imported
barley. Many middle and low-income countries also provide tax incentives of various
kinds for philanthropic or charitable donations by businesses.2

c) Foreign investment contract negotiations and concessions

Foreign investment contract negotiations offer opportunities for governments to set
clear expectations for investor contributions to social investment, skills and enterprise
development, and technology transfer. The terms of these agreements (which are
often not publicly available) may on occasion explicitly address companies’
community and social investment strategies.

Governments issuing natural resources concessions in sectors including mining and

oil and gas also need to consider the extent to which infrastructure and services (e.g.
health, housing, or education) associated with new projects should be provided by
the company making the investment in the concession, rather than the state. If
revenues from taxes are low, it might be possible to place more emphasis on
provision of social or other infrastructure by investors. But the capacity of public
sector actors to take over the administration of the services or infrastructure in due
course is also an important consideration.

d) Cooperative environmental management

Cooperative environmental management approaches – in which environmental
regulators negotiate staged approaches to environmental improvement and
compliance, or give credit for strong environmental management systems in the form

1
See e.g. Global Companies Fight Chinese Effort on Aiding Unions, New York Times, October 12 2006,
available online at [Link] and
2
See [Link] for a country-by-country guide to approaches

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of reduced inspections – are also an area of public policy innovation. But they can be
controversial when they are seen as undermining strong regulation, or reducing
scope for citizen scrutiny of environmental policy implementation.

One example is the Mexican Environmental Protection Agency’s (PROFEPA)

Industria Limpia programme (Box 7), which is based on firm-specific negotiated
agreements towards plant-based environmental improvements. The programme is
designed to attract the “leader” firms in corporate social responsibility to show
leadership by example. But take-up of the programme has been limited in some
sectors, such as electronics. The reason may be that the business benefits are
unclear, since for companies selling into the European, Japanese or US markets,
Mexican standards are less important than the standards of those importing
countries. According to PROFEPA, lack of interest also stems from the fact that the
requirement quantifiably to demonstrate full compliance is difficult and costly.

Box 7: Mexico’s Industria Limpia Program

The Mexican Environmental Protection Agency, PROFEPA, has devised an innovative, voluntary
“carrot”-based certification approach to improve environmental compliance in manufacturing industries—
the Industria Limpia (clean industry) programme. Certification is given on a facility, not company-wide,
basis.

When a firm signals interest, PROFEPA sends an auditor to the plant to carry out a formal audit of the
firm’s environmental activities. The firm chooses an auditor from a list of private sector certified auditors.
After the audit is completed, PROFEPA negotiates an action plan with the firm based on improvements
towards quantifiable targets.

When the firm signs an agreement to adhere to the action plan, it is officially admitted into the
programme. The firm must demonstrate concrete improvements on an annual basis and meet specified
targets. If they do not, they face the inspections and fines required by law for non-compliance.

Once the firm has achieved compliance, it is “certified” and can use the Industria Limpia label to
promote its products in domestic and foreign markets. Certification expires after two years. To stay in
the program, firms must quantifiably demonstrate every three months that they remain in compliance. If
firms want to go beyond compliance they can be given a certification of “excellence.”

Source: Gallagher and Zarsky (2007)

e) Company-community agreements
Rights of public participation have long been recognised as key instruments of
sustainable development. In the field of CSR, public sector actors can help by
mandating public participation in defined circumstances relating to private sector
investment. Legislation can help to secure benefits for communities at local level by
requiring negotiated agreements between companies and communities. Legislation
on Social Responsibility Agreements between holders of forest concessions and
local communities in Ghana (noted in Fox et al (2002)) and agreements between
natural resource companies and local communities in Western Siberia (Box 7) are
examples.

If such initiatives are to bring real benefits, communities need to be able meaningfully
to take part as negotiating partners. Public policy makers should therefore do more
than simply setting overall policy frameworks by working to support efforts to ensure
that communities are aware of their rights, and have capacity to secure positive
outcomes.

Box 7: Company-Community agreements in Western Siberia

The Khanty-Mansiisk Autonomous Region (or Yugra) lies in north-western Siberia and 2% of the
population is indigenous, with about 2,000 living permanently on the land. The Yugra Charter sets out
the role of the provincial government, including implementation of social development programmes;

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ensuring benefits to communities from resource exploitation; and facilitating training and work
placements for indigenous skilled workers. Regional legislation passed in 1989 and 1990 requires that
agreements be signed between developers and indigenous resource users. The detail of these
agreements is agreed between the parties and generally includes construction of power lines, housing
and cultural facilities. As a rule, each household living on land used for industrial activities receives a
snowmobile, motorboat, electric generator, spare parts, building materials, fuel and a quarterly financial
compensation payment. The agreements also cover the cost of higher education, health treatment,
specialist training and work placements, the transportation of food to migrating herders and traditional
craft products to markets. Virtually all the companies working in the area have their own charitable
foundations which sponsor indigenous projects. The regional government runs an annual competition for
the best performing oil and gas company ‘Black Gold of Yugra’, which includes a special prize for the
best work with indigenous peoples.

Source: Liudmilla Alferova, in Wilson and Stammler (2006)

f) Company reporting
Company reporting on environmental and social issues is an increasing subject of
legislation in high income countries (see Fox et al 2002). There are so far few (if any)
specific examples of comprehensive CSR reporting requirements in middle and low
income countries. But reporting requirements on specific issues, such as the Black
Economic Empowerment scorecard in South Africa, are more common.

g) Labelling schemes
Government engagement in labelling and certification schemes of different kinds has
become among the most visible ways, internationally, in which governments have
responded to the drivers for engagement with CSR. For example, in China officials
have actively endorsed efforts to place the country in active mode as a standard-
setter, not simply a ‘taker’ of standards developed elsewhere. CSC9000T, a textile
industry standard, was adopted in 2005 and developed within the China Textile and
Apparel Council and with government endorsement. It is based on Chinese
legislation, and provides a management system for companies wishing to be socially
responsible.3

The institutional design of such schemes may on occasion hamper positive

outcomes. India’s voluntary product labelling scheme, ECOMARK, was adopted in
1991 at the initiative of the Indian Parliament. But the initiative has not been
successful, with just 12 manufacturers applying for the Ecomark licence in the 15
years since its adoption.4 Indian NGO CUTS cites heavy reliance on government
agencies in the overall administration of the scheme as among the reasons, making it
susceptible to being weakened by frequent changes in government personnel.

Partnerships
Partnerships are potentially a valuable way for public sector actors to seek to
combine the skills and competences of public and private sector actors as well as
civil society in areas of broad societal concern such as HIV/AIDS (Box 8) or
sustainable economic development (Box 9).

Box 8: The Africa Comprehensive HIV/AIDS Partnership (ACHAP) in Botswana

The Africa Comprehensive HIV/AIDS Partnership (ACHAP) was established in 2001 as a formal
partnership between Merck, the Bill and Melinda Gates Foundation and the Government of Botswana.
ACHAP works with government agencies, development partners, the private sector and civil society.
The aim is to develop and implement a national comprehensive HIV/AIDS strategy, with the goal of
decreasing the spread and mitigating the impact of HIV/AIDS in Botswana. The initiative includes
capacity building and strategic planning within government institutions. As of December 2005, total
spending on the programme was just over 45 million USD. The strength of ACHAP lies in its full

3
See [Link]
4
Source: News from CUTS, September 2006, available online at [Link]
[Link]/[Link]

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integration with government strategy and its ability to harness private-sector expertise in support of
national efforts to address HIV/AIDS.
Source: Inspiris 2006
See also: [Link]
[Link]

Box 9: The Mineral Technology Centre, Brazil (CETEM)

Initiated and supported by the Ministry of Mines and Energy, The Mineral Technology Centre in Brazil
works with industrial partners to develop pollution control technologies for the minerals and metals
industry. This includes associations representing the construction materials industry and the
metallurgical industry. CETEM has also worked with representatives of small-scale miners in Amazonia
to disseminate technologies that reduce discharges of mercury from gold mining.
[Link]

Partnerships are no easy fix to the most difficult policy challenges, often requiring
considerable investment of time and sometimes also financial resources. Public
sector actors should assess carefully the level of ongoing commitment that is
required before entering into partnerships that may effectively be unsustainable.
Partnership-based policy commitments that involve major commitments of public
resources may be vulnerable in the event of economic downturns (Box 10).

Box 10: Brazil’s Zero Hunger Programme

In 2003, President Lula da Silva set up the Zero Hunger (Fome Zero) Programme with the aim of
coordinating public actions to eradicate hunger and reduce poverty in Brazil. Fome Zero is run by the
ministries of Social Development and Fight against Hunger, Agrarian Development, Health, Education,
Agriculture and Livestock, Labour and Employment, Science and Technology, National Integration,
Environment, and Finance. In 2005, the federal budget assigned to Fome Zero was R 21 billion (around
US$ 8.4 billion), with additional loans and technical assistance from the UN Food and Agriculture
Organisation (FAO) and the World Bank. However, broader economic problems in the country may
threaten the long-term sustainability of the programme.

Through Fome Zero the government has worked to direct CSR activities to public goals: in 2003, Nestlé
donated 1.8 million kilos of food products to the Zero Hunger Programme. In recognition of Nestle’s
support, the Brazilian government granted Nestlé its first Zero Hunger Programme Partnership
Certificate. Fome Zero also stimulates local enterprise for social purpose, focusing on increasing
production of family farmers and distributing food produced to vulnerable members of the population. In
2004, some 430 family farmers were provided access to rural credit for the first time. In 2005 between
1.4 million and 1.8 million families were expected to have access to total credit of 2.8 billion USD.

Sources: Various, including

Statement by Brazil’s Minister of Social Development and Fight against Hunger to the United Nations
System Standing Committee on Nutrition (SCN), June 2005 (see
[Link]
doc)
[Link]

Public procurement
Governments around the world are typically large-scale consumers themselves.
Whilst international public procurement rules need to be factored into decision-
making, public procurement offers real potential for governments or state enterprises
to express their interest in CSR or socially preferable enterprises through the
marketplace. For example, in 2004, Indian Railways announced that it would be
using only hand spun and hand woven materials for bedding on its trains. The move
was reported to be motivated in part by by concerns to improve rural employment.5
Local and regional government could equally make use of public procurement to
promote CSR. For example, the Municipal government of ShenZhen (see Box 11)
has recently expressed interest in directing its public procurement to promote CSR.

5
“And now, Khadi makes its appearance on Indian railway”, Hindu Business Line, June 9th 2004,
[Link]

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Box 11: Public procurement and regional government: Shenzhen
In March 2006, the Shenzhen Municipal Bureau of Labour and Social Security published a report on
CSR in Shenzhen and announced that it would be working to produce guidelines on CSR by the end of
the year. A press report suggests that the guidelines could include provisions refusing to give contracts
to companies that do not shoulder social responsibility, or refusing to subsidize such firms. A
spokesman for the municipality was quoted in the Shenzhen Daily saying that "The city government's
annual procurement reaches more than 2 billion yuan (US$241 million). It should make full use of its
economic influence to promote corporate social responsibility (CSR)."

Source: ShenZhen Says No to Sweatshops, ShenZhen Daily, March 31 2006, available online at
[Link]

Overarching public policy frameworks

Clear public policy frameworks on matters related to international trade and
investment or domestic enterprise development can help to steer voluntary CSR
activities to meet public policy goals. For example, improving CSR is also listed as a
priority work area of China’s Ministry of Commerce under the heading ‘transforming
trade growth pattern.6 And Shanghai’s 11th 5-year plan, adopted in 2006,7 gives CSR
the status of ‘an integral part of public governance’. The Government of Kazakhstan
has also incorporated corporate social responsibility within its work programme for
2006-2008 (Box 12).

Box 12: Government of Kazakhstan Commitment to CSR

With the overall goal of formulating the normative legal basis for stimulation of increased corporate
social responsibility on the basis of international standards, the 2006-2008 government Programme of
the Republic of Kazakhstan includes references to elaboration of norms on social reporting by business
based on international standards, and of a set of measures to support business initiatives. The
government indicates in its work programme that a “general agreement” between the government, trade
union associations of the republic and republic employer associations will be concluded during 2007-
2008, taking into account the principles of the United Nations Global Compact.
Source: 2006-8 Government Programme at: [Link]

4. Concluding Comments
CSR offers real opportunities for the governments of middle and low-income
countries to change the terms on which they interact with business. The governments
and citizens of low and middle income countries need to set the CSR agenda for
themselves; taking the best of what has evolved to date, and of what their business
communities already have to offer. CSR defined only or primarily in rich countries
could create obstacles to sustainable development.

There is plenty of room for ground-breaking innovation. Engagement with CSR can
help to develop capacity within public policy and regulatory institutions, to free up
existing resources, and leverage additional resources through partnership. But for
each potential intervention, there is a need too to assess the likely costs and
benefits; the risk of failure or undesirable side effects. Policy-makers need to be
aware that little can be generally concluded about the potential benefits of
engagement based on the wide-ranging experiences to date. Policy choices, in short,
matter as much here as any other field of social endeavour.

6
Shuaihua Cheng, pers comm, referring to
[Link]
7
Idem, referring to
[Link]
[Link]

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Key Reading
Simon Zadek, Peter Raynard and Cristiano Oliviera, Responsible Competitiveness:
Reshaping Global Markets Through Responsible Business Practices, AccountAbility,
2005

Steve Bass, Dilys Roe and Bill Vorley, Standards and Sustainable Trade: A Sectoral
Analysis for the Proposed Sustainable Trade and Innovation Centre, IIED et al 2002

Tom Fox, Small and Medium-Sized Enterprises (SMEs) and Corporate Social
Responsibility: A Discussion Paper, IIED, 2005

Tom Fox, Halina Ward and Bruce Howard, Public Sector Roles in Corporate Social
Responsibility: A Baseline Assessment, World Bank Group, 2002
Wilfried Luetkenhorst, Corporate Social Responsibility and the Development Agenda:
the case for actively involving small and medium sized enterprises, Intereconomics,
May/June 2004

Jane Nelson, The Public Role of Private Enterprise, John F. Kennedy School of
Government, Harvard University, 2004

Halina Ward, Public Sector Roles in Corporate Social Responsibility: Taking Stock,
World Bank Group, 2004

Additional Referenced sources

Ghayur Alam, A Study of ecolabels in India and the European Union and their impact
on the export of leather products from India, Consumer Unity and Trust Society, 2005

Liudmila Alferova, (2006) “Legal Provisions for Safeguarding the Rights of

Indigenous Minorities of the North in the Khanty-Mansiisk Autonomous Region
(Yugra)”, in Emma Wilson, and Florian Stammler (eds.), Sibirica - the Interdisciplinary
Journal of Siberian Studies, special issue on the Oil and Gas Industry, Communities
and the State, vol 5. issue 2, pp.153-160.

Kevin Gallagher and Lyuba Zarsky, Enclave Economy, Foreign Investment and
Sustainable Development in Mexico’s Silicon Valley, Cambridge: MIT Press, 2007

Ann Tallontire and Bill Vorley, Achieving fairness in trading between supermarkets
and their agrifood supply chains, Briefing Paper for the UK Food Group, 2005

About the authors

Halina Ward is Director of the Business and Sustainable Development Programme at
the International Institute for Environment and Development (IIED). Tom Fox is a
Growing Sustainable Business Broker with UNDP in Zambia. Emma Wilson is a
Senior Researcher with IIED’s Business and Sustainable Development Programme.
Lyuba Zarsky is a Fellow at IIED and a Senior Research Fellow with the Global
Development and Environment Institute, Tufts University.

Acknowledgements
The authors are grateful to Shuaihua Cheng and Peiyuan Guo for pointing the way to
the Chinese examples in this paper, and to Bill Vorley of IIED for insights from his
work on supermarkets and small producers.

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