Universal standards in CSR: are we
prepared?
Adefolake Adeyeye
Adefolake Adeyeye is an
Adjunct Lecturer in the
Faculty of Law, National
University of Singapore,
Singapore.
Received: 1 April 2008
Revised: 5 October 2010
Accepted: 31 October 2010
DOI 10.1108/14720701111108880
Abstract
Purpose – The purpose of this paper is to examine in detail the positive and negative aspects of
selected soft law initiatives and the relevance of hard laws in the pursuit of corporate social responsibility
(CSR).
Design/methodology/approach – Soft law initiatives are categorized into company codes,
industry-initiated codes, and general codes in order to determine more accurately the effectiveness
of the codes in enforcing CSR standards. A number of factors relevant in determining the effectiveness
of such codes are identified and applied. Partnerships between soft law initiatives and hard laws are
illustrated.
Findings – Soft law initiatives are necessary tools in CSR. However, transparency, implementation,
monitoring and compliance mechanisms are core areas in which the effectiveness of the initiatives
needs improvement. Categorizing the initiatives helps to identify specific areas needed for improving
effectiveness.
Research limitations/implications – The initiatives examined are limited to those relevant for human
rights, the environment and anti-corruption. The paper selects a number of relevant initiatives and does
not attempt to examine all initiatives in these sectors. The reference to hard laws focuses on anti-bribery
laws.
Practical implications – The paper provides useful information on improving the effectiveness of soft
law initiatives, which are the current modes for enforcement of CSR; the relevance of hard laws in CSR;
and the role of NGOs in ensuring CSR.
Originality/value – The paper identifies the evolution of universal standards in CSR and calls for a
universal approach which aims to address the need for adequate and effective enforcement.
Keywords Social responsibility, Standards, Laws and legislation, Management accountability,
Law enforcement
Paper type Research paper
1. Introduction
Corporate social responsibility (CSR) has gained tremendous recognition in recent times.
However, debates about CSR seem to have moved from whether corporations have other
responsibilities apart from profit maximization to how corporations can comply with broader
responsibilities. One way of complying which is increasingly being used is through voluntary
initiatives. Modern CSR is generally associated with voluntary non-binding rules that
corporations adhere to in an attempt to be socially responsible.
There is greater awareness of the need for corporations to be responsible commensurate
with their increasing power. This awareness is being raised by corporations themselves;
international civil society, which has greater public scrutiny and exerts pressure on
corporations to behave responsibly; and the real and potential threat of international legal
action regarding foreign direct liability. It is leading to global changes, forcing broader
corporate social responsibilities, and the development of CSR universal standards in the
areas of human rights, the environment and anti-corruption.
VOL. 11 NO. 1 2011, pp. 107-119, Q Emerald Group Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j PAGE 107
 The enforcement of such standards is typically through the use of soft law initiatives. This
article will address the issue of CSR enforcement of these standards using soft law
initiatives. It will examine the positive and negative aspects of soft laws, the relevance of hard
laws (regulations) if applicable, and provide suggestions on how soft law initiatives can be
more effective.
CSR cannot be beyond rules, but should include clearly mapped out rules to which
corporations should adhere. This is necessary to ensure that corporations are held
accountable and guided towards certain acceptable actions. These rules should be
mirrored across the globe to ensure that corporations are held accountable irrespective of
the country in which they carry out their activities. Universal standards need a universal
approach. A universal approach would take account of the need for adequate and effective
enforcement, which would address issues including:
B for which standards corporations can be held responsible;
B how corporations can be held responsible; and
B what sanctions and deterrents would be most effective.
In the area of human rights, environment and anti-corruption, the many codes and guidelines
which will be discussed in this article will demonstrate that there has been much response to
the question regarding for which standards corporations should be held responsible. Soft
law initiatives create awareness and make it clear what standards corporations should be
responsible for. However, the questions – how corporations can be held responsible, and
what sanctions and deterrents would be most effective – still needs much attention. In an
attempt to address these questions, the article will examine a number of accountability and
enforcement problems prevalent in the use of soft law initiatives for CSR.

Section 2 of this article will address the definition and scope of the CSR as it relates to human
rights, environment and anti-corruption. Section III will deal with selected soft law initiatives,
highlight the positive and negative aspects of such laws; analyze where possible the effects
of such laws on CSR; and consider improvements to make such laws effective. Where
applicable reference will be made to hard law attempts at CSR. Section 4 will conclude the
article.

2. What is CSR?
CSR covers a wide spectrum. This article will address three main issues at the heart of CSR:

2.1 Whether corporations have broad responsibilities other than profit maximization
This issue has two main schools of thought. The traditional school, with which Milton
Friedman is associated, says the only responsibility corporations have is that of maximizing
profits to shareholder while engaging in open and free competition, without deception or
fraud. The CSR issues Friedman was concerned with included philanthropy, cost and labor
cuts (Friedman, 1962). Corporate philanthropy is just one aspect of CSR, and should not be
equated with CSR. Friedman’s objective was to ensure that social responsibility did not
adversely affect the workings of a free market economy, specifically focusing on the market
in America at the time. The CSR issues of concern here are human rights, the environment
and anti-corruption. A close examination of these issues shows that Friedman’s assertions
can no longer hold true. In these areas, corporations increasingly have to consider other
stakeholders. For example, in the area of human rights and the environment, corporate
activities result in massive environmental and social problems affecting the rights of local
communities. The activities of NGOs, the effects of a bad reputation and tarnished integrity,
and the threat of legal actions are factors necessitating corporate consideration of other
stakeholders.
In 2005, The Economist published a survey on CSR which suggested that profit
maximization should be the corporation’s goal (The Economist, 2005). Needless to say, the
survey produced many responses from individuals and organizations involved in CSR who

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believe that businesses have broader responsibilities (Business and Human Rights
Resource Centre, 2005). These responses came from the other school of thought which has
emerged, and shifts towards the concept that business has broader responsibilities that
extend beyond owners and shareholders to include employees, suppliers, customers and
host communities – what are collectively called ‘‘multi-stakeholders’’.

2.2 Whether CSR is beyond rules, subject to voluntary rules or mandatory rules
Christopher Stone, a well-known writer who believed that corporations should be socially
responsible, believed that CRS was beyond legal rules. He advocated a legal system that, in
dealing with corporations, moved towards an increasingly direct focus on the processes of
corporate decision-making (Stone, 1975). This argument is rejected. While a focus on
processes of corporate decision-making is ideal, corporate decision-making in present
times is very complex. More often than not, it does not reflect the individual perceptions of
any one decision maker and may override personal values. Therefore, there is the need for
rules that hold corporations accountable and guide them towards certain actions. A realistic
look at the structure and pattern of the modern corporation suggests that the broader
responsibilities should be within clearly defined rules.
On the other hand, many see CSR as voluntary initiatives promoting self-regulation. For
example, Christian Aid sees CSR as an entirely voluntary, corporate-led initiative to promote
self-regulation as a substitute for regulation at either national or international level. CSR
encompasses the voluntary codes, principles and initiatives that companies adopt in their
general desire to confine corporate responsibility to self-regulation. Christian Aid believes
business needs to be bound by tighter national laws and regulations held in a framework of
agreed international standards (Christian Aid, 2004). Christian Aid’s view that CSR is entirely
self-regulatory is not correct. CSR includes both voluntary and mandatory rules to improve
corporate behavior. Anti-corruption laws are examples of mandatory CSR rules. There are
also attempts to hold corporations responsible through the use of international legal action.
An example is the attempt to use the Alien Torts Claims Act in the USA for holding
corporations directly liable for tort injuries caused by actions in violation of the laws of nations
or treaties of the USA. Therefore, it should be said that businesses are now being bound by
laws. However, such laws are limited and may have enforcement issues of their own.

2.3 Whether universal standards of CSR are evolving

The World Business Council for Sustainable Development (WBCSD), a powerful coalition of
companies actively involved in CSR, says ‘‘since 1998, dialogues with diverse stakeholders
throughout the world reveal that CSR means different things to different people, depending
upon a range of local factors including culture, religion and governmental or legal framework
conditions. There can be no universal standard’’ (World Business Council for Sustainable
Development, 1999).
This article argues that universal standards are evolving in the areas of human rights,
contributions to sustainable development, the environment, and anti-corruption. Multiple
actors are involved in the evolution of these standards. They include NGOs such as Christian
Aid, global business leaders such as WBCSD, international organizations such as the United
Nations, and individual states. One fundamental issue that must be addressed within this
evolution is enforcement, particularly the role that soft law initiatives play in enforcement. By
examining selected soft law initiatives and identifying inadequate enforcement mechanisms,
this article will attempt to strengthen the effectiveness of CSR standards.

3. Soft law initiatives

Soft law norms are created by informal processes, being moral-political obligations in
nature. They are subject to looser internal ‘‘sanctions’’ to induce compliance, such as peer
pressure or generated expectations (Thio, 2004). Soft laws are typically non-binding
self-regulatory laws. They refer to the codes, guidelines and standards that are developed to
regulate and promote certain expected corporate behavior. Generally, there are advantages
to voluntary initiatives. The first and obvious advantage is that they are voluntary, and as a

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 result are non-threatening to companies that adopt them. If adopted willingly and
purposefully, they have the potential to create substantial significance in the CSR agenda.
They are flexible, and therefore easily adaptable, and are necessary tools in improving
corporate behavior.
The codes discussed in this article focus on human rights, environment and anti-corruption.
They are divided into three categories:
1. company codes;
2. industry-initiated codes; and
3. general codes.
The effectiveness of a code depends on a number of factors. These include the influence
stakeholders can exert in ensuring compliance, whether the goals of the codes can be
achieved, how closely fit the goals of the code are to the adopting company’s activities, and
transparency mechanisms put in place for implementation, monitoring and compliance. The
institutions involved in the creation of a code and the parties that subscribe to it or are
signatories to it are also important factors to consider in determining the effectiveness of a
code.
The governance forces that impact on a company’s motivation to behave responsibly
include NGOs, companies themselves, corporate peer group pressures, civil society/NGOs,
and national and international governance agencies. The activities of some of these forces in
the development of voluntary initiatives and motivation towards CSR will be discussed in the
following sections.

3.1 Company codes

A good example of a company-initiated code is Shell Group’s General Business Principles.
The were originally published in 1976, but were revised in 1997 due to heightened public
interest in human rights and sustainable development (Shell, 1997). A further revision took
place in 2005 (Shell, 2005). Through the principles, Shell recognizes the need for a social
contract to operate effectively. The group recognizes five areas of responsibility:
1. shareholders;
2. employees;
3. customers;
4. business partners; and
5. society as a whole.
Shell’s responsibility to society aims to conduct business as responsible corporate members
of society, observe the laws of countries in which it operates, expresses support for human
rights and contributes to sustainable development.
The bad publicity that Shell received in the 1990s forced it to reconsider corporate social
responsibility. It also put other corporations on notice of the importance of respecting human
rights, contributing to sustainable development, and discouraging corruption. However,
whether this notice is leading to improved corporate behavior must be examined closely. A
confidential 2003 report commissioned as part of Shell’s efforts to help develop a ‘‘peace
and security strategy’’ in the Niger Delta said that Shell feeds violence in the area and may
have to leave by 2009 (Tran, 2004).
In 2004, Ethical Corporations reported that Shell’s record for being a leader in corporate
responsibility was under direct attack as a result of evidence suggesting that its social and
environmental performance around the world does not match its public pronouncements
(Ethical Corporation Newsdesk, 2004). Shell’s 1997 revised Principles state that Shell has a
systematic approach to health, safety and environmental management. The 2005 revised
Principles affirm this, but add security to the list. Shell’s transparency has also come under
attack. Some have argued for a more receptive attitude towards outside influence with

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legitimate interests as a way of tackling such problems (Ethical Corporation Newsdesk,
2004). More transparency seems to be the watchword. The 2005 revised Principles aimed to
address this issue. They recognize the need for stakeholder dialogue and engagement. The
1997 revised Principles refer simply to communication through comprehensive corporate
information programs providing full relevant information to legitimately interested parties.
An advantage of the Shell Business Principles is that they illustrate clearly the emergence of
CSR as an important subject that corporations must adhere to. It also shows that CSR needs
constant reviews and must be adaptable to change. Shell, for instance, has had to revise its
Principles to demonstrate a commitment to CSR. The recognition of the need for stakeholder
dialogue and engagement suggests its adaptability to change. Overall, the voluntary and
flexible nature of company-initiated codes makes them more adaptable to change. As a
result, it may be easier for decisions affecting CSR to be made. However, such codes by
themselves cannot address CSR goals effectively. This is because of the lack of
accountability and transparency to external stakeholders.
While Shell’s CSR performance may still need improvement, it may be said that the voice of
external stakeholders and the media in crusading against the deeds or misdeeds of Shell is
a relevant factor exerting pressure on the company to take CSR seriously. For such codes to
be effective in other companies or industries, civil society would have to play the same role.
This may not be the case because the pattern of civil society has generally been to address
itself to the misbehaviors of global giants in the pursuit of CSR, ignoring lesser but equally
responsible or irresponsible companies. Civil society needs to address the misdeeds of
companies, large and small to motivate CSR.
NGOs have used protests as well as collaborations with the banks that underwrite projects
carried out by MNCs to motivate CSR. An example can be seen in the announcement by JP
Morgan Chase that it would introduce policies to promote sustainable forestry and
indigenous peoples’ rights and block funding that could be used for illegal logging. It also
promised to reduce its own, and its clients’, carbon emissions. These initiatives occurred as
a result of protests at the New York City and Chicago offices relating to claims that the bank’s
underwriting of illegal logging in Indonesia and human rights abuses was tied to a
Chase-funded mining operation in Peru. BankTrack, a loose collection of non-governmental
organizations, has collaborated with banks to jointly tackle environmental and social
concerns. JP Morgan Chase and many other major banks have signed the Equator
Principles (EP). The benefits and weaknesses of the EP will be discussed in the section 3.2.

3.2 Industry-initiated codes

An industry initiative that aims to promote CSR is the Voluntary Principles on Security and
Human Rights (‘‘Voluntary Principles’’). The Voluntary Principles were created to address the
problems of human rights security abuses in extractive industries operating in developing
countries. The Voluntary Principles stem from a tripartite initiative between business and civil
society groups, led by the USA and UK governments and now including The Netherlands
and Norway (Voluntary Principles, 2000). They are designed to provide practical guidance
to ensure that security arrangements carried out in the extractive industry are managed in
accordance with human rights standards.
In a five-year overview of the principles, member companies – which include many with
significant operations in developing countries, such as BG, BP, Chevron and Shell –
identified three primary strengths of the principles (Voluntary Principles, 2005). The first is
that the Voluntary Principles achieve their purpose of providing guidance on managing
security and human rights. The second is the increased credibility that the tripartite
approach – i.e. government, NGO and company participation – gives the principles as
opposed to a single-stakeholder approach. Finally, the Voluntary Principles raise awareness
of the security and human rights issues faced by companies. Lack of transparency,
monitoring and auditing are cited as the weaknesses of the Principles. Companies have
acknowledged the need for independent verification to ensure the Principles are actually
being practised.

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 Although the Voluntary Principles were implemented in 2000, companies are still unable to
measure the impact of the Principles. This is regrettable, but only too common. One attribute
of the Voluntary Principles that companies emphasized was it value in creating greater
recognition for CSR (Voluntary Principles, 2005). Many standards create awareness but their
effectiveness remains to be seen. Nevertheless, the Voluntary Principles’ attempt to identify
strengths and weaknesses and its transparency in providing the feedback from companies
is welcomed. Many of the challenges its member companies face have been identified.
There is the need for concerted efforts to address these challenges. Independent monitoring
and auditing is a step that is recommended, but no doubt will come with costs and other
issues.
Another example of an industry-initiated code is the Equator Principles (EP). The EP were
originally developed in June 2003 by ten banks to address the environmental and social policy
issues that private financial institutions face in project financing. The original EP were based on
the policies and guidelines of the World Bank and the International Finance Corporation
(Equator Principles, 2003). In July 2006, the Principles were revised (EP II) to incorporate the
performance standards set by the IFC in a finalized review of its environmental and social
standards (Environ, 2007). As of December 2007, the EP website listed 56 EPFIs. The aim of
the Principles is to ensure that projects financed by private financial institutions are developed
in a socially responsible manner reflecting sound environmental management practices.
Therefore, the EP has the potential to be a very useful benchmark for a common standard in
the approach that private institutions involved in project financing should have towards
environmental and social risks. It has created significant awareness to the social and
environmental problems such financing can generate.
However, implementation and monitoring of the Equator principles has been subject to much
criticism (Yeomans, 2005). Each EPFI implements the principles through its own internal
social and environmental policies, procedures and standards relevant for project financing
activities. There have been calls particularly by NGOs for more transparency and
information on implementation. In an attempt to address these issues, Principle 10 of EP II
requires EPFIs to report on the progress and performance of implementation of the Equator
Principles on an annual basis.
A look at the company disclosure reports for 2007 showed that 33 of the 56 EPFIs were
reporting. The reports are basic, showing assessments figures including project, sector,
transaction and capital costs and location (ABN-AMRO, 2007). Arguably, it is unlikely that
these reports in their current format will fully address transparency concerns. Confidentiality
agreements still prevent banks from disclosing information concerning projects that were
unsuccessful for failure to meet the EP standards. Each bank decides whether a borrower
has complied with its social and environmental policies, procedures and standards. This
process lacks commonality and is a weakness in implementing the EP. Different banks have
different environmental management systems. The quality and comprehensiveness of some
environmental management systems have been questioned (Chan-Fischel, 2005).
Some EPFIs have independent verification of their implementation. HSBC, for example,
carried out independent verification of its implementation. The reviews were positive
recognizing that HSBC used independent external consultants to carry out social and
environmental impact assessments and categorize projects. However, the group was
advised to put in place an automated internal report mechanism (HSBC, 2007). Others such
as ING rely on an internal Equator Principles advisory team that is separate from commercial
units to provide training, guidance and compliance. ING in its report made no reference to
independent verification (ING Group, 2006).
The method by which EPFIs implement the EP is a serious issue that still needs to be
addressed. The need for a common guideline on implementation can be gleaned from the
case of Botnia and its Uruguay paper mill. ING Group had considered funding loans to
Botnai and or ENCE for paper mill production in Uruguay. Many NGOS reported violations of
the Equator Principles and requested ING to suspend loan considerations until the sponsors
complied with IFC environmental and social policies and the Equator Principles.

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In December 2005, The Centre for Human Rights and Environment released an Equator
Compliance Complaint letter written to ING regarding this loan. The letter reported violations
of the Equator Principles and requested ING to cease considerations of financing projects
until the sponsors complied with the IFC’s environmental and social safeguard policies and
the Equator Principles (Centre for Human Rights and Environment, 2005). It is not clear to
what extent ING’s internal advisory committee had considered the environmental and social
impacts of such project financing. However, in April 2006, ING Group in a letter to the Centre
for Human Rights and Environment (CEDHA) stated that following recommendations by its
advisory and coordinating team, it would no longer participate in the project (Centre for
Human Rights and Environment, 2006). ING’s assertion that its decision was not based on
assessment of the project’s compliance with EP was seen as necessary to prevent potential
lawsuits from Botnai (Business and Human Rights Resource Centre, 2006). In the same year,
it was reported that Calyon, another signatory to the Equator Principles, had approved loans
to Botnia after its finance team considered it a general loan to the company, and not project
finance, which would result in greater scrutiny by the bank under its commitments to the
Equator Principles (BankTrack, 2006). This case illustrates the problems raised by the lack of
transparency on the part of companies and the failure of clear guidelines on the need and
use of internal or external mechanisms for verification of compliance.
So far the discussions have centered on soft law initiatives addressing human rights and the
environment. The next analysis will address corruption. Combating corruption is a serious
challenge that corporations face frequently. Many corporations have been involved in
corporate scandals involving corrupt payments to public officials, both domestic and
foreign. Such payments have an adverse effect on development, competition and fair trade,
and should not be entertained. There is much hard law addressing corruption in international
business, such as the Foreign Corrupt Practices Act in the USA.
Corporations are also aware of the negative effects of corruption and are involved in
initiatives to curb corruption. One such initiative is the Transparency International Business
Principles (TI Principles). This initiative is facilitated by Transparency International (TI) and
Social Accountability International (SAI). Private sector companies, NGOs and trade unions
were involved in the development of the principles. The aim of the TI principles is to ‘‘provide
practical guidance for countering bribery, creating a level playing field and providing a
long-term business advantage’’. The TI principles call for companies to have zero tolerance
to bribery and commitment to implementation of an anti-bribery program. In November
2004, TI published a guidance document to help companies implement or review their
anti-bribery programs/practices (Transparency International, 2004).
Like many of the initiatives discussed in this article, the TI Principles create awareness of
CSR issues – in this instance corruption in international business. However, it is very difficult
to determine the impact of the business principles on companies. The TI Principles are
simply a guide for companies to use in implementing their own anti-bribery programs if they
choose. There is no way of gauging the number of companies using the Principles. There is
no independent information on feedback from companies that have applied the Principles to
determine their effect. Any information on feedback is gleaned from the social or
sustainability reports of individual companies. The legitimacy and credibility of the Principles
is suspect. The principles are seen as a valuable ‘‘content’’ for the anti-corruption principle
of the global compact, the starting point for implementation of a no-bribe policy by industry
sectors, and as a potential pre-qualification requirement for bidders on internationally
funded projects (Nussbaum, 2004). In essence the Principles cannot stand alone, but rely
on other principles to be impactful.
Other principles useful for curbing bribery are the Partnering Against Corruption Initiative
(PACI), launched in partnership with TI, and the Basel Institute on Governance, announced
in January 2004 at the World Economic Forum (WEF) annual meeting. Based on the TI
business principles, the PACI principles are voluntary and aim to rally business leaders,
governments, civil servants and legislators behind the fight against corruption as well as to
consolidate private sector efforts to fight bribery and corruption and shape the evolving
regulatory framework (World Economic Forum, 2004).

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 Unlike the TI Principles, the PACI principles need to be adopted by companies. As of June
2008, the WEF website lists 140 signatory companies to the PACI. Since the PACI principles
were developed, a number of its founding members and/or their subsidiaries have been
under investigation and/or prosecution for corrupt practices. In July 2004, two subsidiaries
of ABB Ltd each pleaded guilty to FCPA violations in connection with their pursuit of oil and
gas construction contracts in Nigeria (United States Department of Justice, 2004). In
October 2006, the US Department of Justice reported that Statoil acknowledged making
bribe payments to an Iranian official in order to secure valuable oil and gas rights in Iran
(United States Department of Justice, 2009).
There are companies involved in the evolution of PACI that have are yet to sign the principles.
These include Chevron Texaco, Japan National Oil Corporation and Saudi Aramco (World
Economic Forum, 2004). These companies were part of 14 multi-industry and multi-regional
PACI task forces involved in the overall process of the PACI Principles. The other 11 are
signatories:
1. ABB;
2. Alcan;
3. Eskom;
4. Fluor Corporation;
5. Hochtief;
6. Newmont Mining Corporation;
7. Occidental Petroleum Corporation;
8. Pakistan State Oil Company;
9. PETRONAS;
10. Skanska; and
11. Statoil Group (World Economic Forum, 2004).
Morganti Group, one of the ten engineering and construction member companies involved in
the derivation process of the PACI Principles, is not a PACI signatory. The other nine
members are:
1. ABB;
2. AMEC;
3. Fluor Corporation;
4. Halcrow Group;
5. Hilti Corporation;
6. Hochtief;
7. Obayahsi Corporation;
8. Skanska; and
9. SNC-Lavalian International (World Economic Forum, 2004).
Failure to adopt the principles by such companies and the threat of serious implications
raises doubts about the ability of PACI to widely compel corporate responsibility by itself and
its effect on corporate practice.
The TI Principles and PACI Principles illustrate rather well the partnership that can take place
between soft law initiatives and hard laws in the CSR agenda. The TI principles create
awareness of the need for companies to have a zero tolerance to bribery. Their failure to
ensure implementation of anti-bribery policies makes them inadequate. Likewise, the PACI
Principles, which require more commitment, have not been effective in curbing corruption.

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Nevertheless their ability to create the necessary awareness makes them a useful tool for
fighting corruption. Anti-bribery laws, if enforced effectively, have the potential to ensure
compliance because of the legal sanctions and cost consequences they provide. However,
current international anti-bribery laws mainly lack adequate enforcement mechanisms and
cannot curb bribery by themselves. Overseas bribery by companies is still very prevalent
despite the existence of international anti-bribery laws criminalizing this practice
(Transparency International, 2006). A 2006 survey by risk consultancy control risks and
law firm Simmons & Simmons concluded that corruption is still a huge global issue, and
many honest companies lose out to dishonest competitors (Control Risks, 2006).
The United Nations Convention against Corruption (UNCAC; United Nations, 2003) is a
recent attempt at CSR enforcement using hard law and an example of the emergence of
universal standards for CSR. The UNCAC has 140 signatories and 92 parties including the
USA, which ratified it on October 30, 2006. The UNCAC recognizes the part that MNCs play
in the supply side of corruption and requires its state parties to criminalize the act of bribing a
national or foreign public official and an official of a public international organization
amongst other offences. Article 26 of the UNCAC requires state parties to adopt measures
consistent with its legal principles to establish the liability of legal persons (including MNCs)
who participate in the offences established in the Convention. Such liability may be criminal,
civil or administrative. The effectiveness of the UNCAC in holding corporations responsible
for the criminal act of corruption listed in the Convention is yet to be seen. This is because the
UNCAC relies heavily on state enforcement. It can perhaps be said that with the exception of
the USA, which implements UNCAC through the Foreign Corrupt Practices Act, states have
typically been slow to hold their corporations responsible for corrupt practices committed in
other countries. This brief analysis of the UNCAC shows the need for adequate enforcement
in international anti-bribery laws’ attempts to curb bribery.

3.3. General codes

General codes address a wide range of social and ethical issues. Typically these include
human rights, labor, the environment and anti-corruption. The Organization for Economic
Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the UN
Global Compact are classical example of such codes.
The OECD Guidelines are recommendations addressed by government to multinational
enterprises providing voluntary principles and standards for responsible business conduct.
The guidelines aim to ensure that the operations of these enterprises are in harmony with
government policies, to strengthen the basis of mutual confidence between enterprises and
societies in which they operate, to help improve the foreign investment and to enhance the
contribution to sustainable development made by multinational enterprises. They deal with a
variety of subjects including the environment, human rights, and combating bribery
(Organization for Economic Co-operation and Development, 2000).
There are questions as to the overall level of the awareness of the Guidelines within the
business community and how comprehensively they are being followed. There are calls
for governments to encourage national contact points (NCPs) to play a more active role in
promoting awareness of the Guidelines in the business sector (Hohnen, 2008). NCPs are
government offices responsible for encouraging observance of the Guidelines and
ensuring that the Guidelines are well known and understood by the national business
community. NGOs have identified several weaknesses in the implementation of the
Guidelines. One such weakness is the close nexus between the business community and
NCPs established to deal with all matters relating to the implementation of the Guidelines.
There is a perception that NCPs’ actions protect business interests rather than seek to
resolve and remedy breaches of the Guidelines (OECD Watch, 2008). Another weakness
is the failure of NCPs to deal effectively with specific instances filed by interested parties.
OECD Watch, made up of several NGOs, cites inordinate delays in the handling of
complaints, lack of transparency and lack of clear procedures as concerns that NCPs
need to address (OECD Watch, 2008).

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 The Global Compact is a voluntary initiative instituted by then UN Secretary-General Kofi
Annan in 2000. The aim of the Global Compact is to encourage businesses to adopt ten
principles that will showcase their commitment to corporate social responsibility, build social
legitimacy, trust and contribute to the UN’s broad-based development and other goals such
as the Millennium Development Goals (United Nations, 2000). Principles 1 and 2 relate to
human rights and urge businesses to support and respect international human rights and
make sure their own corporations are not complicit in human rights abuses. Principles 3-6
deal with labor issues. Principles 7-9 deal with the environment and Principle 10 deals with
anti-corruption. Businesses are required to adopt a core set of values within their ‘‘sphere of
influence’’.
The Global Compact does not define ‘‘sphere of influence’’. The terms ‘‘sphere of influence’’
and ‘‘complicity’’ have been the subject of debate. Steven Ratner (2001) notes that
corporations should be held responsible within their sphere of influence: when their duty
relates to a relationship with government, there is a nexus of affected population and
corporations know the people doing the acts and the abuses they are likely to perpetrate.
The Special Representative to the United Nations Secretary General (SRSG) appointed to
look into human rights and business issues including researching and clarifying the
implication for business on concepts such as ‘‘sphere of influence’’ and ‘‘complicity’’
addressed these issues in his 2008 report (Ruggie, 2008).
According to Ruggie (2008), ‘‘sphere of influence’’ can be subject to two interpretations. The
first interpretation relates to the human rights impacts of corporate activities that cause harm,
while the second relates to the leverage a corporation may have over other actors that are
causing harm. He opines that sphere of influence as it relates to the accountability of
corporations should be focused on the first interpretation. In relation to the issue of proximity
in the sphere of influence model, Ruggie (2008) opines that it is the companies’ web of
activities and relationships that should determine whether or not a human rights impact falls
within the responsibility to respect (Ruggie, 2008).
With so much uncertainty as to the meaning of corporate sphere of influence, it is
questionable whether businesses fully appreciate the extent to which these values should be
applied. It is likely that business will approach the subject from the SRSG’s point of view.
There are also questions as to whether the Global Compact is maximizing its potential and
ability to showcase CSR, build social legitimacy and trust and contribute to development.
Nevertheless, the partnership and active engagement between multi-levels of business, civil
society and government that the Global Compact creates is good. The Global Compact has
created a mass volume of awareness in CSR issues. Its focus on four core areas makes it
clear which standards business needs to adhere to, albeit uncertainty as to a company’s
sphere of influence.
Critics of the Global Compact see it as no more than an attempt to lend the legitimacy of the
UN to corporate public relations hype (Picciotto, 2003). The voluntary nature of the Global
Compact raises doubts as to its ability to address the important issue of accountability –
transparency and monitoring. Admittedly, the Global Compact emphasizes that it is not
designed to monitor or measure corporate performance. Nevertheless, aware of the
importance of these issues, it has put some integrity measures in place. Businesses are
required to communicate their progress in implementing the Global Compact principles, but
the Global Compact cannot guarantee the accuracy of the reports and its website currently
requires individuals to review communication on progress reports online. It may well be that
the sheer number of participants (there are over 4,000), the volume of CSR work and
apparent bureaucratic tendencies make it simply too difficult to assess the effectiveness and
impact of global compact on corporate behavior.

4. Conclusion
Universal standards for CSR are emerging in the areas of human rights, the environment,
and anti-corruption. However, enforcement of these standards is for the time being mostly
carried out through soft law initiatives. Such initiatives are voluntary and non-binding. They

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create much needed awareness for CSR issues and must be complimented. They are
necessary tools in improving corporate behavior, but are by themselves inadequate.
Many of the soft law initiatives examined in this article lack adequate transparency,
monitoring and compliance mechanisms external to companies. This is an area that needs
emphasis and encouragement. It may be that NGOs and civil society can play an informed
role in ensuring CSR through greater public scrutiny which raises awareness to corporate
misbehaviors and pressurizes corporations to take these issues more seriously. There is also
a place for the emerging role of international governance agencies such as the lending rules
of the World Bank and the International Finance Corporation. This has not been addressed in
any detail in this article and may be a subject for further research.
More partnership between the use of soft law initiatives and hard laws, where applicable, is
required. An area in which this has been exemplified in this article is anti-corruption
standards.

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Corresponding author
Adefolake Adeyeye can be contacted at: lawaoa@nus.edu.sg

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