Corporate Social Responsibility part 7 – The Role of Governments in Promoting Responsible Business Practices
July 11th, 2008Corporate Social Responsibility 10 CommentsThis is the seventh post in a series on Corporate Social Responsibility (CSR)
Today I would like to discuss the role of governments in promoting CSR.
One view is that CSR, by definition, is the function of business, not government. Under this view, business, not government, is in the best position to manage CSR in an effective manner. If governments intervene, they will simply mess things up.
I disagree. Governments should, and do, play an active role – particularly in terms of defining expectations, setting positive examples and rewarding ethical conduct.
What should governments do?
In my opinion, the role of governments in promoting responsible business practices can be summarized in seven steps as outlined below:
• Set laws to define minimum standards of behavior.
This is the most basic function of governments in relation to CSR.
Companies have no mandate to decide upon minimum acceptable standards of behavior – governments do. Governments, therefore, not companies, need to define minimum requirements through legislation.
• Develop frameworks for ethical business practice.
This can be done at a national level, at an international level, or both.
At a national level, India’s Ten Point Social Charter provides an excellent example. The UN Global Compact, which stipulates ten core principles relating to human rights, the environment and corruption, provides an international example.
In both of the cases above, compliance with the content of the document is not mandatory. However, both documents clearly outline core principles which companies are expected to follow.
Governments must clearly define the standards required for ethical corporations. Businesses that seek to be responsible must follow these standards.
• Favor ethical companies in procurement.
Government departments, entrusted with the use of taxpayers’ money, should consider the ethical practices of potential suppliers in their procurement decisions.
Only companies with positive ethical practices should be rewarded with taxpayers’ money.
• Set an example.
Governments should aim to conduct the affairs of their own departments in a manner which is beyond reproach.
Leadership is done by example. Governments must therefore demonstrate ethical and responsible conduct by practising it within their own operations.
• Use fiscal policy to encourage and reward ethical behavior.
Tax credits or subsidies can be provided to encourage certain types of ethical behavior. One example may be hiring staff from particularly disadvantaged groups, like those who suffer from physical or mental disability.
Tax credits and subsidies can also be used to promote investment in certain types of technology. Renewable energy is a prime example.
• Work with industry and other stakeholders in the development of voluntary codes of conduct.
Industry and other key stakeholders are usually in the best position understand the particular requirements of their industry. Accordingly, governments should not play an overbearing role in this area.
However, governments have a role to play in ensuring that such codes address the needs of all relevant stakeholders, as well as meeting expectations of the general public.
• Sponsor co-ordination and training.
Many CSR projects operate at an individual company level. Governments can play an active role in fostering and promoting co-operation and coordination of individual projects which operate within the same area.
Governments can also foster learning and development by organizing workshops or other forums to provide opportunities for companies to share their knowledge and experience.
Conclusion
Governments should seek a proactive role in promoting sound ethical practices in business.
This should include defining expectations, setting a positive example and rewarding business for sound ethical practices.
Over to You:
Your thoughts, opinions, and perspectives in relation to the role of governments in promoting responsible business behavior are most welcome.
Please feel free to express your opinion by clicking on the ‘comments’ section at the head of this post.
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