Transparency instead of disasters
This article was published in the yearbook of Stete 2015
The public discussion about Corporate Social Responsibility started later in Finland than it did in the US and many European countries. The question has already been raised to the Finnish agenda ten years ago and guidebooks ever since have been published about environmental, economic and social responsibility. Trade Unions and NGOs have been very useful in training people and spreading information. Even the Finnish Government has planned to make Finland the best country in Corporate Responsibility.
Still, we are facing frequent serious issues, mostly concerning global companies functioning in other countries on the other side of the globe. One example is the recent news about the use of child labour in a Finnish paper factory overseas. Basic working law violations, ignorance in public procurements, health and safety problems as well as concerns with long working hours and too low salaries are also a reality in Finnish companies overseas. Even if there have been efforts to improve Corporate Social Responsibility, there is still a lot to do.
It seems that consumers react only when big disasters become public. A good example of this is from the textile and garment industry in Bangladesh. People working on the branch know very well that working conditions in Bangladesh have always been very bad; wages are low, only 30 euros per month and health and safety measures in factories remain seriously lacking.
However, 80 % of the country´s GNP consist of clothing export. There are over 3 million workers producing clothes for companies all over the world, also for companies in Finland. Only after the big disaster in Rana Plaza factory where 1250 workers lost their lives and at least as many were injured, the international media started paying attention to the problem, even though there have been big and disastrous fires already before Rana Plaza where people have also lost their lives because they have been locked inside the factories.
Similar sad stories from other industries can also be found from other big producer countries. One example is from Qatar, where they are currently building a football stadium for the World Championship Games of 2022. Over 400 workers, mostly immigrants, have already lost their lives in the construction work. Many Finnish export companies have businesses in Qatar, and yet these problems for human safety haven’t been faced.
Decent work is far from reality, in many countries and in many sectors. And this is an issue that should be dealt with globally.
Human rights for workers in wineries, juice production, hospital equipment, stone work, making bricks, making footballs and fisheries is a vast area to keep an eye on for Trade Unions alone. Support from institutions such as the EU and the UN is increasingly important.
After the catastrophe of Rana Plaza, Trade Unions and NGO´s negotiated an Accord to improve worker safety in clothing factories. According to the new agreement, companies should pay benefits to the victims of the disaster. However not all companies that have industries in problematic areas have joined the agreement. Also, the memory of our society is limited. One and a half years ago, Finnish consumers decided to boycott a company which produced their merchandise in these same areas. However, 1,5 years after the fire, most people and the media have completely forgotten about the incident.
The minister on labour, Mr. Lauri Ihalainen has said that CR needs global solutions. That is true, global binding solutions are urgently needed. ILO basic rights should be respected in the entire supply chain. All over the world there are extreme violations that concern health and safety, working time, living wages and the right to organise and to negotiate collectively.
The European Union’s measures aimed at developing corporate social responsibility are most welcome and should be supported. Sound corporate social responsibility prolongs employees’ (working) lives, is an integral element in sustainable development and even enhances economic growth and productivity.
On the 15 of April 2014, the European Parliament adopted a Directive on the disclosure of non-financial information by certain companies. According to the Directive, all companies with more than 500 employees will be required to include a report on environmental matters and social and employee-related aspects in their annual reports. It is good that at the same time companies are being required to disclose information on how they have tackled anti-corruption and bribery issues. Respect for human rights is also covered by this requirement. The Directive was approved in the Council on the 29th of September.
According to the compromise between the Parliament and the Council, during the year 2018 the Commission should consider the possibility of introducing an obligation requiring a country-by-country report containing information on profits made, taxes paid on profits and public subsidies received. Now it is up to the Member States themselves to decide on whether companies are required to report as part of their annual report, or separately. Even if included in the audit, the report need not be audited as such. Instead, the auditor’s responsibilities go no further than ensuring that the report has been made.
In the opinion of Finnish employee organisations, the entire Directive would be applicable for companies with over 250 employees, since a company is large by definition if it has at least 250 employees and smaller companies, for practical reasons, might not be able to find funding for these kinds of ventures
Challenges in implementing social responsibility
Key challenges in implementing social responsibility are related to non-compliance with the EU, international treaties and recommendations and national legislation. Supervision is currently ineffective and insufficiently resourced. The authorities’ awareness of social responsibility, and communication on the issue, is highly inadequate. Mere recommendations are clearly not enough – binding legislation is required at both EU and national level.
In terms of corporate social responsibility, Finnish employee organisations have put a special emphasis on ground rules for working life, employees’ rights and human rights, as well as corporate environmental responsibility and corporate responsibility for sustainable development.
When running their businesses, enterprises should take into account the persons and population groups affected by the impact of the business, either direct or indirect, at all stages of its operations. The organisations representing such persons and population groups, such as employee organisations, should be included in this process. Indigenous people, women and children are in the most vulnerable position, particularly with respect to global operations, and should thus be put more emphasis on.
Contractors’ liability for their contracting partners’ national and international obligations should be enhanced. In particular, a regulatory model should be established for ensuring compliance with minimum-level terms of employment.
Who is responsible?
What are the consumers’, investors’ and states’ responsibilities? Which part of the process has the biggest impact? Are the consumers guilty when they want to buy very cheap products and are not concerned or thinking about the living conditions from where the products are made? Are the investors and factory owners the most guilty ones when they want to gain the biggest profits possible? Some states even tempt producers with low taxes and other benefits, completely disregarding international conventions.
To tackle this vast problem OECD has published guidelines for multinational enterprises. – OECD national contact points have the duty to spread the information, however not to act as tribunals.
UN Guiding Principles on Business and Human Rights must be enforced in all EU Member States, based on a broad concept of human rights. Basic and human rights are particularly important fundamental rights to which everyone is equally entitled, including the right to security and protection at work and in working life.
Corporate social responsibility, but how?
Enterprises have many different guidelines that they can choose to follow. Many Finnish clothing companies rely on Business Social Compliance Initiative (BSCI) by which they try to follow their supply chain’s subsidiaries’ and subcontractors’ working conditions in developing countries. BSCI is a company’s own responsibility code. Two of three suppliers must be audited as good suppliers in a five year period of joining the code. BSCI could be seen as the first step to better functioning surveillance of workers’ rights.
There are also many multi-stakeholder initiatives, based on organisations like Ethical Trading Initiative, Fair Wear Foundation, Fair labour Association, Clean Clothes campaign.
In many countries the companies have legally binding responsibility to publish certain minimum standards in their yearly reports. GRI, Global Reporting Initiative tries to guide companies to report the social and environmental impacts of their business in a coherent way by using coherent standards.
Social Accountability International has produced a SA8000- standard where social responsibility and decent working conditions are the focus point. Trade Unions have been consulted in the process of making this standard. The problem with all different standards is auditing: how often and by whom. To be reliable it should be frequent and conducted by independent auditors.
What is still worrying is that social responsibility and human rights are not found to be the most important questions among Finnish enterprises, according to a research survey made in the beginning of the year 2014. Two out of three enterprises name environmental aspects to be at the top of the list when they were asked about corporate social responsibility. Human rights and consumer questions are found to be less important. That is a sad result, but reveals that information and training in these questions must be increased.
Finnwatch, the watchdog agency tracking Finnish companies’ operations in developing countries has made many useful reports about Finnish companies. For example The Decent Work programme has investigated working conditions at company units and those of their subcontractors in developing countries, which supply goods to Finnish markets.
Special attention has been paid to working hours, employees’ livelihood and occupational safety and health. In one of its projects it also searches for the origins of products from developing countries that are used in hospitals. The goal is not only to provide information but also to influence companies, decision-makers and people responsible for public procurements to make their actions more responsible.
In order to enhance the supervision of corporate social responsibility, binding rules should be implemented on the publication of personnel and environmental information in annual reports. These rules will also serve to prevent companies from engaging in aggressive tax avoidance measures.
Supervision of corporate social responsibility
New legislation is required for the implementation of corporate social responsibility. Right of action for trade unions and other organisations would advance the rights of employees and citizens who are in the weakest position. Employers acting in compliance with such legislation would also benefit from an organisational right of action, since this would make it easier to intervene in competitors’ illegal activities, which often distort competition.
More resources must be allocated to national labour protection authorities. Moreover, new methods should be considered for enhancing the efficiency of supervision, such as involving trade unions in supervision. Labour protection authorities should fulfil their obligation to supervise more extensively than presently, for instance by taking a more active stand on whether companies’ operations comply with EU and ILO conventions on working life.
Auli Korhonen