Corporate accountability to the communities they work with

‘Tri-sector’ partnerships between government, business and civil society are seen as a way for the private sector to help tackle poverty. Such approaches may not be relevant to poorer groups working with transnational corporations to reduce the social and environmental impact of their investments. It is not easy to make companies accountable to the communities they work with.

A paper from the Institute of DevelopmentStudies in the UK investigatesthe conditions in which community-based strategies for corporate accountabilitymake a difference. The authors analyse 46 cases in which communities haveattempted to make corporations answerable for their social and environmentalresponsibilities. While some communities have influenced transnationalcorporations (TNCs), many lack access to political representation and the meansto respond to corporate irresponsibility. This is particularly so wherestate-based regulation is weak, international law is rarely respected andcorporate accountability is a foreign concept.

The relaxation of labour and companylaw has made it easier for TNCs to enter and exit local communities, but theirresponsibilities are not clearly defined or regulated. When corporations playgovernments and workers off each other to their own advantage it is moredifficult for poorer communities to demand accountability. Further, while corporations have easy access todecision making, the poorer communities they are based in may be far removedfrom the centres of political power. Communities encounter TNCs in situationsof sharp political and economic inequality.

Supportersof the ‘liberal’ corporate social responsibility (CSR) approach believegovernment intervention in the economy should be minimal and corporationsshould regulate themselves. The authors find that such arguments:

• focus on voluntary measures such as corporate codesof conduct negotiated on terms set by business, neglecting the potential of strategiesused by communities to demand broader forms of corporate accountability
• have a limited understanding of how local conditionsaffect the extent to which corporations are vulnerable to community pressure
• use concepts of partnership and negotiation that failto consider the importance of power relations
• assume that communities have the ability andconfidence to participate effectively in partnerships
• fail to distinguish between NGOs and the community, assuming the formeradequately represent the latter
• overlook the close ties existing between governmentand business that reduce scope for accountability to communities.

The authors argue that a range of state-,corporation- and community-related factors determine the effectiveness ofstrategies aimed at making TNCs answerable to communities. For example:

• Ifbusiness-community dialogues are narrowly defined communities may lendlegitimacy to a process without actually influencing it.
• Loanconditions from international organisations such as the World Bank and theInternational Monetary Fund may determine how a government approachescompany-community conflicts, often privileging the former.
• Evenwhere states are willing to support communities in dispute with TNCs they maybe unable to implement sanctions against them: TNCs can avoid theirresponsibilities by claiming that the local companies they control are separatelegal entities.
• Highlevel of community dependence on a single corporation for employment often limitsthe ability of the community to protest.
• TNCs are adept at presenting themselves as agents of‘modernisation’ and ‘development’while stigmatising traditional livelihoods as ‘backward’ and ‘unproductive’.

There is much that states, corporations and civilsociety can and should be doing to strengthen community-based strategies concerningTNCs. But while regulation by civil society and corporate self-regulation maybring about certain gains for poor communities, they are limited as a viable globalmodel for corporate regulation and accountability.