Corporate power and corporate social responsibility
Corporate power and corporate social responsibility
Power and responsibility are closely related concepts. It is argued that power can be seen as both a condition for and a cause of responsibility. Increased power is generally seen as entailing increased responsibility (Bendell 4; Stahl 5; Villiers ). Concern about the damage caused to the environment by economic activity, globalization, and the growth of the power and influence of large transnational companies are some of the factors that have stimulated the debate over CSR. Furthermore, social and environmental criteria are increasingly affecting the decisions of individuals and institutions both as consumers and investors. Business is also more transparent because of the media and modern communication technologies (European Commission ). The advocates of CSR assert that companies should be made accountable for how they exercise their power and use their resources.
Basically, CSR has two dimensions. It aims to examine the role of business in society and to maximise the positive societal outcomes of business activity (Ward ). However, definitions of CSR abound, making it a difficult concept to grasp. It is routinely suggested that CSR is any behavior by business over and above fundamental legal requirements. There is, however, a lack of consensus about what role law should play in CSR. This is commonly referred to as the “voluntary versus mandatory CSR” debate (see, e.g., Zerk ; European Commission , , ). Representatives of business stress a voluntary approach to CSR and argue that firms should be able to develop their own responses to CSR questions (European Commission , , ). There has been extensive research concerning the so-called “business case” for CSR, seeking to demonstrate that companies which adopt responsible business practices are more profitable and attractive to investors, employees and consumers (Vogel 5). The European Commission views CSR primarily as a voluntary activity. According to the Commission, CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission ). Furthermore, CSR is described as “the responsibility of enterprises for their impacts on society” (ibid ). Compliance with the law is also understood as part of social responsibility. The representatives of many civil society organizations, on the other hand, Basically, CSR has two dimensions. It aims to examine the role of business in society and to maximise the positive societal outcomes of business activity (Ward ). However, definitions of CSR abound, making it a difficult concept to grasp. It is routinely suggested that CSR is any behavior by business over and above fundamental legal requirements. There is, however, a lack of consensus about what role law should play in CSR. This is commonly referred to as the “voluntary versus mandatory CSR” debate (see, e.g., Zerk ; European Commission , , ). Representatives of business stress a voluntary approach to CSR and argue that firms should be able to develop their own responses to CSR questions (European Commission , , ). There has been extensive research concerning the so-called “business case” for CSR, seeking to demonstrate that companies which adopt responsible business practices are more profitable and attractive to investors, employees and consumers (Vogel 5). The European Commission views CSR primarily as a voluntary activity. According to the Commission, CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission ). Furthermore, CSR is described as “the responsibility of enterprises for their impacts on society” (ibid ). Compliance with the law is also understood as part of social responsibility. The representatives of many civil society organizations, on the other hand,
be developed, implemented and evaluated solely by business, but rather require the involvement of all stakeholders (Zerk ; European Commission ). Generally speaking, in the Northwest Russian forest sector, CSR is a voluntary choice for the forest companies and is nowadays, to a significant extent, market-driven. In this context the voluntary nature of CSR means that there are no laws obligating the forest companies to follow certain CSR practices. However, it should be noted that laws do regulate some important dimensions of CSR such as environmental protection and workers’ rights. The demands of markets and the need of export-oriented Russian companies to safeguard their reputation in Western markets create incentives for the Russian forest industry companies to develop their CSR practices. However, CSR in the Northwest Russian forest sector is rather challenging, since Soviet traditions and the poor social and economic conditions in several localities also have an impact on what kind of behavior is considered as responsible in the forest industry. Furthermore, nowadays, actors such as international and Russian domestic NGOs participate actively in the discussion on CSR and seek to simulate the CSR practices of the forest companies (e.g., Matilainen ; Tysiachniouk a; Kuliasov and Kuliasova ; Kuliasova ).
Forest certification standards constitute the primary private regulation scheme dealing with the CSR practices of forest companies in the Northwest Russian forest sector. Since the end of the s, NGOs have actively promoted forest certification in Russia. The FSC was originally established in by several international NGOs and forest companies as a response to concerns about global deforestation (Cashore ; Cashore et al. ). The FSC system of forest certification is by far the most prominent certification regime in the Russian forest sector; the first FSC certifications were granted there in . The PEFC (Programme for the Endorsement of Forest Certification), initiated by landowners’ associations and forest products corporations, is another significant forest certification scheme. The PEFC was founded in and has now become the most widespread forest certification scheme in the world. Nevertheless, the PEFC has not been as successful in the Northwest Russian forest sector as the FSC. There are both forest management and chain of custody Forest certification standards constitute the primary private regulation scheme dealing with the CSR practices of forest companies in the Northwest Russian forest sector. Since the end of the s, NGOs have actively promoted forest certification in Russia. The FSC was originally established in by several international NGOs and forest companies as a response to concerns about global deforestation (Cashore ; Cashore et al. ). The FSC system of forest certification is by far the most prominent certification regime in the Russian forest sector; the first FSC certifications were granted there in . The PEFC (Programme for the Endorsement of Forest Certification), initiated by landowners’ associations and forest products corporations, is another significant forest certification scheme. The PEFC was founded in and has now become the most widespread forest certification scheme in the world. Nevertheless, the PEFC has not been as successful in the Northwest Russian forest sector as the FSC. There are both forest management and chain of custody
viable management of forests in all regions of the world. 15 Companies that choose to comply with FCS standards are granted a certificate and are allowed to use the FSC label in their marketing and market their products as coming from appropriately managed forests. The compliance of forest operations with FSC standards is monitored by third-party auditors (see, e.g., Maletz and Tysiachniouk ). This regulation of the CSR practices of forest companies can be seen as a form of private governance. Forest certification does not create binding obligations on forest companies – at least, not in a legal sense. However, this private regulation is important, since the violation of private rules and loss of certification could seriously harm the reputation of a company. The forest companies in the Russian part of the Barents Region are export-oriented, which further emphasizes the importance of a good reputation. Forest certification has been regarded as a mechanism that has brought international CSR principles and the principles of sustainable forestry into the forest sector and the local communities in Russia (Tysiachniouk a, b; Kuliasova , ). In addition, it can be suggested that forest certification has introduced legal pluralism in the Northwest Russian forest sector. The emergence of forest certification in the Northwest Russian forest sector emphasizes the role of private regulation in constraining the behavior of forest companies. Legal pluralism will be discussed in the following sections.
some remarks on legal pluralism
The aim of this section is to provide a brief introduction to legal pluralism. The traditional concept of legal pluralism became popular in the s and s. It was developed within the fields of legal anthropology and sociology to analyse co-existing and overlapping normative orders within societies (Michaels ). It is frequently suggested that legal pluralism implies that the state is not the
15 For more details, see www.fsc.org.
sole source of legal order and that there can be several co-existing legal orders in the same field (see, e.g., Griffiths ; Berman ; Michaels ). In this way, the idea of legal pluralism challenges legal centralism and the monopoly of the state in making and administering law. A legal centralist approach considers law as “an exclusive, systematic and unified hierarchical ordering of normative propositions depending from the power of the state” (Griffiths ).
Legal pluralist scholars have argued that law does not reside solely in the coercive commands of sovereign states as legal centralists claim and that non- state communities also create law. Legal pluralism describes hybrid legal spaces where more than one legal or quasi-legal regime operates in the same social field. It is basically a descriptive framework. Legal pluralists observe that various actors create norms, and they analyse the interplay between rules; but legal pluralists do not seek to propose a hierarchy of substantive norms and values (Berman ).
Legal pluralism is, however, far from being a clear and unambiguous concept (Woodman ). The notion of legal pluralism has been marked by a deep conceptual confusion. One reason for the continuing disagreements is that legal pluralist scholars come from several disciplines, bringing different concepts and orientations to the subject. An international lawyer, for instance, who discusses legal pluralism has something very different in mind from a legal anthropologist who is studying legal pluralism (Tamanaha ; von Benda-Beckmann ). The debate over legal pluralism has raised complex questions such as what law is, what criteria should give social phenomena the quality of being legal, what type of legal complexity should be called legal pluralism, and what simultaneous existence or co-existence of law or legal orders means (Tamanaha ; von Benda-Beckmann ; Woodman ). My objective here is not to examine the whole extensive debate on legal pluralism in detail. For the purposes of this chapter, the key questions are the power of forest companies, their role as rule-makers, and the presence of multiple regulatory systems that govern forest companies and their CSR, not the formal status of these rules.
The concept of legal pluralism has gone through several stages in its development. In her discussion of the development of legal pluralism, Sally Engle Merry ( ) refers to “classical” and “new” legal pluralism. Classical legal pluralism focused on analyzing overlapping normative systems created during the process of colonisation. Thus, legal pluralist scholars originally focused on non-Western societies and their legal systems. Classical anthropology-oriented The concept of legal pluralism has gone through several stages in its development. In her discussion of the development of legal pluralism, Sally Engle Merry ( ) refers to “classical” and “new” legal pluralism. Classical legal pluralism focused on analyzing overlapping normative systems created during the process of colonisation. Thus, legal pluralist scholars originally focused on non-Western societies and their legal systems. Classical anthropology-oriented
New legal pluralism, on the other hand, extended the concept of legal pluralism to the advanced industrial countries of Europe and the United States. It was recognized that normative plurality existed in virtually all societies. Merry ( ) stresses that this was an extraordinarily powerful conceptual move, in that it placed ”at the center of investigation the relationship between the official legal system and other forms of ordering that connect with but are in some ways separate from and dependent on it. The new legal pluralism moves away from questions about the effect of law on society or even the effect of society on law toward conceptualizing a more complex and interactive relationship between official and unofficial forms of ordering”.
More recently, globalisation has shaped the idea of legal pluralism. The development of global communication technologies, the rise of multinational corporations, and the mobility of capital and people across borders mean that many jurisdictions feel the effects of activities taking place around the globe. Inevitably this leads to multiple assertions of legal authority over the same act without regard to territorial location. Globalisation has given rise to another wave of legal pluralism. Scholars of legal pluralism have seen globalisation as
a new field in which to apply their expertise (Michaels ; Berman ; Tamanaha ; Teubner ). According to Gunther Teubner (), “global law will grow mainly from the social peripheries, not from the political centres of nation states and international institutions”. Different non-state actors play roles, such as law-making, that were traditionally reserved to the state. This development can also be identified in the forest sector in the Russian part of the Barents Region. In the next section I will examine the rule-creating activities of one these private actors: forest companies.
forest industry companies as promoters of private regulation
This section is concerned with the regulatory capacity of the forest companies and how the forest companies have introduced private regulation in the Northwest Russian forest sector. As previously mentioned, legal personality and limited liability are usually regarded as characteristic features of companies, and because of these features companies are powerful actors. Furthermore, as the idea of legal pluralism stresses, companies are important rule-creating communities – another thing that makes them powerful. Generally speaking, there are key differences in regulatory capacities between businesses. Large affluent companies generally have better capacities to participate in discussions concerning private regulation, whereas small and medium-sized enterprises often struggle to keep up with development (Hutter ). The forest sector in the Russian part of the Barents Region is nowadays dominated by large companies, and many small forest companies have become affiliates of large holding companies (see, e.g., Matilainen ; Torniainen et. al ). Undoubtedly, this consolidation of the forest industry is a significant factor enhancing the regulatory capacity of the forest companies.
Private regulation established by companies themselves or by the industry is routinely called self-regulation. This is a broad concept that covers a wide range of arrangements. There are also hybrid forms of self-regulation such as enforced self-regulation, which involves a mix of state and corporate regulatory efforts. Furthermore, sometimes self-regulation is meditated through trade associations (Hutter ). Civil regulation and soft law are also frequently used concepts in discussions about private regulation. The term “civil regulation” covers a wide range of arrangements such as various standards and certification regimes set by NGOs. It does not derive its authority from governments, but, instead, the advocates of civil regulation turn to the market’s supply chains to create incentives and force companies to comply. In the forest industry, forest certification regimes are a significant example of civil regulation. Forestry standards have been studied rather extensively (Vogel 5, ; Cashore et al. ; Cashore ). Civil regulation is a form of soft law, a term that refers to regimes that are not based on state authority. Voluntariness and consensus-based decision making are central features of soft law regimes (Kirton and Trebilcock 4). Soft law instruments can have a Private regulation established by companies themselves or by the industry is routinely called self-regulation. This is a broad concept that covers a wide range of arrangements. There are also hybrid forms of self-regulation such as enforced self-regulation, which involves a mix of state and corporate regulatory efforts. Furthermore, sometimes self-regulation is meditated through trade associations (Hutter ). Civil regulation and soft law are also frequently used concepts in discussions about private regulation. The term “civil regulation” covers a wide range of arrangements such as various standards and certification regimes set by NGOs. It does not derive its authority from governments, but, instead, the advocates of civil regulation turn to the market’s supply chains to create incentives and force companies to comply. In the forest industry, forest certification regimes are a significant example of civil regulation. Forestry standards have been studied rather extensively (Vogel 5, ; Cashore et al. ; Cashore ). Civil regulation is a form of soft law, a term that refers to regimes that are not based on state authority. Voluntariness and consensus-based decision making are central features of soft law regimes (Kirton and Trebilcock 4). Soft law instruments can have a
Company legislation establishes a framework for the rule-creating efforts of companies. Apart from company legislation, companies are regulated by bylaws, which are important regulatory documents in any company that address issues such as the company’s administration, decision-making procedures, and the relationship between the company and its shareholders. The Russian Law on Joint Stock Companies, for instance, stipulates the contents of bylaws in detail, listing all the information bylaws must include. The list is rather long but not exhaustive. According to the Law, other requirements which are not contradictory to the Law on Joint Stock Companies or other laws of the Russian Federation can be included. In the Finnish Law on Joint Stock Companies, on the other hand, there are only a few mandatory requirements for the content of bylaws. According to the Finnish law, the name of the company, the registered office, and the field of business must be mentioned in the bylaws. Consequently, it seems that in this respect Finnish companies have more leeway. However, before the Russian Federal Law on Joint Stock Companies, which was passed on December , bylaws were quite important regulatory instruments in Russia. Russian companies routinely used their bylaws as a tool to supplement inadequate company legislation (Lehtinen ).
Bylaws are, however, just one expression of the regulatory activities of companies. CSR regimes involve self-regulation, since CSR is regarded as
a voluntary commitment of companies and a business activity that exceeds the requirements of state laws (Scott et al. ). CSR practices are routinely defined and regulated by companies in documents called “the codes of conduct”, “CSR principles” or “ethical codes”, just to mention a few examples of terminology used by companies. In addition, these CSR principles and codes of conduct are often published, for instance, on the company’s web page. Thus, self-regulation is undoubtedly a tool to show stakeholders that the company is committed to certain CSR practices. In the Northwest Russian forest sector, large international companies have engaged in self-regulation concerning their CSR. Furthermore, foreign forest companies that operate in Russia usually bring with them their own CSR principles (Matilainen ). As a rule, large global companies have common CSR principles, which are implemented coherently in every country in which the company has business operations. Therefore, when a foreign company acquires a Russian subsidiary company, a voluntary commitment of companies and a business activity that exceeds the requirements of state laws (Scott et al. ). CSR practices are routinely defined and regulated by companies in documents called “the codes of conduct”, “CSR principles” or “ethical codes”, just to mention a few examples of terminology used by companies. In addition, these CSR principles and codes of conduct are often published, for instance, on the company’s web page. Thus, self-regulation is undoubtedly a tool to show stakeholders that the company is committed to certain CSR practices. In the Northwest Russian forest sector, large international companies have engaged in self-regulation concerning their CSR. Furthermore, foreign forest companies that operate in Russia usually bring with them their own CSR principles (Matilainen ). As a rule, large global companies have common CSR principles, which are implemented coherently in every country in which the company has business operations. Therefore, when a foreign company acquires a Russian subsidiary company,
As we have already shown in this article, FSC (Forest Stewardship Council) forest certification is a prominent civil regulation regime in the Northwest Russian forest sector. Other forestry standards such as the PEFC (Programme for Endorsement of Forest Certification) have not been as successful as the FSC, although efforts have been made to introduce the PEFC in Russia. The FCS forest certification standards have been so actively and purposefully promoted in Russia by influential NGOs and large forest companies that efforts to introduce the PEFC in Russia have been undermined (Nystén-Haarala ). Both international and Russian domestic NGOs have been active in raising consumers’ awareness of irresponsible forestry practices and pressuring companies to be more responsible (Tysiachniouk ). Environmental NGOs, in particular, have been active in promoting FSC standards in Russia. In consequence, in the Northwest Russian forest sector, forest certification is strongly biased toward environmental issues, although the FSC also includes requirements concerning economic and social sustainability. However, an emphasis on environmental questions is a general tendency in FSC certification (Kotilainen et al. ; Kuliasova ; Tulaeva ).
Essentially, the FSC establishes a framework for collaboration and negotiations among retailers, civil society organizations and forestry companies (Vogel 5). The support of large forest companies for FSC forest certification standards and their willingness to co-operate in the certification process are crucial for the success of the FSC in the forest sector in Russia. Naturally, it is the forest company that makes the ultimate decision whether or not to certify its operations. In fact, the forest companies in Northwest Russia have adopted FSC standards relatively quickly. Many, if not all, of the leading companies have adopted a policy of certifying their forest operations. Forest certification requires co-operation and dialogue between forest companies and various groups such as NGOs, local communities and certification experts (Maletz and Tysiachniouk ). During the actual process of certification, the interpretation of rather general FSC principles is the result of dialogue between the forest companies and the NGOs. Certification specialists play a crucial role in interpreting forestry standards and adjusting them to local conditions (Nystén-
Haarala ; Maletz and Tysiachniouk ). Furthermore, it should be noted that companies also have to negotiate with the Russian forest authorities, since FSC standards sometimes conflict with Russian forest legislation and forestry practice (Nystén-Haarala ; Pappila ).
Since participation in FSC forest certification is a voluntary choice for forest companies, they will engage in it to the extent that it makes business sense for them to do so (Vogel 5). There are several studies showing that in Russia the demand for participation in FCS forest certification has come from Western markets and customers, as well as from foreign or Russian parent companies. As a rule, in Western markets customers expect forest products to be produced in an economically, environmentally and socially sustainable manner. These market demands have created serious pressures on the forest companies to apply more sophisticated and reliable CSR practices. Active participation in FCS forest certification by many Northwest Russian forest companies is a mechanism to safeguard sales in Western markets. In addition, both Russian and foreign holding companies have fostered FSC certification as they have adopted the policy of certifying their forest operations. In consequence, they also require their subsidiary companies to certify their forest operations (Kotilainen et al. ; Kuliasova ; Tysiachniouk a, b; Kuliasov and Kuliasova ; Tulaeva ). Studies also show that for foreign forest companies, forest certification and close cooperation with well-known international NGOs and other stakeholders are mechanisms for adjusting to the Russian business environment (Tysiachniouk a).