Ethical Performance
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second term for Bush puts the ball in corporate court

December 2004

While the US election results were widely regarded as bad news for CSR, the re-election of the president could, paradoxically, be a catalyst for change

It would be wrong to say that gloom has descended on the CSR sector in the US since the re-election of George W. Bush as president last month. But it was certainly not the result that most in the field had wanted.

In the four years of his first presidency, Bush paid scant attention to the social responsibilities of business, as distinct from fiduciary responsibilities, rolling back regulations that had sought to mitigate the social and environmental impact of corporations.

While Bush’s Democrat opponent John Kerry would, by general consent, hardly have set the country ablaze with CSR initiatives, most in the field argue that he would have prompted modest change. By contrast, most expect the stance of the Bush administration to harden, especially as new appointments have given it a more conservative hue. ‘There was little chance of seeing anything significant under Kerry, but there’s not a cat in hell’s chance now,’ one US-based CSR lawyer told EP.

The touchstone issue is likely to be climate change. David Gardiner, a consultant and member of the now disbanded White House climate change task force, expects the Republican party to interpret the elections ‘as a mandate to push its policy on climate change in a direction that will actually make things worse’, not least by opening the Arctic wildlife refuge in Alaska to oil exploration.

Peter Kinder, president of KLD Research and Analytics, a Boston-based SRI research firm, argues that the administration is likely to extend its repeal of anti-pollution laws and failure to enforce existing regulations.

Lawyers anticipate the Alien Tort Claims Act, which is being used by activists to challenge alleged human rights abuses outside the US by multinationals, will be nullified or revoked in the event of the appointment of more conservative US Supreme Court judges.

But it’s not all bad news. A Bush second term could well galvanize frustrated pressure groups. ‘There will not be any significant change under the next administration in terms of framework conditions, but I do believe there will be a significant increase in activity from NGOs and civil society as a result,’ says Dawn Rittenhouse, director of sustainable development at DuPont. ‘The pressure will come from consumers and society as a whole rather than government.’

Others point to the devolved nature of government in the US. ‘There will be activities at state level – and some states are as large as many countries,’ says Allen White, one of the founders of the Global Reporting Initiative. ‘They often give companies the licence to operate. There are already moves in California and Minnesota to soften shareholder primacy, and many states are leaders on environmental issues.’

Gardiner expects litigation to focus minds and that investors will be ‘gigantically influential’ in coming years as they take more account of the risks arising from climate change and other issues.

Kinder singles out as an important advance the decision by the Securities and Exchange Commission to require, from the end of August 2004, all mutual funds and investment advisers to disclose their proxy voting policies and procedures. The legislation formed part of the administration’s wider efforts to improve corporate governance following the Enron scandal. ‘They have redefined the nature of fiduciary responsibility,’ says Kinder. ‘If they don’t revoke that, it is a phenomenal tool. Until the measure was in place you couldn’t find out if or even whether proxies were being voted. But it will take at least two years to tell how effective it is.’

A new generation more sensitive to social and environmental concerns is also beginning to make its presence felt in corporations, Kinder believes. ‘There’s a lot of new blood coming through’, he adds.

Global market pressures will play their part. The trend for US companies to outsource production in a bid to reduce costs will continue and has already prompted unions and activists to highlight working conditions in supply chain factories in China and elsewhere. And US companies will be influenced by ‘cross-pollination’ with ideas from European markets, Rittenhouse says.

‘I’d say the work continues, regardless of the president,’ one senior CSR manager at a US multinational told EP. ‘We don’t need the government’s direction to do a lot of this, and in many ways business right now is much more of a leader than government on many social issues.’ As Kinder and others argue, there are plenty of US businesses prepared to take things forward without a nod from government.

So what do the next four years hold? White is not alone in predicting that Bush’s re-election will lead to ‘spotty and modest gains in traditional CSR areas’, among them volunteerism.

But he is also not alone in believing that the influence of corporations will grow under Bush. Expect, paradoxically, CSR to become more important in the second term.



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