Ethical Performance
inside intelligence for responsible business


growth in litigation ‘could endanger CSR’

January 2005

A global trend towards litigation could be threatening progress on corporate responsibility, according to John Elkington, who heads the SustainAbility consultancy.

Elkington says the growing number of legal campaigns targeted at companies by civil society groups on issues such as human rights, climate change and obesity could have the opposite effect to that intended, pushing businesses back into their shells so that the improvements sought do not materialize.

‘It is worth asking whether the net result will be improved social and environmental performance on the part of targeted industries and companies, or whether it will be little more than a feeding frenzy for the legal profession, forcing companies back into compliance mode and minimalist solutions,’ he writes in SustainAbility’s latest quarterly bulletin.

Elkington, whose consultancy has published a new report on the subject, The changing landscape of liability, says campaigns against companies producing hazardous products such as asbestos and cigarettes have now become ‘a major industry in [their] own right’. But he argues that those bringing the lawsuits in the hope of prompting change fail to realize that ‘no amount of corporate responsibility in a compliance mindset will deliver sustainable development on the scale needed’.

PricewaterhouseCoopers recently observed a ‘general increase’ in cases filed against US and foreign companies in the US since 1998. It counted 21 class actions against foreign businesses listed on US stock exchanges between January and September 2004, up from 15 for the whole of 2003. This showed that companies based outside the US were increasingly facing litigation that had once been almost exclusively confined to that country.

James Cameron, an international environmental lawyer and co-author of the SustainAbility report, fears a decade-long ‘moral crusade’ by legal activists determined to direct their anger at corporations.

The report says the trend towards more litigation means that there should be ‘rapid convergence between companies’ risk management and CSR programmes’ and that much more ‘robust risk management’ is urgently needed. Companies should resist the temptation to retreat into compliance mode, because the best way to become more litigation-proof is to raise their social and environmental performance beyond legal requirements, the authors say.

Phillip Rudolph, a partner in the US legal firm Foley Hoag, commented that the trend for more litigation was increasing the involvement of corporate lawyers in CSR, which was not always helpful. ‘I don’t think CSR necessarily belongs in the legal department, but that is happening in the US.’

Sune Skadegad Thorsen, a partner in the Danish legal firm Lawhouse, argued that one problem was the lack of grounding in, and feel for, CSR among corporate legal advisers. ‘They think in traditional ways, and it’s not part of their training to come up with innovative solutions.’

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