The Effectiveness of Disclosure as a Regulatory Strategy for CSR
Corporate social responsibility (CSR) refers to a corporation’s actions to assess and take full responsibility for its effect on social wellbeing and the environment . CSR implies that an organization’s efforts should be beyond necessary or required by environmental protection groups or the regulator. However, cooperate social responsibility doesn’t imply that an organization should give charitable causes or engage in related philanthropic activities. Instead, it means that an organization must understand its economic, social, and environmental consequences associated with running a business while seeking to compensate for them. Disclosure can be an effective corporate social responsibility strategy where an organization must disclose key information regarding what it has done to benefit the community . In other words, organizations must disclose their actions or their contributions to society’s overall welfare and their plans concerning this course2. In most cases, these disclosures should be undertaken within a social responsibility report published on a company’s website or the annual report on publicly listed companies. CSR disclosure tends to be crucial to a particular company’s stakeholders because it outlines its current and plans regarding its actions to benefit society . This discussion aims to explore the effectiveness of disclosure as a regulatory strategy for CSR.
Recently, organizations have been engaging in various social programs to reduce or compensate for any negative impacts that they might have inflicted on the communities. These corporate social responsibility initiatives often involve activities like minimizing carbon emissions and other related practices. At first glance, cooperative social responsibilities appear to benefit everyone, from corporations, stakeholders, society, and future generations3. Still, kind-heartedness and generosity are not usually the motivating factors behind these CSR initiatives. Instead, most organizations often engage in CSR to attract more consumers and investors, cover for any wrongdoings with their programs, and create a good public image1. As a response to this behavior, courts and other regulatory bodies have started to limit companies on the extent of their communication regarding their CPR programs and required them to use disclosure as a regulatory strategy.
One of the main problems with CSR has been that some companies intend to atone for their previous mistakes. For example, some companies often engage in greenwashing, where they spend a lot of resources and time claiming to embrace green practices through marketing and advertisements. Still, in reality, they do very little to implement business practices that reduce environmental impact . A classic example would be the actions taken by Walmart’s environmental policies, where despite the organizations advertising and marketing its products and services to be eco-friendly, their actions have often been questionable. In this case, disclosure can be used as an effective regulatory strategy for Walmart’s CSR, as evidenced by its recent initiatives to adopt practices that, according to most analysts, are meant to respond to criticism level towards their global environmental impact . Today’s Walmart’s sustainability goal is anchored on three key principles, namely, receive 100% renewable energy, create zero waste, and only sell products that are sustainable to the environment4. Walmart’s initiative is a good example of how disclosure is an effective regulatory strategy to enhance cooperate social responsibility.
Although some companies adopt CSR after violating their corporate social responsibility, organizations like ExxonMobil appear to have implemented CSR initiatives before violating them later. Under such circumstances, disclosure can be applied as an effective strategy to prevent such practices, violating an organization’s CSR. For instance, in 2009, ExxonMobil managed to secure oil rights in Nigeria, and in 2016, the company announced that its affiliate organizations were recognized as the best in upholding corporate social responsibility . This recognition came about because of its efforts to promote education, healthcare, local capacity development, and economic empowerment. However, in 2017, ExxonMobil workers in Nigeria went on strike because more than 83 of their colleagues had been wrongfully terminated . Additionally, in the same year, community members around their facility in Nigeria also blocked all routes leading to it, claiming that the company had violated their previous agreement . The community demanded that the company compensate them for continuous environmental pollution and degradation occasioned by oil spillages, operational noise, and gas-flaring7. This situation could have been avoided if the disclosure was used as an effective regulatory strategy to enhance its corporate social responsibility.
Today legal consequences exist for organizations that claim or pretend to engage in corporate social responsibility but, in reality, fail to accomplish their outlined or expected good social initiatives. In the case, Nike v. Kasky, the shoe manufacturer Nike had made claims through advertisements and other communication forms that the company had adopted strategies to improve living conditions for its overseas workers . However, Nike was a suit for false advertising aimed at increasing its sales by making some false statements and omissions regarding the working conditions through which some of its products were being manufactured8. Although Nike rose the claim that their actions were protected speech under the first amendment, the court agreed with the plaintiff’s claims. Additionally, the Securities and Exchange Commission also established guidelines on how corporations have to disclose their corporate social responsibility programs, especially those dealing with climate change issues . For instance, Regulation S-K Item 101establishes that disclosing any materials affecting the environment has to be made9. Adopting these practices indicates that disclosure is an effective regulatory strategy for enhancing a company’s corporate social responsibility.
In conclusion, most companies’ cooperate social responsibility initiatives have a high potential of making huge positive impacts on our community and environment. However, without disclosure and more stringent regulations, legislation, or rulings, these corporate social responsibility policies will remain a façade that corporations use to hide the harmful impacts resulting from their activities. Disclosure can be an effective corporate social responsibility strategy where an organization must disclose key information regarding what it has done to benefit the community. In other words, organizations must disclose their actions or their contributions to society’s overall welfare and their plans concerning this course. Today, most organizations often engage in CSR to attract more consumers and investors, cover for any wrongdoings with their programs, and create a good public image. As a response to this behavior, courts and other regulatory bodies have started to limit companies on the extent of their communication regarding their CPR programs and required them to use disclosure as a regulatory strategy. Moreover, legal consequences exist for organizations that claim or pretend to engage in corporate social responsibility but, in reality, fail to accomplish their outlined or expected good social initiatives. The Securities and Exchange Commission also established guidelines on how corporations have to disclose their corporate social responsibility programs, especially those dealing with climate change issues.
References
[1] Jason Brandenberger, Best-Laid Plans: Corporate Social Responsibility Often Goes Awry, 3 Ariz. J. Envtl. L. & Pol’y 1041 (2013).
[2] Jonathan Bellish, Towards a More Realistic Vision of Corporate Social Responsibility Through the Lens of the Lex Mercatoria, 40 Denv. J. Int’l L. & Pol’y 548, 571-72 (2012)
[3] Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens, 81 Temp. L. Rev. 831, 853-54 (2008).
[4] Declaration of Interdependence, Whole Foods Market, http://www.wholefoodsmarket.com/mission-values/core-values/declaration-interdependence.
[5] Lee Scott, CEO, Wal-Mart Stores, Twenty First Century Leadership, Address to Employees and Suppliers (Oct. 24, 2005), (available at https://corporate.walmart.com/_news_/executive-viewpoints/twenty-first-century-leadership).
[6] Press Release, ExxonMobil, ExxonMobil Named Best Overall Company in Corporate Social Responsibility (CSR) (Jan. 20, 2016), http://corporate.exxonmobil.com/en/company/worldwide-operations/locations/nigeria/news-releases/exxonmobil-named-best-overall-company-in-csr.
[7] Sam Thielman, ExxonMobil under Investigation over Lucrative Nigerian Oil Deal, The Guardian, (June 23, 2016), https://www.theguardian.com/business/2016/jun/23/exxonmobil-nigeria-oil-fields-deal-investigation.
[8] Anietie Akpan, Akwa Ibom Communities Block Routes to Oil Firm’s Facilities, The Guardian (Sept. 14, 2017),https://guardian.ng/news/akwa-ibom-communities-block-routes-to-oil-firms-facilities/.
[9] Nike, Inc. v. Kasky, 539 U.S. 654 (2003); 17 U.S.C. §§229.101, 229.303.
[10] Press Release, New York State Office of the Attorney General, Attorney General Cuomo Announces Agreement with Aes To Disclose Climate Change Risks to Investors (Nov. 9, 2009), https://ag.ny.gov/press-release/attorney-general-cuomo-announces-agreement-aes-disclose-climate-change-risks-investors
