ON CORPORATE ACCOUNTABILITY IMPLEMENTING #1 PRINCIPLE OF CORPORATE SOCIAL RESPONSIBILITY

1. ON CORPORATE ACCOUNTABILITY IMPLEMENTING #1 PRINCIPLE OF CORPORATE SOCIAL RESPONSIBILITY Jalal Lingkar Studi CSR/A+ CSR Indonesia www.csrindonesia.com IESR Forum Dialogue: Developing a Regional Platform in Natural Resource Governance Jakarta, 29 October 2012

2. AGENDA (Corporate) Social Responsibility Literature on Corporate Accountability Concluding Remarks

3. ISO 26000:2010 Guidance on Social Responsibility

4. Definition of Social Responsibility “Responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that contributes to sustainable development, health and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behaviour; and is integrated throughout the organization and practiced in its relationships.” (ISO 26000: 2010Guidance on Social Responsibility)

5. Schematic Overview of IS 26000:2010

6. Priciples of Social responsibility • Accountability • Transparency • Ethical behaviour • Respect for Stakeholder’s interest • Respect for rule of law • Respect for international norms of behaviour • Respect for human rights Accountability: “state of being answerable for decisions and activities to the organization's governing bodies, legal authoritiesand, more broadly, its stakeholders.”

7. Principle #1: Accountability • The principle is: “an organization should be accountable for its impacts on society, the economy and theenvironment.” This principle suggests that an organization should accept appropriate scrutiny and also accept a duty torespond to this scrutiny. • Accountability involves an obligation on management to be answerable to the controlling interests of theorganization; to legal authorities with regard to laws and regulations; and to those affected by its decisions and activities, as well as to society ingeneral, varies according to the nature of the impact and the circumstances.

8. Principle #1 (cont.) • The degree of accountability may vary, but should always correspond to the amount or extent of authority. Thoseorganizations with ultimate authority are likely to take greater care for the quality of their decisions andoversight. • Accountability also encompasses accepting responsibility where wrongdoing has occurred, takingthe appropriate measures toremedy the wrongdoing and taking action to prevent it from being repeated.

9. Keith (2010). Evolution of Corporate Accountability: From Moral Panic to CSRBusiness Law International Vo. 11/3 “Given the important and complex role that corporations play in modernsociety, there is a strong argument that corporate accountability requiresa new approach. The prosecution and sentencing of corporations oughtto encourage the principles of CSR through appropriate legislationand a mandatory ADR process.” “One of the first steps towards establishing legal recognition of theprinciples of CSR ... making it mandatory for the largest companies ...to include information on CSR in their financial reports.”

10. Morgera (2009). Corporate Accountability in International Environmental LawOxford University Press “...‘accountability’ refers in general to the way in which public and private actors are considered answerable for their decisions and operations,and are expected to explain them when they are asked by stakeholders. They are required to be open in their decision-making processes to be examinedand judged by other interested parties.” “Consequently, corporate accountability implies ... widening thescope of stakeholders within a company beyond shareholders, so as to include allinterest groups affected by the company’s activities, such as: governments, employees,boards of directors, investors, consumers, suppliers, local communities situatedwhere the company operates, civil society, and the public at large.”

11. Newell (2005). Citizenship, Accountability, and Community: the Limits of CSR AgendaInternational Affairs, Vol. 81/3 “Most CSR initiatives are not intended to tackle questions of poverty and social exclusion. They aim atless ambitious goals of performance enhancement and image management,...” “Voluntarism and self-regulation suggest dangerousprecedents where state regulation remains unenforcedor actively subverted, where compliance needs to be established before ‘beyondcompliance’ initiatives can sensibly be contemplated.” “... the role of a strong state ..., an activeand well-mobilized civil society and a private sector willing and able to respondto CSR priorities emerge as prerequisites for the success of CSR initiatives.”

12. Valor (2005). CSR and Corporate Citizenship: Towards Corporate AccountabilityBusiness and Society Review, Vol. 110/2 “There are two conditions for the advancement of the social controlof companies. First is the stakeholders’ pressure through theireconomic decisions. Companies will only incorporate social andenvironmental objectives in their agenda when economic agentsshow that they also seek these values by incorporating them into their economic decisions.” “... a second condition to ensure corporate accountability: a systemchange. To put it in a nutshell, this change implies accepting thatthe common good is more important than the right to receive adividend, and that social and environmental performance must bebalanced with economic performance. This paradigm of the firmshould be adopted by economic agents (especially shareholders), by managers, and by regulators.”

13. Bendell (2004). Barricades and Boardrooms: A Contemporary History of Corporate Accountability Movement. UNRISD Technology, Business and Society “Previous efforts at corporate accountability had failed because of corporate power, and by the turn of the millennium that corporate power was greater than ever before. If civil groups chose to continue boxing with corporate power, they might win a few rounds, but past form suggested that they would lose the fight. “ “Progress therefore relied on people in civil groups and companies transcending the real and metaphorical barricades that separated them, and identifying with a collective movement for reshaping the relationship of corporations with society.”

14. Schrege (2003). Judging Corporate Accountability in the Global EconomyColumbia Journal of Transnational Law, Vol. 42/1 “... three pillars on which astrategy to promote accountability should be based.First, ...encourage local accountabilityand promote resolution of disputes in the jurisdictionswhere alleges abuses have occurred. Second, ...create soft law “safe harbors” to shieldcompanies that take effective action to prevent abusesor correct them when they are discovered. Finally, ...support the development ofmultilateral efforts to create accountability, ...”

15. Concluding Remarks • Accountability is now understood as principle of social responsibility. Corporate accountability is #1 principle of CSR. • CSR is responsibility of a company for its impacts on society and the environment, both within and beyond regulations. • Companies are considered answerable for their decisions and operations,and are expected to explain them when they are asked by stakeholders. They are required to be open in their decision-making processes to be examinedand judged by other interested parties • Accountability also encompasses accepting responsibility where wrongdoing has occurred, takingthe appropriate measures to remedy the wrongdoing and taking action to prevent it from being repeated.

16. Concluding ... (cont.) Corporate accountability implieswidening thescope of stakeholders within a company beyond shareholders, so as to include allinterest groups affected by the company’s activities. Partnership among government bodies, civil society groups and progressive companies is considered as key to promote corporate accountability. Law enforcement, mandatory CSR (sustainability) reporting, alternative dispute resolution, and multilateral efforts are chief among ways suggested by corporate accountability experts.

17. Thank you very much!JalalLingkar Studi CSR/A+ CSR IndonesiaJalan Danau Sentani Nomor 9Bogor 16144 www.csrindonesia.comoffice@csrindonesia.comjalal.csri@yahoo.com+62-815-13803616