Can Corporate Social Responsibility Be Legally Enforced?

13 / 10 / 2019

• CSR
• news

We live in a society that increasingly prioritizes accountability in all aspects of life, from the way our food is grown to the way men treat the women around them. People are tired of the “business as usual” approaches embedded in our culture and are demanding new social norms that take into consideration the marginalized and voiceless. Corporations, particularly oil and gas entities, can either recognize this trend towards social accountability or ignore it to their detriment, as weak corporate social responsibility is increasingly recognized internationally as a basis for transnational tort liability, Forbes reported.

Corporate social responsibility (CSR) is a form of soft law. It is not required by U.S. statute or regulations, i.e., “hard law,” but is nonetheless seen as obligatory by most corporations because of consumer expectations and internal norms. Examples of CSR initiatives would be internal policies such as reducing carbon footprints to mitigate climate change, improving labor policies and embracing fair trade, engaging in charitable giving and volunteer efforts within the surrounding community, and making socially and environmentally conscious investments.

The expansion of the CSR business model can be seen in the number of major companies that have improved their environmental disclosure by publishing annual sustainability reports.  For example, “85% of the companies in the S&P 500 Index published sustainability or corporate responsibility reports in 2017.”   This is significantly up from the year 2011, when “just under 20% of S&P 500 companies reported on their sustainability, corporate social responsibility, ESG [Environmental, Social and Governance] performance and related topics and issues.”

Consumer preference for social and environmental accountability is growing in the United States, and major companies are taking note.

Although Corporate Social Responsibility is a form of soft law, there is a trend internationally to move it to more legally enforceable hard law. Specifically, in 2011, the United Nations endorsed the “UN Guiding Principles on Business and Human Rights” (“UNGPs”). The UNGPs “provided the first global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity.” The principles build a legal framework of specifically defined rights, duties and causation, have been almost universally embraced and apply to all businesses, large and small. Thus, companies should have CSR programs that are “litigation ready” when it comes to human rights, because the UNGPs will inform the content of reasonable business practices, which has critical implications for transnational civil and commercial disputes. In other words, the UNGPs create transnational tort liability of corporations to third parties.

The Corporate Human Rights Benchmark, the first public benchmark of corporate human rights performance, illustrates that U.S. oil and gas companies are not currently doing enough to address human rights through their CSR initiatives. For example, in 2018, the Benchmark scored ExxonMobil at 18.5 out of 100 and Chevron at 28.8 out of 100. Factors that make up the score include governance and policies, embedding respect and human rights due diligence, remedies and grievance mechanisms, company human rights practices, responses to serious allegations and transparency.