CORPORATE SOCIAL RESPONSIBILITY IN GENERAL
1. CSR values and practices, including levels of support from government, business and the general public
CSR initiatives in the US are characterised by a mix of regulatory, voluntary, and judicial drivers. In certain areas such as environmental protection, corporate governance and employee relations, complex statutory and regulatory regimes provide a framework for corporate activities. The US has also been an author and signatory of important voluntary initiatives such as the Voluntary Principles on Security and Human Rights and the UN Global Compact, and has sponsored the formation of organisations such as the Fair Labor Association. But much CSR activity in the US is undertaken through voluntary mechanisms on a company-by-company basis, through a patchwork of multi-stakeholder initiatives, or through litigation, rather than through any concerted or overt governmental or regulatory involvement.
As a practical matter, stakeholder engagement at various levels continues to be a primary driver of CSR activity in the US. Consumers are attuned to and concerned with many corporate reputational issues, including fair trade and sweatshop practices, the environmental impact of corporate activity, and human rights practices of companies abroad. Investors, ranging from faith-based investment consortia to major institutional investors such as state pension plans, are increasingly active in putting forth CSR-related shareholder resolutions and in creating CSR screening mechanisms for their investments. In the wake of Enron and other corporate scandals, many institutional investors are pressing for governance reforms unthinkable only a few years ago. NGOs within the US and around the world are actively promoting US company leadership in CSR, and many have entered into partnerships of various kinds with businesses to encourage dialogue and action on a range of CSR issues. Businesses are increasingly responsive to the multiple drivers promoting CSR in the US. Corporate participation in major voluntary initiatives is increasing, as is the number of US companies publishing CSR or triple-bottom line reports.
2. Laws, statutes, government publications or other significant framework documents
Specific, comprehensive federal regulatory regimes, discussed at length below, govern environmental, labour, and governance issues in the US. Beyond these, however, US legislators and regulators have not promoted mandatory CSR obligations for corporations; nor have they developed framework documents addressing the broad issue of CSR. The various state jurisdictions provide an additional layer of topical statutes and regulations relating to aspects of CSR activity, but similarly do not provide framework laws relating broadly to corporate social responsibility.
3. International treaties, conventions or standards
The US has ratified a number of international treaties and conventions, including UN conventions, relevant to CSR issues. These cover topics ranging from protection of civil and political rights to prevention of child labour. These conventions, however, impose obligations on states rather than legal persons, and as such do not explicitly govern the activities of private business. The most prominent standards relating to the promotion of CSR are voluntary initiatives on which the US government has provided support or been consulted, and to which companies individually commit to adhere. Principal among these are the UN Global Compact, the OECD Guidelines for Multinational Enterprises and the Voluntary Principles on Security and Human Rights. The Global Compact is a voluntary, multi-stakeholder initiative that brings together UN agencies, private businesses, labour organisations and civil society to support ten principles in the areas of human rights, labour, the environment, and anti-corruption. The OECD Guidelines are voluntary principles and standards addressed to multinational enterprises operating in or from the 33 adhering countries, including the US. Adhering countries designate National Contact Points to, inter alia, respond to enquiries about the Guidelines and “contribute to the resolution of issues that arise relating to implementation of the Guidelines in specific instances”. The US National Contact Point is located within the State Department. Finally, together with the government of the UK, extractive and energy sector participants, and NGOs, the US promulgated the Voluntary Principles in 2001. The Voluntary Principles provide guidelines for companies in three areas of concern to industry and NGOs: engagement with private security; engagement with public security; and risk assessment supporting security arrangements consistent with human rights.
4. Non-statutory sources of liability for companies
There are three key sources of non-statutory CSR-related liability for companies operating in or from the US: legal liability; shareholder activity; and reputational risk.
Legal liability
The primary source of legal CSR-related liability for companies operating in or from the US is the wide variety of potential tort actions that can be brought by private plaintiffs in either federal or state courts under the country’s common law system. The unique procedural and substantive characteristics of the US legal system have made it particularly fertile ground for the imposition of CSR liability through litigation. Procedural characteristics include the availability of juries in most civil trials, the absence of a ‘loserpays’ rule, contingent fee opportunities for plaintiffs’ lawyers, the availability of high punitive or exemplary damage awards above and beyond traditional economic damages in tort actions, and the widespread availability of class-action lawsuits. Each of these procedural tools either reduces legal hurdles for bringing actions or increases the litigation burden, cost, and potential brand impact to defendant companies.
Substantive drivers of CSR litigation in the US include federal statutes such as the Alien Tort Claims Act (ATCA) that have been construed to provide private rights of action against corporate entities. Other substantive litigation tools include state consumer protection laws and common law actions such as nuisance and trespass. Each of these legal tools, and others, have been used or are being considered for use against businesses for alleged human rights, labour rights, or environmental abuses occurring around the globe.
Companies face an array of CSR-related lawsuits, ranging from labour class actions brought by aggrieved former employees, to environmental class actions, to ATCA suits arising from human rights abuses allegedly committed abroad, to actions by shareholders and investors seeking redress for corporate misconduct. While government suits, both civil and criminal, are not uncommon, private actions have, for the reasons spelled out above, also become increasingly popular. A 2003 study found that settlements for US tort litigation exceed $200 billion annually, and that tort costs grew by 13 per cent in 2002.
Among the most hotly debated tools for bringing CSR lawsuits is the right the ATCA gives foreign nationals to file civil suits in US courts for injuries caused by violations of the law of nations. The ATCA has been used against corporate defendants on both an individual and a class action basis. According to a 2003 study, plaintiffs have relied upon the ATCA to sue more than 50 multinational corporations, and to claim more than $200 billion in actual and punitive damages. Plaintiffs have brought ATCA cases alleging extrajudicial killing, violations of environmental standards, and human drug testing, to offer just a few examples. As discussed later, a recent US Supreme Court decision has suggested that future ATCA cases may be confined to established human rights violations such as extrajudicial killing, torture, genocide, and slavery.
Shareholder activity
Outside of the litigation arena, institutional investors and other shareholders are increasingly seeking improvements in corporate practices ranging from enhanced transparency and accountability to implementation of corporate codes of conduct. Tools relied upon by these groups include shareholder resolutions pressing for specific corporate action on CSR-related issues such as improved environmental or labour standards, and threats by institutional or other large groups of shareholders to divest due to corporate actions thought to violate human rights or other CSR norms.
Reputational risk
Reputational risks to US companies primarily derive from campaigns by NGOs and activist groups against a particular corporate activity or failure to uphold specific labour, human rights, or environmental standards. Boycotts and action campaigns have been used successfully to pressure companies, particularly in the extractive and apparel sectors, to adopt CSR programmes or cease particular practices.
5. Principal institutions, government agencies and/or major non-governmental organisations (NGOs)
The US currently has no federal or state-level institutions or agencies specifically charged with promotion or oversight of CSR as a whole. However, there are federal agencies that address specific aspects of CSR obligations and oversight, and several that encourage public
– private partnerships in their areas of competence. Moreover, each state jurisdiction has its own specific agencies charged with oversight and management of environmental, employment, governance and consumer protection issues.
Federal agencies
At the federal level, agencies address an array of human rights, labour rights, environmental, and governance issues. For example, human rights concerns are addressed by the Bureau of Democracy, Human Rights and Labor of the Department of State. This Bureau is charged with promotion and protection of democracy, human rights and labour rights around the world in accordance with US policy.
On employment rights matters, the US Department of Labor, and particularly its Bureau of International Labor Affairs, address issues in the US and abroad. The Bureau of International Labor Affairs formulates international economic, trade, immigration, and labour policies in collaboration with other US government agencies, and provides international technical assistance in support of US foreign labour policy objectives. The Employment Standards Administration of the Department of Labor oversees compliance with federal programmes such as the workers’ compensation programme and several other comprehensive labour law initiatives.
Environmental oversight is the responsibility of the Environmental Protection Agency (EPA), which is charged with researching and setting national standards for federal environmental programmes, including those related to clean air and water, greenhouse gas emissions, and clean-up of contaminated industrial sites. The EPA also administers the Climate Leaders programme, a voluntary industry-government partnership that encourages companies to develop long-term comprehensive climate change strategies and set greenhouse gas emissions reduction goals.
Finally, with respect to governance issues, the Securities and Exchange Commission (SEC), including its Division of Corporation Finance, oversees corporate disclosure of information to the investing public, as well as a vast array of federal regulations addressing governance issues relating to public companies.
NGOs, business organisations and multi-stakeholder initiatives
In addition to the activities and roles of these federal agencies, a great number of NGOs and business organisations in the US are concerned with an array of CSR issues. For example, Public Citizen is an NGO that for 30 years has promoted the rights of consumers by applying pressure on the federal and state governments, as well as businesses, on issues ranging from auto safety to environmental standards. Similarly, CorpWatch is an NGO that monitors corporate accountability and seeks to foster democratic control over corporations. One of the most prominent and well-respected business organisations in the CSR realm is Business for Social Responsibility, a membership organisation for corporations that provides its members with CSR information and resources, as well as networking and engagement opportunities with stakeholders. Business for Social Responsibility is part of a broader universe of similarly-focused organisations that includes Business in the Community in the UK and CSR-Europe.
An example of a prominent multi-stakeholder CSR organisation within the US is the Fair Labor Association (FLA), a voluntary, independent standard-setting and monitoring body that holds participating companies in the footwear and apparel industries accountable for the conditions under which their products are made. The FLA enforces an industry-wide workplace code of conduct based on the core labour standards of the International Labor Organisation. The FLA, created through an initiative of the US government during the Clinton presidency, includes companies, universities and NGOs. Additional NGOs, business organisations, and multi-stakeholder initiatives that focus on particular CSR issues are discussed more fully and in the specific context of their activities later in this chapter.
SPECIFIC AREAS OF CORPORATE SOCIAL RESPONSIBILITY
6. Human rights
Constitutional foundation
The US has historically assumed a leadership role in promoting human rights around the world. Before such notions enjoyed broad, global recognition, basic human rights such as freedom of speech and assembly, and freedom from cruel and unusual punishment, were enshrined in the foundational documents of the US, including the Constitution’s Bill of Rights. Originally drafted to apply only to the rights of the people vis-à-vis the federal government, these protections were extended to apply to actions of state governments as well. Private persons, however, are subject to such restrictions only to the extent that federal statutes have been passed containing such requirements. The Department of Justice’s Civil Rights Division is the primary institution within the federal government responsible for enforcing federal statutes prohibiting discrimination on the basis of race, sex, disability, religion, and national origin.
US acceptance of international standards
More recently, as notions of human rights have acquired greater global recognition and support, the US has committed to the Universal Declaration of Human Rights, ratified several United Nations human rights conventions, and prepares annual country reports on Human Rights Practices of nations around the world. Much of this activity is overseen by the Department of State’s Bureau of Democracy, Human Rights and Labor. Civil society in the US, similarly, expresses great concern for human rights and their promotion abroad and at home.
Federal and state laws and regulations
Federal regulation and enforcement of human rights standards in the corporate context is undertaken through issue-specific statutes and programmes, including those discussed later regarding corporate responsibility to employees. The federal government does not, however, have an agency specifically charged with oversight of human rights within the US. Many individual states have enacted human rights acts prohibiting discrimination based on certain characteristics, and have Departments of Human Rights charged with enforcement and oversight of compliance with those acts.
In 2004, the SEC was ordered to create an Office of Global Security Risk. This mandate arose out of Congress’s concern that “a company’s association with sponsors of terrorism and human rights abuses, no matter how large or small, can have a material adverse effect on a public company’s operations, financial condition, earnings, and stock prices, all of which can negatively affect the value of an investment”. The extent to which the existence of the Office of Global Security Risk will impact human rights-related CSR is still unclear.
Non-governmental organisations
NGOs concerned with human rights in the US include the American Civil Liberties Union, the National Association for the Advancement of Colored People, the Human Rights Campaign, and the Southern Penalty Law Center. Other NGOs with a more global reach, including Human Rights Watch, Human Rights First, Amnesty International and Physicians for Human Rights address human rights issues both in the US and internationally. Social Accountability International develops and implements consensus-based voluntary socially responsible standards and accredits qualified organisations to verify compliance with those standards. It oversees implementation by participants of the SA8000 social accountability standard, which is aimed at addressing, inter alia, human rights abuses in production facilities around the globe.
7. Corruption
The US has longstanding legislation and common law addressing corruption, both domestically and internationally. With the enactment of the US Foreign Corrupt Practices Act in 1977 (PL 95-213), the US became the first country to criminalise the bribery of foreign public officials. Violations of the Act are punishable by fines up to $2 million, including $100,000 that can be assessed against an officer, director, employee, or agent of a corporation that violates the Act. The US is also a party to the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions as well as the Inter-American Convention Against Corruption. It has signed, but not yet ratified, the United Nations Convention Against Corruption. Finally, the US participates in the self-evaluation mechanisms of the Group of States Against Corruption and the Inter-American Follow-Up Mechanism to the Inter-American Convention Against Corruption.
The US does not have a single, unified anti-corruption Act or legal regime. Instead, at the federal, state and municipal levels there are multiple systems designed not only to prevent, detect and prosecute corruption, but also to enhance the ‘checks and balances’ system inherent in the governance structure. State systems vary, but largely reflect the federal system. Oversight of anti-corruption efforts falls largely to the federal system of Inspectorates General, the Office of Government Ethics, the system of ethics officers within each federal agency, and the Government Accountability Office, which conducts oversight of the executive branch on behalf of Congress. Enforcement of anti-corruption laws and regulations at the federal level is largely performed by components of the Departments of Justice and the Treasury.
Numerous federal statutes and regulations prohibit corrupt activities. Some federal statutes governing public corruption include those prohibiting bribery, interference with a public or judicial process, conflicts of interest, supplements to official salaries, influence peddling, and the like. Since the passage of the USA Patriot Act (PL 107-56) in 2001, foreign corruption is defined as a predicate crime to money laundering. The USA Patriot Act also increases the due diligence requirements placed on financial institutions when dealing with individuals identified as ‘senior foreign political figures’, (the US term for what are internationally called ‘politically exposed persons’), or any entities in which they own a substantial interest.
The US has the power to recover the proceeds of corruption found anywhere within its jurisdiction through criminal and/or civil forfeiture; it will freeze, forfeit, and repatriate funds acquired through foreign corruption to the country affected. The US participates actively in the Financial Action Task Force, an international organisation that sets global anti-money laundering standards. In support of the international efforts through the No Safe Haven initiative to deny safe haven to corrupt officials, those who corrupt them, and their assets, the US promotes mutual legal assistance and information sharing to identify illicitly acquired assets of corrupt individuals and repatriate them. The US also issued a Presidential Proclamation that denies entry into the US to individuals who have participated in acts of corruption which have a serious adverse impact on US foreign policy goals. The American Bar Association has a taskforce on issues related to foreign corruption. The principal NGO operating in the US on issues of corruption is the US branch of Transparency International. The Transparency International Corruption Perceptions Index 2003 ranked the US as the 17th least corrupt nation in the world.
8. Corporate governance and business ethics
Regulatory activity — governance
Corporate governance is regulated in the US at the federal level through various statutes and regulations, of which the most important are the Securities Act of 1933 (15 U.S.C. §§77a-77bbb) and the Securities Exchange Act of 1934 (15 U.S.C. §§78a-78lll), particularly as amended by the Sarbanes-Oxley Act of 2002 (PL 107-204). The SEC oversees and enforces compliance by the US stock exchanges and publicly traded companies with the corporate disclosures required under federal regulation, and with associated corporate governance requirements. While standards for corporate governance did not originate with the Sarbanes-Oxley Act, the previous requirements were much less pervasive. Both the Sarbanes-Oxley Act and the President’s Corporate Fraud Task Force, founded in 2002 to co-ordinate and assist in federal corporate fraud prosecutions, were products of the public outrage and economic effects that followed the collapse of Enron and emerging news of other accounting and corporate fraud scandals. Federal law authorises the SEC to investigate any person or entity suspected of violating the securities laws or SEC regulations. In certain circumstances, private rights of action exist under the law.
At the state level, each state jurisdiction promulgates its own corporations code, and has its own common law derived from legal actions arising under its code. The most highly developed state corporations law in the country is generally considered to be the statutory and common law of Delaware, whose common law is often relied on as useful precedent in actions arising in states with less-evolved common law to draw upon.
Regulatory activity — ethics
There are several sources of US regulations regarding business ethics. On the federal level, the SEC has regulations governing the composition, responsibilities and behaviour of corporate boards and their committees. These are echoed in stock exchange rules and implemented by agreement with corporations listing on each exchange. Other sources of regulation include incentives under the federal tax code, which are only available to eg, companies complying with rules regarding deductibility of compensation for officers and directors; and state corporations codes, which, for example, detail the fiduciary duties of directors. The Federal Sentencing Guidelines were updated in 2004 to expand and clarify federal expectations regarding corporate governance and ethics programmes. These Guidelines serve as a key promoter of corporate ethics programmes, in that companies that fully implement specified measures face reduced punishment if a firm or an executive is convicted of criminal misconduct.
The Sarbanes-Oxley Act of 2002 requires, among other things, new levels of corporate disclosure on governance issues. Compliance with Sarbanes-Oxley will generally require improved record-keeping, an outside auditor to provide a report on internal controls, and enhanced intra-corporate communication. Stock exchanges require written charters for certain corporate committees, such as audit committees, and require members to articulate their corporate governance standards. Sarbanes-Oxley prescribes criminal and civil penalties for corporate officers who do not comply with the Act. Key governance provisions of the Act include requirements that annual reports contain an internal control report regarding structures and procedures for financial reporting; that the chief executive officer and chief financial officer personally certify in both a civil and a criminal representation that he/she has reviewed the report and that it does not contain, to his/her knowledge, untrue or misleading statements of material fact; that the company disclose whether or not the issuer has adopted a code of ethics for senior financial officers (this requirement is now also mandated by stock exchanges); and that whistleblower protections be provided for employees who report improper activity.
Non-governmental activity
In recent years, private coalitions have advocated improved SEC disclosure requirements in the CSR arena. The Corporate Sunshine Working Group is an alliance of socially responsible investment organisations, environmental organisations, unions, and public interest groups. It is actively engaged in dialogue with the SEC seeking increased environmental and social disclosure from companies. The business community has its own organisations that address policy issues in the area of governance. For example, the Business Roundtable, an association of chief executive officers of leading US corporations, has taskforces that advocate policies and positions on issues of concern to public companies. The Roundtable has a taskforce on governance that has been active regarding recent changes to federal governance regulation. One prominent US organisation focusing on corporate responsibility and ethics issues is the Ethics Officers Association, a corporate ethics officers’ professional group, which has several programmes regarding, and conducts research on, ethics and compliance issues. Another group, the Defense Industry Initiative on Business Ethics and Conduct, has put forth Principles of Business Ethics and Conduct that address corporate responsibilities under federal procurement law and in the defence industry generally.
9. Corporate responsibility to employees
Federal laws and regulations
Companies operating in the US are subject to numerous labour and employment laws and regulations at both federal and state level. There is a vast body of labour and employment law directed at CSR-related issues. Specifically, employers within the US are subject to myriad laws regulating the workplace environment and the terms and conditions of employment, including how, when and how much employers must pay their workers, how to operate a safe and healthy workplace, what rights employees have to organise, how and when to provide employees with notice of an impending plant closing or mass layoff, and circumstances that constitute unlawful discriminatory and retaliatory practices.
Federal agencies
Numerous federal agencies, including the US Equal Employment Opportunity Commission, the Department of Labor, and the National Labor Relations Board, are charged with the implementation and enforcement of labour and employment requirements. In addition, various departments within these agencies, such as the Occupational Safety and Health Administration (OSHA), a division of the Department of Labor, are responsible for assuring the safety and health of workers.
Health and safety
A key example of CSR-related employment regulation pertains to the required provision of a safe and healthy workplace. The Occupational Safety and Health Act of 1970 (PL 91596) regulates workplace safety and health standards and requires employers to furnish a place of employment free from recognised hazards that cause or are likely to cause death or serious physical harm. The Occupational Safety and Health Act gives the OSHA, the agency charged with administering the Act, the authority to enter places of employment, to inspect and investigate all working conditions, including machines and equipment, and to question privately employers and employees. Individual employees finding workplace safety and health hazards may file a formal complaint and, like many other related laws, the Occupational Safety and Health Act contains a whistleblower provision protecting employees from retaliation for doing so. Employers that violate the Act may be subject to significant fines and/or imprisonment. The OSHA encourages states to develop and operate their own safety and health programmes. Many states have standards as stringent, if not more stringent, than comparable federal standards.
Fair pay
There are a number of statutes regulating how, when, and how much employers must pay their workers. The Equal Pay Act (PL 88-38) prohibits sex-based wage discrimination between men and women in the same establishment in positions requiring equal skill, effort and responsibility under similar working conditions. The Fair Labor Standards Act of 1938, as amended, establishes minimum wage, overtime pay, record-keeping, and child labour standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. Currently, covered non-exempt workers are entitled to a minimum wage of not less than $5.15 an hour and an overtime pay at a rate of not less than one and a half times their regular rates of pay, after 40 hours of work in a working week. Many states have established higher minimum wage rates and some states require employers to pay overtime to employees who work more than eight hours in a work day. The Fair Labor Standards Act also regulates the employment of youth, prescribing the age at which youth can perform specific jobs and the hours they can work. In addition, a number of states have compulsory school attendance laws, which mandate how many years of school a child must complete before accepting employment. The 2004 amendments to the Fair Labor Standards Act clarify who is eligible for overtime protection; a significant change in the amendment is the increase in the amount an individual can earn and still be eligible for overtime pay.
Anti-discrimination
The principal federal anti-discrimination statute relating to employers and employees is Title VII of the Civil Rights Act of 1964 (PL 88-352), which prohibits employers from discriminating on the basis of race, colour, religion, sex (including pregnancy, childbirth or related medical conditions) or national origin. Title VII was amended in 1991 to allow for the recovery of compensatory and punitive damages, and the availability of jury trials. Other relevant statutes include the Age Discrimination in Employment Act (PL 90-202) which prohibits employers from discriminating against employees 40 years of age and older on the basis of age, and the Americans with Disabilities Act (PL 101-336), which prohibits employers from discriminating against qualified individuals with disabilities.
Anti-retaliation
The prohibition on retaliation is a fundamental tenet of US labour and employment laws. Nearly all of the principal laws regulating the workplace contain anti-retaliation provisions. These rules prohibit employers from discharging or otherwise discriminating against any employee who has engaged in protected activities seeking to enforce rights protected by law. Protected activities include initiating a proceeding under, or for the enforcement of, particular laws; testifying in any such proceeding; assisting or participating in any such proceeding or in any other action to carry out the purposes of these laws; and complaining about a violation of the laws.
Freedom of association and collective bargaining
The National Labor Relations Act (49 U.S.C. §§ 141 et seq.) provides the basic statutory protection for private sector employees relating to their rights to unionise and to engage in collective activity, as well as their rights to refrain from doing so. The National Labor Relations Board, which has primary responsibility for administering the Act, has two principal functions: (1) determining, through secret-ballot elections, whether employees wish to be represented by a union in dealing with their employers and, if so, by which union; and (2) preventing and remedying unlawful acts, by either employers or unions. Under section 7 of the Act, employees have a right to engage in union activity, to seek the assistance of a labour union and, generally, to work together to seek to improve their working conditions.
Additional federal protections
US law mandates not only how an employer operates its facility, but also how an employer must treat its employees in the event of a closure or a layoff. The Worker Adjustment and Retraining Notification Act (PL 100-379) requires employers to provide employees notice 60 days in advance of covered plant closings and covered mass layoffs to give workers and their families time to adjust to the prospective loss of employment. An employer that violates this Act is liable to employees for the amount equal to back pay and benefits for the period of the violation, up to 60 days. In addition to ordering back pay and benefits for violations of the Act, courts are authorised to order an employer to pay reasonable attorneys’ fees as part of any final judgment.
A core element of the employment relationship is employees’ need for time off. Federal law mandates that employers provide unpaid leave to qualifying employees. The Family Medical and Leave Act (PL 103-3) requires covered employers to provide eligible employees with up to 12 weeks’ unpaid leave each year for certain conditions such as the birth or adoption of a child, caring for a family member with a health condition, or dealing with the employee’s own serious health condition. While federal law does not mandate that employers provide flexible schedules, certain states require employers to provide employees with a number of hours of unpaid leave to accompany family members to various appointments. Moreover, many employers opt to provide employees with paid or unpaid leave beyond that mandated by law, in the form of vacation or personal time and sick leave. The Migrant and Seasonal Agricultural Worker Protection Act (29 USC §§ 1801 et seq.) regulates the hiring and employment activities of farm labour contractors, agricultural employers and agricultural associations employing agricultural workers. The Act prescribes wage protections, housing and transportation standards, and disclosure requirements in an effort to ensure that agricultural workers have safe housing, use safe vehicles and have full information about their rights.
State regulation
Many states have adopted labour and employment-related laws that have more stringent requirements than those imposed by federal law. For example, some states have expanded the list of categories protected by Title VII to include a prohibition of discrimination on the basis of sexual orientation, ancestry and genetic information. In addition, many states have enacted payment of wage statutes that impose strict requirements prescribing when employers must pay wages to certain classes of employees. These statutes impose severe penalties, including treble damages and attorneys’ fees, for non-compliance with the law. Many states have adopted requirements that employers who operate within their state provide employees with paid rest and meal periods.
Common law legal tools
Common law tort claims in the employment context are often pre-empted by federal or state statutes. For example, state workers’ compensation acts generally bar common law actions against employers if it is established that the plaintiff is an employee, that his or her condition was a personal injury and that it arose out of or in the course of his or her employment. Increasingly, employees have been seeking to enforce provisions of employee handbooks, claiming that an employer’s refusal to provide benefits constitutes a breach of contract.
Voluntary initiatives
Despite the cornucopia of statutory requirements which regulate how employers must operate their workplaces and treat employees, many employers provide benefits beyond those required by law. For example, some employers provide domestic partner benefits, thereby allowing non-married couples to receive benefits, such as health insurance, traditionally provided only to married couples. In addition, employers are increasingly allowing employees to take advantage of flexible work arrangements. Moreover, some employers have demonstrated their commitment to diversity by expanding their definitions to include classifications beyond those covered by Title VII and applicable state laws, such as lifestyle, work habits and economic background.
International initiatives
With respect to international corporate social responsibility matters, the US has partnered with various countries in an effort to address workplace health and safety conditions. In 2002, the US partnered with Mexico and Canada, through the North American Agreement on Labor Co-operation, a supplemental agreement to the North American Free Trade Agreement, in an attempt to improve working conditions in North America relating to occupational health and safety. The countries committed to work together to improve working conditions and living standards of workers by holding training programmes and developing a communications system for exchanging information about best practices.
Non-governmental organisations
Foremost among the NGOs concerned with corporate responsibility to employees in the US are labour unions, including the AFL-CIO union federation, the International Brotherhood of Teamsters and the United Auto Workers. Other groups active on CSR issues internationally include the Fair Labor Association, the International Labor Rights Fund, and the National Labor Committee.
10. Corporate responsibility towards the environment
Federal regulation
Companies operating in the US are subject to numerous environmental laws and regulations at the federal, state, and local level. The primary federal agency implementing and enforcing environmental requirements is the Environmental Protection Agency (EPA), although other US agencies, including the Department of Interior, also have responsibility for implementing environmental laws.
Principal federal statutes include the National Environmental Policy Act of 1969 (PL 91190), the Endangered Species Act of 1973 (PL 93-205), the Clean Air Act (PL 88-206), the Clean Water Act (PL 95-217), the Federal Insecticide, Fungicide and Rodenticide Act (PL 80-104), the Resource Conservation and Recovery Act (PL 94-580), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (PL 96-510), as amended by the Superfund Amendments and Reauthorisation Act of 1986 (PL 99-499) and the Small Business Liability Relief and Brownfields Revitalisation Act of 2001 (PL 107118)), the Toxic Substances Control Act (PL 94-469), the Emergency Planning and Community Right to Know Act of 1986 (PL 99-499) and the Pollution Prevention Act of 1990 (PL 101-508).
These statutes and their implementing regulations establish obligations and create liabilities for, among other things, harm to endangered species; discharge of pollutants into land, water, or air; storage and disposal of wastes; and remediation of contaminated property. They also establish public reporting requirements for toxic or hazardous materials used in manufacturing processes and impose requirements on entities wishing to introduce new chemicals. Corporate liability is typically without regard to fault. Violations can result in financial penalties, including the recovery of the economic benefit of prior noncompliance. Wrongdoing can also give rise to the obligation to correct violations and remediate resulting environmental damage. Many environmental statutes, although not all, also permit suits to be brought by private citizens to enforce their requirements. Under a number of statutes, more serious cases may result in criminal prosecution of responsible individuals, including corporate officers.
In addition to regulating environmental impacts, US environmental law has sought to mandate disclosure of environmental information. A primary vehicle for doing so is the Toxics Release Inventory, established under Emergency Planning and Community Right to Know Act and broadened by the Pollution Prevention Act; this is compiled each year based on information collected by the EPA. It reports on the locations and quantities of use of more than 600 chemicals, and also provides information on waste management and source reduction activities at all covered facilities. The publication of this information is thought to create incentives for companies voluntarily to consider ways to reduce their use or release of toxic or hazardous materials.
The Sarbanes-Oxley Act of 2002, enacted in response to allegations of misreporting of corporate financial health, has created significant new corporate obligations with respect to the proper disclosure of environmental liabilities by publicly traded companies. The statute and its implementing regulations impose requirements for corporate governance and internal controls to ensure that environmental liabilities are accurately reported in filings with the Securities and Exchange Commission. These regulations subject corporate officers and directors to enhanced civil and criminal penalties in the event that disclosures are inadequate or misleading.
Federal voluntary initiatives
While companies operating in the US are subject to numerous obligations under environmental law, not all of the principal concerns of corporate social responsibility for the environment, including the minimisation of environmental impacts, the sustainable use of resources, and national and international equity in the distribution of environmental impacts, are formally addressed by statutory or common law. However, the EPA strongly encourages the voluntary use by companies of environmental management systems (EMS), including but not limited to ISO 14001, to improve compliance with existing environmental requirements and to move beyond compliance to address environmental social responsibility concerns. A large number of instructional materials and studies have been developed and promulgated by the EPA in an effort to demonstrate that EMS are not only good for the environment but also economically beneficial to businesses by enabling them to reduce inefficiencies and waste.
An April 2000 Executive Order, Greening the Environment Through Leadership in Environmental Management, committed the US government to do more to promote EMS. Examples include leadership by example through implementation of EMS at appropriate federal agencies, continued development and dissemination of instructional materials and technical assistance documents for implementing EMS, and recognition of EMS success stories. Many US companies have implemented some form of EMS on a voluntary basis. However, companies have been comparatively slow to implement ISO 14001 and to obtain third party registration of ISO 14001 compliance due to uncertainty regarding the business necessity or benefit of obtaining such registration. Companies have also been waiting to determine the outcome of ongoing evaluations by both the federal government and many states as to how EMS concepts might be incorporated as enforceable parts of the environmental regulatory programme and/or be used as alternative mechanisms for compliance with regulatory requirements in individual cases. To date, EPA has sought to make EMS mandatory only in a few narrow circumstances, including as part of settlement agreements with polluting entities with a history of regulatory non-compliance.
State regulation
The states also play an important role in imposing and enforcing environmental requirements. Implementation and enforcement of a number of federal environmental statutes, including Resource Conservation and Recovery Act and the Clean Water Act, may be delegated to states, and many states have obtained such delegations. States are also permitted under most federal environmental statutes to enact and enforce additional requirements that apply to facilities within their borders, and they may also regulate environmental issues not addressed by the federal environmental laws. In practice, most states have their own set of environmental laws, which impose as many or more obligations as the federal environmental statutes. Many states, cities, towns and other political subdivisions can and do impose additional environmental obligations on activities or facilities within their jurisdiction.
Common law liability
Independent of explicit regulatory requirements, companies may also be subject to liability under common law, including liability for harm due to negligence, harm resulting from the conduct of an activity constituting a nuisance, and harm flowing from so-called ‘ultrahazardous’ activities. Claims of this nature typically include damage to property and personal injury, including so-called ‘toxic torts’. Claims for exposure to asbestos and tobacco smoke are especially prominent in the US.
International treaties and initiatives
With respect to international CSR concerns, the US has signed and implemented several global environmental initiatives, including the Convention on International Trade in Endangered Species and the Montreal Protocol on Substances that Deplete the Ozone Layer. The US has declined, for now, to ratify or implement others, including the Basel Convention on Transboundary Movements of Hazardous Waste and the Rotterdam Convention on Trade in Hazardous Chemicals and Pesticides. The US ratified the 1992 Framework Convention on Climate Change but later took the step of withdrawing its signature from the Kyoto Protocol, which would have required specific reductions in emissions of greenhouse gases.
At the federal level, the US presently is addressing global warming concerns primarily by supporting evaluation and voluntary implementation of technologies that reduce emissions, although debate continues regarding direct regulation of such emissions. While federal action has been slow, several states have enacted statutes or implemented regulations capping or reducing greenhouse gases for at least some categories of sources. Recently, the attorneys general of several states have filed a climate change lawsuit under a common law nuisance theory against top US emitters of carbon dioxide.
Non-governmental organisations
There are many prominent and active US NGOs that focus on issues related to the environment, both domestically and abroad. Two that have CSR-related programmes are Conservation International and the Nature Conservancy. Other NGOs with important voices in the US environmental arena are the Natural Resources Defence Council, the Sierra Club, Environmental Defense, Oxfam America, and Greenpeace USA.
11. Corporate responsibility to communities
Corporate responsibility towards communities outside the context of environmental and labour laws is only sparsely regulated in the US. There is no overall or framework legislation on this issue. Corporate responsibility is promoted primarily through incentive programmes such as tax credits both at the federal and state level. Such programmes include tax credits for employment in specified enterprise zones, tax credits for employment of specific populations such as Native Americans or welfare recipients, tax credits available to corporations for charitable deductions, and state programmes promoting investments in certain communities through job training incentive programmes or industrial development bond issues.
One type of funding used by the federal government to encourage CSR towards communities is the Brownfields Economic Development Initiative, administered through the federal Department of Housing and Urban Development. Funds from this initiative are used to spur the return of environmentally contaminated real property to productive economic use through financial assistance to public entities for use in redevelopment.
Pursuant to the federal Community Reinvestment Act (12 U.S.C. § 2901), the US banking industry is required to invest in low- and moderate-income communities. Some state legislatures have tried various methods, including regulation, to persuade insurance companies to offer consumer services in low-income and urban areas. The National Coalition for Community Reinvestment is a coalition of national, state and local organisations promoting community reinvestment activism. The NCCR publishes periodic newsletters and reports on community reinvestment in the US.
Finally, though not explicitly directed towards communities, federal and state laws exist that are aimed at protecting consumers from competitive misdeeds of businesses. The Federal Trade Commission Act (15 U.S.C. §§ 41-51), signed in 1914, established the Federal Trade Commission as the government agency to enforce federal antitrust laws; its mandate has grown to include enforcement and oversight of federal consumer protection laws. Each state also has its own version of unfair trade practices and unfair competition laws, typically designed to protect consumers from corporate irresponsibility. Acts targetted under federal and state laws and regulations may include false advertising and solicitations, deceptive pricing practices, and anticompetitive acts and practices. Some states provide a private right of action for consumers under the law as well as government enforcement through the state’s attorney general’s office.
12. Corporate responsibility for overseas activities
Federal initiatives Trade
Increased attention is being paid of late to CSR impacts of US entities overseas. While the US government has a decided preference for voluntary initiatives to promote CSR, certain issues have been incorporated into trade agreements and mandatory federal regulation. For example, the US government has indicated that it will promote some CSR values, particularly in the labour and environmental arenas, through World Trade Organisation (WTO) dialogue and inclusion of requirements in bilateral free trade agreements. Consistent with this, the US in 2002 supported a link of conflict diamond certification to a trade waiver under the WTO, the first such link of a voluntary CSR initiative to a WTO trade waiver. Most current federal promotion of CSR values overseas, however, is accomplished through some form of federal regulation, through the promotion of public-private partnerships, and through the promotion of international voluntary standards.
Child and forced labour
The issues of child and forced labour have generated some federal regulation and oversight, as well as numerous federally-supported studies and voluntary initiatives. Pursuant to the Tariff Act of 1930, as amended in 1997 (19 U.S.C. § 307), it is forbidden to import into the US goods made by child forced labour or indentured servitude. This ban is enforced by the US Customs Service. The International Child Labor Program of the Department of Labor administers US policy on child labour, including raising public awareness on the issue and administering public grants to organisations engaged in limiting child labour. It also publishes annual reports on international child labour issues. The International Child Labor Program has produced a number of publications on child labour, including a 1996 report on The Apparel Industry and Codes of Conduct. More broadly, the Department of State has promoted and funded projects by the Partnership to End Sweatshops (a public-private partnership) that aim to build local capacity in developing countries to improve labour law compliance through multi-stakeholder engagement. The Department of State’s Bureau of International Labor Affairs in 2002 produced a report on Development of a Methodology for the Regular Reporting of Working Conditions in the Production of Apparel. This report analysed issues in the reporting of working conditions in the sector both domestically and abroad.
Environmental concerns
Environmental issues abroad have also generated attention. The US Overseas Private Investment Corporation and the US Export-Import Bank are required by statute to assess the environmental impacts of projects under consideration for political risk insurance and financing. One such project, the Camisea natural gas project in Peru, was denied funding by the Export-Import Bank on environmental impact grounds.
Alien Tort Claims Act litigation
By far the most high-profile statute impacting CSR for overseas activity is the Alien Tort Claims Act (ATCA) (28 U.S.C. §1350), which permits foreign plaintiffs to bring a suit in federal court for a tort committed in violation of the law of nations. This law has been used for the past decade to sue foreign and domestic corporations in US courts for complicity in alleged violations of international law.
Enacted in 1789, the ATCA was originally intended to clarify jurisdiction in cases involving matters such as piracy and the actions of diplomats. Although it lay dormant for two centuries, in 1979 the ATCA was resurrected when a Paraguayan doctor successfully brought suit in the US against a former Paraguayan police official for the murder of the doctor’s son in Paraguay. In the ensuing two decades, human rights lawyers have used the law as a means for the redress of human rights and other violations committed outside the US. Most recently, human rights and environmental activists have brought suits on behalf of foreign nationals against multinational corporations for their alleged complicity in the rights abuses of foreign regimes.
No ATCA action brought against a corporation has yet resulted in a final judgment against a corporation, and some have been dismissed entirely. Corporations have raised numerous substantive and procedural objections to the appropriateness of using the ATCA as a remedy for alleged corporate misconduct. Two of the strongest objections, and ones that have met with success in ATCA cases, are those relating to forum non conveniens (ie arguments that the legal claims must properly be brought in a jurisdiction other than the US), and arguments against piercing the corporate veil to hold parent companies (with legal presence in the US) liable for actions of their foreign subsidiaries or affiliates.
In 2004, the Supreme Court ruled for the first time on an ATCA case. The Court in Sosa
v. Alvarez-Machain, 124 S. Ct 2739 (2004), clarified that only a limited set of well-established, clearly defined violations of international law can be the basis for ATCA suits. These most likely include genocide, war crimes, crimes against humanity, torture, slavery, and extrajudicial killings. A major focus in pending ATCA cases will therefore be on whether the conduct alleged to have occurred meets the Court’s definition of a violation of international law. There was also a reference in the Sosa decision to the question of whether such violations can be said to have been committed by private actors, such as corporations. In a footnote, the Court noted that the answer to that question may turn on the specific violation alleged. This issue will certainly generate considerable attention in the lower courts. Finally, the Supreme Court cautioned the lower courts to give deference to any concerns raised by the executive branch that a specific ATCA lawsuit would unduly impact foreign policy concerns.
Non-governmental organisations and voluntary initiatives
Organisations in the US concerned with activities of US corporations overseas include prominent international NGOs, such as Amnesty International and Human Rights Watch, as well as the International Labor Rights Fund, Human Rights First, and Earthrights International. Among the more prominent voluntary initiatives aimed at minimising the negative impact of multinational, including US multinationals, overseas would be the Equator Principles. The Equator Principles are a set of voluntary standards by which participating financial institutions screen significant project finance activities based upon the expected environmental and social impacts of the projects for which financing is being sought. Several US-based financial institutions have signed onto the Principles.
13. Procurement
Federal laws and regulations
The US Congress has enacted various laws regulating the acquisition of goods and services by the federal government. Chief among these are the Armed Services Procurement Act of 1847, the Competition in Contracting Act of 1984, the Federal Property and Administrative Services Act of 1949 (PL 79-404), and the Federal Acquisition Reform Act of 1996 (PL 104-106). The principal federal procurement regulations are the Federal Acquisition Regulation and the supplements to that regulation promulgated by individual federal agencies.
Federal procurement law is often used to advance specific policy goals, some of which relate to CSR. The federal government is required to comply with federal labour standards that, among other things, establish minimum remuneration levels to contractor employees. The government also provides business opportunities to certain categories of citizens, such as women and minority business owners, through procurement regulations. Pursuant to Executive Order 13126, federal agencies are prevented from buying products that have been made with forced or indentured labour, including child labour. Federal suppliers of items on a Department of Labor list of products frequently produced using child labour must certify that they have made a good faith effort to determine whether forced or indentured child labour was used to produce the listed items.
State laws and regulations
Each state also has its own procurement regulations, many of which function in a similar fashion to the federal regulations, and promote state goals of implementing labour standards and supporting certain socio-economic groups. There is precedent for states to use their purchasing power to influence activities overseas, most strikingly in the South Africa boycott of the 1980s, when a number of state and local governments implemented procurement boycotts of companies doing business in South Africa. An attempt made by Massachusetts to implement a similar boycott of companies doing business in Burma was struck down by the Supreme Court in 2000 on the ground that it was pre-empted by federal sanctions on Burma. Maine, on the other hand, has a procurement statute that imposes restrictions on the purchase of certain items when such items are made under abusive conditions. (Me. Rev. Stat. Ann. title 5, § 1825-L (2004)). To date, that statute has not been deemed pre-empted by federal statutes.
14. CSR reporting and socially responsible investing
Federal reporting requirements
The Securities and Exchange Commission issues regulations regarding the types of disclosure that publicly traded companies must make in their financial reports. Disclosure of non-financial information is required if it is deemed to be sufficiently material, a concept that has been continually defined through these SEC regulations, as well as by statutes, case law, and in the Generally Accepted Accounting Principles (GAAP) that govern accounting professionals in the US. While companies have an overall obligation to report liabilities that will have a material impact on their financial reports, CSR-related SEC reporting requirements are most specific with regard to environmental liabilities. These contain a number of specific provisions that companies should consider when evaluating their public disclosures regarding the environmental impacts of their activities, whether such disclosures appear in SEC filings or in CSR reports.
Voluntary reporting initiatives
Voluntary CSR reporting is a growing trend in the US business community, and is increasingly followed and encouraged by consumers and activists. Such reporting is currently undertaken by an increasing number of US companies, but is neither mandated nor regulated by the federal or state governments. The most widely used voluntary standard to support CSR-related reporting is the Global Reporting Initiative’s Sustainability Guidelines on Economic, Environmental and Social Performance. To date, however, the existence, form and substance of CSR reporting in the US is entirely voluntary and informed by business goals and stakeholder engagement.
Litigation risks of voluntary reporting
The California Supreme Court’s decision in Kasky v. Nike, 27 Cal. 4th 939 (Cal. 2002), gave rise to some uncertainties for companies who engage in public discourse about their operations beyond that required by law. Kasky was a limited holding that Nike’s public statements about conditions in its production facilities constituted commercial speech in the context of California’s laws on unfair competition and false advertising, and were therefore not subject to heightened free-speech protections. This case raised many concerns about what companies may say without incurring potential liability under California law. It was feared at the time that the Kasky decision would have adverse consequences for CSR reporting and the ability of social investment funds to secure accurate information through such reporting. These consequences, however, have thus far failed to materialise. No suits have been filed to date related to CSR reporting under the Kasky precedent.
Socially responsible investment activity
Socially responsible investing is increasingly common in the US, both among institutional investors and private persons. Assets in professionally managed, socially screened investment portfolios increased 36 per cent between 1999 and 2001. In 2003, 11 per cent of funds under professional management in the US were being screened for some SRI issue. Major indices rating social performance include the Dow Jones Group Sustainability Index and the FTSE4Good indices.
Shareholder activism has increased along with the increase in funds under SRI management. In 2003, 310 proxy resolutions on social issues were filed, a 15 per cent increase from 2001. Major public pension funds have used their clout to push for change outside the forum of shareholder resolutions, evaluating the companies in their portfolios for governance as well as human rights and industry-specific concerns. The TIAA-CREF, a huge California public pension fund, has for years divested entire countries of origin from its portfolios based on human rights records. Major SRI investor activities now include direct meetings with boards of directors to push for change.
Prominent organisations promoting and analysing CSR reporting and socially responsible investing include the Interfaith Center for Corporate Responsibility (a coalition of faith-based institutional investors using the power of persuasion backed by economic pressure from consumers and investors to hold corporations accountable); the Coalition for Environmentally Responsible Economies, whose corporate members commit to environmental reporting; and the Social Investment Forum, a group of social investment practitioners and institutions, which promotes socially responsible investment and publishes reports on relevant investment practices. Socially responsible funds managers include Trillium Asset Management and Domini Social Investments.
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