In recent years, companies have been engaging in social good programs to reduce and compensate for the negative impact they have on the larger community. These efforts are often called Corporate Social Responsibility (“CSR”) initiatives, and they can range from reducing carbon emissions to engaging in fairer and more open employment practices. At first glance, CSR seems to benefit everyone – corporations and their shareholders, society as a whole, and even future generations. However, generosity and kind-heartedness are rarely the motivating factors behind CSR initiatives. Many corporations engage in CSR to create good press, attract consumers and investors, and to cover up the very wrongs their CSR programs seek to correct.[1] In response to this conduct, regulatory bodies and courts have begun to limit what companies are permitted to communicate about their CSR programs.[2]
Defining what exactly constitutes CSR is not a simple task. Generally, CSR means a corporation “assess[es]and take[s]responsibility for the company’s effects on environment[al]and social wellbeing.”[3] Importantly, CSR means the corporation’s efforts should “go beyond what may be required by regulators or environmental protection groups.”[4] CSR does not, however, simply mean giving money to charity or engaging in similar philanthropic activities.[5] CSR means a corporation understands the environmental, economic, and social consequences of running its business and seeks to correct or compensate for them.[6]
A discussion about several CSR initiatives and how these initiatives came about will aid in further understanding this concept. A profit-driven corporation may decide to engage in CSR when it: 1) seeks to service “the ‘right’ customer base,” 2) is “atoning for a prior CSR atrocity,” or 3) is “servicing the ‘right’ customer base after a CSR atrocity.”[7] The first scenario occurs when consumers are attracted to a company’s high-end products, despite a product’s relatively expensive price tag.[8] These companies engage in CSR because their customers value social responsibility over price, meaning these policies create a competitive advantage.[9] An example of a company falling into this scenario is Whole Foods Market, whose current CSR initiatives entail giving their employees “fair wages and benefits,” “donating 5% of [their]after-tax profits to not-for-profit organizations,” and “advancing environmental stewardship” by “[s]upporting sustainable agriculture” and “[r]educing waste and consumption of non-renewable resources.”[10] Companies in this category best exemplify the reasons why companies should engage in CSR.
Companies that fall into the second and third scenarios exemplify the problems with CSR. Corporations in these categories may engage in CSR to atone for a prior wrongdoing.[11] A common example of this scenario occurs when companies engage in greenwashing. Greenwashing is “when a company or organization spends more time and money claiming to be green through advertising and marketing than actually implementing business practices that minimize environmental impact.”[12] Wal-Mart’s environmental policies exemplify this phenomenon. In response to criticisms concerning the company’s global environmental impact, Lee-Scott, former CEO of Wal-Mart, laid out its newest sustainability goals: (1) to be supplied “100 percent by renewable energy,” (2) to “create zero waste,” and (3) to “sell products that sustain our resources and environment.”[13] Unsurprisingly, such a huge initiative fell short of its promises when Wal-Mart’s own suppliers failed to meet this green standard.[14]
Though companies often engage in CSR after a CSR violation, ExxonMobil seems to have implemented CSR initiatives and later violated them. In 2009, ExxonMobil secured lucrative oil rights in Nigeria.[15] In 2016, ExxonMobil announced that its affiliates in Nigeria were voted the “2015 Best Company of the Year in Corporate Social Responsibility (CSR) by the Social Enterprise Report and Awards (SERAs).”[16] ExxonMobil received such an honor for their “extensive CSR projects in the areas of education, health, economic empowerment and local capacity development.”[17] In 2017, Nigerian workers of ExxonMobil went on strike when, according to union officials, 83 employees were wrongfully terminated.[18] In September of 2017, members of the community in Nigeria blocked all routes to ExxonMobil facilities, alleging the company refused to honor their agreement with the community.[19] The community also demanded that ExxonMobil compensate them “for environmental pollution/degradation by oil spills, gas-flaring, operational noise and hazards.”[20]
There are now legal consequences for companies that purport to engage in CSR but in actuality, fall short of accomplishing their social good initiatives. In Nike v. Kasky, Nike made claims in advertising and other communications that it had taken steps to improve conditions for overseas workers.[21] Plaintiffs brought suit under California’s false advertising laws, arguing that “in order to maintain and/or increase its sales, Nike made a number of false statements and/or material omissions of fact concerning the working conditions under which Nike products are manufactured.”[22] The Court found for the plaintiffs but did not address Nike’s constitutional argument that their statements were First Amendment protected speech.[23] The Securities and Exchange Commission has also issued guidelines as to how a corporation must disclose their CSR programs, particularly programs dealing with climate change.[24] For example, Regulation S-K Item 101 requires disclosure of any material effect that environmental compliance costs may have on earnings and competitive positions, with regards to disclosure of capital expenditures.[25]
Even at a state level, corporations are being forced to disclose their environmental impact on the community. In 2007, New York Attorney General Andrew Cuomo investigated and subpoenaed five major energy companies over whether their disclosures sufficiently informed investors of the risks and liabilities posed by carbon dioxide emissions from new power plants.[26] In 2009, Cuomo announced an agreement that “requires the AES Corporation (AES) – a global energy company . . . to disclose timely and relevant information to investors about financial risks associated with the production of global warming pollution.”[27]
The CSR initiatives of many corporations have the potential to make a significant positive impact on our environment, our community, and our financial markets. However, without more stringent rulings, regulations, or laws, CSR policies will remain a façade behind which corporations hide their organization’s harmful impacts.
[1] See generally Jason Brandenberger, Best-Laid Plans: Corporate Social Responsibility Often Goes Awry, 3 Ariz. J. Envtl. L. & Pol’y 1041 (2013).
[2] See generally Nike, Inc. v. Kasky, 539 U.S. 654 (2003); 17 U.S.C. §§229.101, 229.303.
[3] Investopedia, http://www.investopedia.com/terms/c/corp-social-responsibility.asp.
[4] Id.
[5] Janet E. Kerr, The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens, 81 Temp. L. Rev. 831, 853-54 (2008).
[6] Id. at 853-55.
[7] 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).
[8] Id. at 572.
[9] Id.
[10] See Declaration of Interdependence, Whole Foods Market, http://www.wholefoodsmarket.com/mission-values/core-values/declaration-interdependence.
[11] Bellish, supra note 7.
[12] GreenWashing Index, http://greenwashingindex.com/about-greenwashing/#what.
[13] 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).
[14] Brandenberger, supra note 1, at 1044-45.
[15] 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.
[16] 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.
[17] Id.
[18] Elisha Bala-Gbogbo, Union Dispute With Exxon Threatens Nigeria’s Oil Output, Bloomberg (May 19, 2017), https://www.bloomberg.com/news/articles/2017-05-19/nigeria-pengassan-oil-union-says-exxon-mobil-talks-hit-impasse.
[19] 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/.
[20] Id.
[21] Nike, Inc. v. Kasky 539 U.S. 654, 656 (2003).
[22] Id.
[23] Id.
[24] See 17 U.S.C. §§229.101, 229.303.
[25] 17 C.F.R. §229.101.
[26] Felicity Barringer & Danny Hakin, New York Subpoenas 5 Energy Companies, N.Y. Times (Sept. 16, 2007), http://www.nytimes.com/2007/09/16/nyregion/16greenhouse.html.
[27] 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.
