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Original Articles

Disclosure and Corporate Social and Environmental Performance: Competitiveness and Enterprise in a Broader Social Frame

John ParkinsonSchool of Law, University of Bristol.
Pages 3-39 | Published online: 27 Apr 2015

  • CA Williams, “The Securities and Exchange Commission and Corporate Social Transparency” (1999) 112 Harvard Law Review 1197, 1296.
  • The term “soft regulation” is being employed here in a different sense from that of “soft law” as used by international lawyers. The latter expression describes “declarations, resolutions, guidelines, principles and other high-level statements by groups of states such as the UN, ILO, and OECD that are neither strictly binding norms nor ephemeral political promises”: International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies (Switzerland, Versoix, 2002), at 73. See also D Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the International Legal System (OUP, 2000). For a further usage, see National Consumer Council, Soft Law in the European Union (London, 2001), 3: soft law describes “any system of regulation other than the traditional process which involves a democratically elected legislature making laws which are then enforced through the civil or criminal procedure of the courts”.
  • See CD Stone, Where the Law Ends: The Social Control of Corporate Behaviour (New York, Harper & Row, 1975), ch 18; R Gray, The Greening of Accountancy: The Profession After Pearce (London, Certified Accountant Publications, 1990), 78–80; N Gunningham and P Grabosky, Smart Regulation: Designing Environmental Policy (OUP, 1998), 62–5. To avoid repetition, “social, ethical, and environmental performance” will often be referred to hereafter simply as “social performance”. Likewise “social reporting” for “social, ethical, and environmental reporting”.
  • Though, of course, it is not the only way of making information publicly available. Other methods include disclosure of environmental information on public registers and product labelling schemes.
  • See JE Parkinson, Corporate Power and Responsibility: Issues in the Theory of Company Law (OUP, 1993), 372–73.
  • See Williams, “The SEC and Corporate Social Transparency” (supra, n. 1), 1294–95.
  • See text accompanying nn. 44–46, infra.
  • On which, see The Industrial Society, Company Law Review Research Project: Final Report (London, Industrial Society, 2001), 26–27, noting that preparation of the proposed mandatory operating and financial review (see text accompanying nn. 22–28, infra) by a number of companies in a “dummy run” did not impose substantial additional costs.
  • Doubtless few members of the population at large would read corporate social reports, but it is likely that the information revealed would be processed and disseminated by some NGOs, and analysed by some institutional investors and providers of benchmarking services (concerning which, see n. 57, infra).
  • See text accompanying nn. 22–28, infra.
  • The categories are “ideal types”. As will emerge below, there is likely in reality to be some blurring between them.
  • ABI, Investing in Social Responsibility: Risks and Opportunities (London, 2001) appendix 1.
  • Ibid.
  • See generally, Williams, “The SEC and Corporate Social Transparency” (supra, n. 1).
  • D Kingsmill, Review of Women's Employment and Pay (London, Cabinet Office, 2001). It was recommended that such disclosures be a mandatory element in the operating and financial review proposed by the Company Law Review: ibid, paras 5.26–47. On the Government's proposals, see n. 27, infra.
  • Ibid, 7.
  • It does not, in the terminology of the Company Law Review, involve the adoption of a pluralist governance structure, but attempts to obtain some of the benefits of pluralism: see Company Law Review Steering Group, Modern Company Law for a Competitive Economy: The Strategic Framework (London, DTI, 1999), 33–55. It is not vulnerable to the indeterminacy/accountability objections that are often levelled against pluralism: for a discussion, see J Parkinson, “Inclusive Company Law” in J de Lacy (ed), The Reform of United Kingdom Company Law (London, Cavendish, 2002) 43.
  • See n. 27, infra. The information requirements of different types of shareholder are also likely to vary. “Socially responsible investors” (see text accompanying nn. 53–74, infra) are likely to require more extensive information than those with a narrowly financial focus: see Fédération des Experts Comptables Européens (FEE), Towards a Generally Accepted Framework for Environmental Reporting (Brussels, 2000), 11. One of the aims of the Pensions Act disclosure requirements (see n. 56, infra and accompanying text) can be regarded as being to stimulate the demand for information on the part of institutional investors.
  • For an example of type 2 reporting, see Global Reporting Initiative, Sustainability Reporting Guidelines (Amsterdam, 2002).
  • Eg a representative of the fund management industry has stated that the “bottom line implications of social issues are not clear. It would be difficult to justify why a company should produce a social report”: Tessa Tennant of the National Provident Institution, quoted in J Elkington, “The ‘Triple Bottom Line’ for Twenty-First-Century Business” in JV Mitchell (ed), Companies in a World of Conflict: NGOs, Sanctions and Corporate Responsibility (London, Earthscan, 1998) 32, 54.
  • “Materiality” is a concept relating to the relevance of an issue to a (recognised) user of information, often defined in terms of whether the information is likely to affect the decisions of a user: see further, FEE, Towards a Generally Accepted Framework (supra, n. 18), 18–19.
  • See eg Company Law Review Steering Group, Modern Company Law for a Competitive Economy: Completing the Structure (London, DTI, 2000) ch 3.
  • DTI, Modernising Company Law Cm 5553-I (London, DTI, 2002), para 4.31.
  • For criticism of current reporting practice, see Company Law Review Steering Group, Modern Company Law for a Competitive Economy: The Strategic Framework (supra, n. 17), para 6.9; C Villiers, “Disclosure Obligations in Company Law: Bringing Communication Theory Into the Fold” [2001] 1 JCLS 181, 184–87.
  • DTI, Modernising Company Law (supra, n. 23), para 4.32 and Annex D, para 5. This is a departure from the Company Law Review proposals, in which the OFR is not exclusively targeted at shareholders, though it is to be written from the perspective of the directors as managers of the business: Company Law Review Steering Group, Modern Company Law for a Competitive Economy: Completing the Structure (supra, n. 22), para 3.33.
  • DTI, Modernising Company Law—Draft Clauses Cm 5553-II (London, DTI, 2002), cl 73(3). A consortium of NGOs (the Corporate Responsibility Coalition—CORE) have promoted a private member's bill (the Corporate Responsibility Bill) including requirements, inter alia, for a more radical, type 2, approach to reporting: see http://www.foe.co.uk.
  • It should also be noted that the White Paper, following the Company Law Review recommendations, draws a distinction between matters that must be reported on by all companies to which the OFR requirements apply (there are size criteria), and those which must be reported on only when in the good faith judgement of the directors they are material, given the objective of the OFR: see DTI, ibid, cls 74 and 75. Inter alia, workforce, environmental, and social issues fall into the latter category. The provisions are also structured in such a way that directors might determine that the company's policies in these areas are material, but not performance under them. The Kingsmill Review of Women's Employment and Pay (supra, n. 15), para 5.36 challenged the argument that reporting on policies (regarding gender balance) was sufficient: while many companies have progressive human capital and diversity policies in place, “few have done the necessary analysis as to how such policies relate to their key corporate objectives and whether the policies in question are actually delivering the desired results”. See also P Monaghan, “Developing a Transparent Approach to Company Reporting” in R Cowe (ed), No Scruples (Spiro, London, 2002) 139, 149. The Company Law Review proposals linked disclosure of social and environmental policies with disclosure of performance: Company Law Review Steering Group, Modern Company Law for a Competitive Economy: Final Report (DTI, London, 2001), para 8.40.
  • Cf the suggestion that OFR disclosures “will necessarily be limited to high-level generalities and will never ever replicate the depth and quality of disclosure to be found currently in even an average environmental, social or sustainability report”: R Adams, The Case for Smart Legislation: The Detail Must Be Flexible (2002), 4: http://www.ippr.org/research/index.php?current=28&detail=events.
  • See Commission of the European Communities, Communication from the Commission concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development COM(2002) 347 final (Brussels, 2002), para 5.3.
  • See http://www.defra.gov.uk/environment/envrp/guidelines.htm.
  • See Commission of the European Communities, Communication from the Commission (supra, n. 29), para 2. See also Report on the Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility A5-0159/2002: the Committee on Employment and Social Affairs of the European Parliament calling for mandatory reporting on social and environmental impacts, possibly by putting the GRI Sustainability Reporting Guidelines (supra, n. 19) on a statutory footing. The issue is being kept under review: see R Howitt, “Europe Promotes Best Practice” (Autumn, 2002) Ethical Performance Best Practice 6, 6–7. The Commission is currently taking steps to develop commonly agreed guidelines and criteria for measurement, reporting, and assurance for (voluntary) triple bottom line reporting by mid 2004: Commission, ibid, para 5.3 and see also para 7.3. See also Commission Recommendation on the Recognition Measurement and Disclosure of Environmental Issues in the Annual Accounts and Annual Reports of Companies 2002/453/EC.
  • See KPMG, KPMG International Survey of Corporate Sustainability Reporting 2002 (Amsterdam, KPMG, 2002), 29–30.
  • For a number of case studies, see N Craig Smith, Morality and the Market: Consumer Pressure for Corporate Accountability (London, Routledge, 1990) ch 8.
  • See P Willetts, “Political Globalization and the Impact of NGOs upon Transnational Companies” in Mitchell, Companies in a World of Conflict (supra, n. 20) 195, 216. See also Gunningham and Grabosky, Smart Regulation (supra, n. 3), 107–08 and the material cited in n. 44.
  • See Craig Smith, Morality and the Market (supra, n. 33), esp ch 7.
  • R Cowe and S Williams, Who are the Ethical Consumers? (Manchester, The Co-Operative Bank, 2000). For a discussion of other survey evidence, see S Zadek, The Civil Corporation: The New Economy of Corporate Citizenship (London, Earthscan, 2001), 57–60.
  • Cowe and Williams, ibid, 28.
  • A distinction should also be drawn between avoidance of products which consumers believe may be harmful to themselves (note, eg, the success of the campaign against genetically modified foods), and boycotting products to alter company behaviour for the benefit of third parties or society generally. As regards the latter, there is evidence that consumers are conscious of the collective action problems involved, which make such behaviour of questionable rationality: see ibid, 29, where it is indicated that only 11% of consumers strongly believe their shopping choices will make a significant difference, though a further 40% believe they have some influence.
  • PN Grabosky, “Green Markets: Environmental Regulation by the Private Sector” (1994) 16 Law & Policy 419, 429.
  • See DTI, Engaging SMEs in Community and Social Issues (London, DTI, 2002), 16. See also Commission of the European Communities, Green Paper Promoting a European Framework for Corporate Social Responsibility (Brussels, 2001) COM(2001) 366 final, at 9.
  • Gunningham and Grabosky, Smart Regulation (supra, n. 3), 235. See also N Gunningham, “Environment, Self-Regulation, and the Chemical Industry: Assessing Responsible Care” (1995) 17 Law & Policy 57, 84–86.
  • See S Draper, Corporate Nirvana: Is The Future Socially Responsible? (London, The Industrial Society, 2000). Another survey suggests that good corporate reputation is regarded as more important than starting salary, fringe benefits, or sports and social facilities by potential employees: see Just Pensions, Socially Responsible Investment and International Development (London, 2001), 5.
  • See S Draper, “Good Work: Employees as Drivers and Demonstrators of CSR” in Cowe, No Scruples? (supra, n. 27) 48, 53–60.
  • See eg J Rees, “Development of Communitarian Regulation in the Chemical Industry” (1997) 19 Law & Policy 477, 486. A striking example of how facilitating access to information about corporate activity may stimulate community pressure is the success of the Toxics Release Inventory in the United States. This provision requires manufacturers to report annual emissions of specified chemicals. The significantly increased community pressure that has resulted has apparently led to a substantial reduction in emissions: see A Fung and D O'Rourke, “Reinventing Environmental Regulation form the Grassroots Up: Explaining and Expanding the Success of the Toxics Release Inventory” (2000) 25 Environmental Management 115.
  • See N Gunningham and J Rees, “Industry Self-Regulation: An Institutional Perspective” (1997) 19 Law & Policy 363, 389–92.
  • See S Tickell, “Why Philanthropy Is Not Enough” in Cowe, No Scruples? (supra, n. 27) 65.
  • See generally, C Secrett, “Under Pressure: Pressure Groups, Campaigns and NGOs”, in Cowe, ibid, 3.
  • See Willetts, “Political Globalization” (supra, n. 34), 200–08. The “processes that have produced a globalized economy have also produced a globalized civil society”: ibid 208. See also C Marsden and J Andriof, “Towards an Understanding of Corporate Citizenship and How to Influence It” (1998) 2 Citizenship Studies 329; ABI, Investing in Social Responsibility (supra, n. 12), 16 (commentary by R Cowe); V Haufler, A Public Role for the Private Sector: Industry Self-Regulation in a Global Economy (Washington DC, Carnegie, 2001), 11.
  • See Zadek, The Civil Corporation (supra, n. 36), 80; M Edwards, NGO Rights and Responsibilities: A New Deal for Global Governance (London, Foreign Policy Centre, 2000) ch 2.
  • NGOs may also try to change company behaviour indirectly, by lobbying companies’ major institutional shareholders: see Secrett, “Under Pressure” (supra, n. 47), 12.
  • See Willets, “Political Globalization” (supra, n. 34), 216.
  • Zadek, The Civil Corporation (supra, n. 36), 78–85.
  • See GP Stapledon, “Institutional Investors: What Are Their Responsibilities as Shareholders?” in J Parkinson, A Gamble and G Kelly, The Political Economy of the Company (Oxford, Hart, 2000) 195, 209–23.
  • It is, of course, also entirely proper for them to press for the adoption of socially desirable policies that are also to the company's direct financial benefit, such as waste reduction measures. Further, as the wealth of widely diversified investors is affected by the performance of the corporate economy as a whole, it is arguable that they should seek the reduction of negative externalities and the increase of positive externalities associated with individual company behaviour. Even though this may cause a fall in the value of the particular holding concerned, it will increase the value of the portfolio as a whole. The gains are likely to be speculative, however, and since the institution in question will capture only a small fraction of them, the costs to it of intervention may outweigh the benefits, though this risk is inherent in any form of intervention.
  • See A Simpson, “Money Talks: The Rise of Socially Responsible Investors” in Cowe, No Scruples? (supra, n. 27) 21, 22.
  • Pensions Act 1995, s 11A, added by the Occupational Pension Schemes (Investment, and Assignment, Forfeiture, Bankruptcy etc.) Amendment Regulations 1999, SI 1999/1849.
  • See Simpson, “Money Talks” (supra, n. 27), 23.
  • See E Mathieu, Response of UK Pension Funds to the SRI Disclosure Regulation (London, UK Social Investment Forum, 2000).
  • See Friends of the Earth, Top 100 UK Pension Funds—How Ethical Are They? (FoE, London, 2001), 7–8; D Coles and D Green, Do UK Pension Funds Invest Responsibly? A Survey of Current Practice on Socially Responsible Investment (London, Just Pensions, 2002), 9–10.
  • See Deloitte and Touche, Socially Responsible Investment Survey 2002 (London, Deloitte and Touche, 2002), 18–19.
  • See C Gribben and A Wilson, That's One Small Step … Socially Responsible Investment and Pension Funds (Berkhamsted, Ashridge, 2000), 7.
  • See Deloitte and Touche, Socially Responsible Investment Survey (supra, n. 60), 13–14. There is a substantial body of research regarding the connection between social performance and financial performance. The results are mixed and there are difficulties in determining the direction of causation, ie whether good financial performance is a consequence of good social performance or whether economic success makes high standards of social responsibility possible. For surveys of the evidence, see J Cook and S Deakin, “Stakeholding and Corporate Governance: Theory and Evidence on Economic Performance” (1999) http://www.dti.gov.uk/cld/review.htm; J Weiser and S Zadek, Conversations with Disbelievers: Persuading Companies to Address Social Challenges (New York, Ford Foundation, 2000).
  • Deloitte and Touche, ibid, 10.
  • See Ethical Investment Research Service, http://www.eiris.org/pages/mediainfo/marsta.htm. In 1989 the figure was a mere £199 million.
  • See National Statistics, Share Ownership 2000, http://www.statistics.gov.uk. In the US it is suggested that about 9% of assets under professional management are subject to social or ethical screening: see Williams, “The SEC and Corporate Social Transparency” (supra, n. 1), 1287.
  • Though there may be indirect effects. Eg the ethical index, FTSE4Good, designed to facilitate ethical investment and SRI generally, may encourage those companies that are excluded to improve performance, in order to avoid reputational damage that may extent beyond the investment community, eg into consumer markets.
  • ES Herman, Corporate Control, Corporate Power (CUP, 1981), 269; Williams, “The SEC and Corporate Social Transparency” (supra, n. 1), 1293–96.
  • Mathieu, Response of UK Pension Funds (supra, n. 58), 23–26.
  • See n. 12, supra.
  • See the points above about vagueness and weak monitoring of SRI investment policies and also S Dresner, Assessing Engagement: A Survey of UK Practice on Socially Responsible Investment (London, Just Pensions, 2002), section II, 2, indicating that demand from clients for information about engagement undertaken by fund managers is low.
  • See generally, GP Stapledon, Institutional Shareholders and Corporate Governance (OUP, 1996) ch 10. On conflicts of interest, see Company Law Review Steering Group, Modern Company Law for a Competitive Economy: Completing the Structure (supra, n. 22), paras 4.51–4.60; Modern Company Law for a Competitive Economy: Final Report (supra, n. 27), paras 6.22–6.40; DTI, Modernising Company Law (supra, n. 23), paras 2.42–48.
  • P Myners, Institutional Investment in the United Kingdom: A Review (London, HM Treasury, 2001), 10.
  • See Roger Cowe, “Rules of Engagement” Financial Times 4 April 2002. See also Coles and Green, Do UK Pension Funds Invest Responsibly? (supra, n. 59), 11, on collaboration between funds.
  • See Dresner, Assessing Engagement (supra, n. 70), section II, 6–7.
  • Arthur Andersen, Ethical Concerns and Reputation Risk Management: A Study of Leading UK Companies (London, Arthur Andersen, 2000), 9, reports that “the desire to protect or improve reputation is the most common factor influencing the development of business ethics activities in organisations”.
  • See ABI, Investing in Social Responsibility (supra, n. 12), 19; Haufler, A Public Role for the Private Sector (supra, n. 48), 26–27.
  • For a highly critical view of corporate codes, see JA Paul and J Garred, Making Corporations Accountable: A Background Paper for the United Nations Financing and Development Process: http://www.globalpolicy.org/socecon/ffd/2000paper.htm.
  • Referring to the chemical industry's Responsible Care programme, it has been suggested that “during the 1980s some sections of the industry came to the fundamental realization that it was not possible to effectively change the image without changing the reality”: Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), 61. See also ibid, 64.
  • Eg ISO 14001 (environmental performance) and SA 8000 (labour management). For an account of some of the processes involved (eg internal monitoring and auditing), see OECD, Making Codes of Corporate Conduct Work: Management Control Systems and Corporate Responsibility (Paris, OECD, 2001). There are, however, doubts about the effectiveness of management systems in raising performance: see P Monaghan, “All Clear? Developing A Transparent Approach to Company Reporting” in Cowe, No Scruples? (supra, n. 27) 139, 140.
  • See Willetts, “Political Globalization” (supra, n. 34), 224.
  • See Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), 366–70; Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), 91–93.
  • Gunningham and Rees, ibid, 364.
  • See Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), 64.
  • Ibid, 61. See also Rees, “Development of Communitarian Regulation in the Chemical Industry” (supra, n. 44), 484–87.
  • See International Council of Chemical Associations, Responsible Care Status Report 2000.
  • Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), 60.
  • See ibid, 67–68. For a analysis of the factors required for effective industry self-regulation more generally, see ibid, esp 90–95; Haufler, A Public Role for the Private Sector (supra, n. 48), 3.
  • See Gunnigham, ibid, 69–70. The relevant national associations have lacked independence and have acted more as lobbyists for the industry than as regulators (ibid, 75–81) and they lack appropriate enforcement powers (ibid, 81–83). See also generally Rees, “Development of Communitarian Regulation in the Chemical Industry” (supra, n. 44).
  • Gunningham, ibid, 68. Re industry self-regulation generally, see ibid, 87, arguing that “government intervention is necessary to ensure that the industry association performs its self-regulatory tasks honestly and effectively, to provide extra leverage where the industry association's efforts and powers are insufficient to change the behavior of recalcitrants, to regulate the behavior of those who refuse to participate in the self-regulatory scheme, and to intervene directly where the gap between industry self-interest and the public interest is too large for self-regulation alone to be a credible strategy”.
  • Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), 383.
  • See C McCrudden, “Human Rights Codes for Transnational Corporations: The Sullivan and MacBride Principles” in Shelton, Commitment and Compliance (supra, n. 2) 418.
  • See http://www.accountability.org.uk and n. 19, supra.
  • See eg Better Regulation Task Force, Alternatives to State Regulation (London, Cabinet Office, 2000).
  • Zadek, The Civil Corporation (supra, n. 36), 10. See also Edwards, NGO Rights and Responsibilities (supra, n. 49), 12–13.
  • The European Commission notes that most definitions describe the latter as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”: EC, Promoting a European Framework for Corporate Social Responsibility (supra, n. 40) para 20.
  • One commentator notes a “shift in the literature on business regulation towards corporate responsibility, and the new possibilities this holds for regulatory theory”: F Haines, Corporate Regulation: Beyond ‘Punish or Persuade’ (OUP, 1997), 2. Cf S Wilks, “Regulatory Compliance and Capitalist Diversity in Europe” [1996] 3 Journal of European Public Policy 536, 550: “the vast majority of regulatory theory takes [the] ‘targets’ of regulation as given and speculates on the optimum design of policy, agency and process in order to induce the desired alterations in their behaviour. There is accordingly an intense debate on agency independence, the role of experts, the desirable balance between rules and discretions, and about the accountability of the regulators. What seems extraordinary is the poverty of the analysis of the regulatory targets … When the targets are businesses, themselves the creatures of state regulation, it seems proper to consider how compliance can be enhanced”.
  • Most famously, Milton Friedman, in eg “The Social Responsibility of Business is to Increase its Profits” New York Times Magazine 13 September 1970. For a discussion of whether the standard objections to corporate social responsibility apply to civil regulation, see text accompanying nn. 142–45, infra.
  • See eg Stone, Where the Law Ends (supra, n. 3) and further text accompanying nn. 121–34, infra.
  • MM Blair, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century (Washington DC, Brookings, 1995), 203. The problem of defining the content of corporate social responsibility, to which the first part of this quote refers, underlies the celebrated Berle-Dodd debate. See AA Berle Jr, “Corporate Powers as Powers in Trust” (1931) 44 Harv Law Rev 1049; E Merrick Dodd Jr, “For Whom Are Corporate Managers Trustees?” (1932) 45 Harv Law Rev 1145; AA Berle Jr, “For Whom Corporate Managers Are Trustees: A Note” ibid, 1365.
  • Eg stakeholder representation at board level or other means of stakeholder participation or accountability mechanisms: for a review of these, see Parkinson, Corporate Power and Responsibility (supra, n. 5), 364–96; for a recent proposal for “stakeholder councils”, see R Cowe, Stakes Not Shares: Curbing the Power of the Corporations (London, NEF, 2001).
  • See generally Marsden and Andriof, “Towards an Understanding of Corporate Citizenship” (supra, n. 48).
  • See generally, K Gordon and M Miyake, “Deciphering Codes of Corporate Conduct: A Review of their Contents”, Working Papers on International Investment No 1999/2 (Paris, OECD, 2000).
  • See K Gordon, “Rules for the Global Economy: Synergies between Voluntary and Binding Codes” Working Papers on International Investment No 1999/3 (Paris, OECD, 2000).
  • See Willetts, “Political Globalization” (supra, n. 34), 223; Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), 385–86; Rees, “Development of Communitarian Regulation in the Chemical Industry (supra, n. 44), 512.
  • Gunningham and Rees, ibid, 383.
  • Ibid.
  • See Gordon and Miyake, “Deciphering Codes of Corporate Conduct” (supra, n. 102); Haufler, A Public Role for the Private Sector (supra, n. 48), 66.
  • International Council on Human Rights Policy, Beyond Voluntarism (supra, n. 2), 19. See also Zadek, The Civil Corporation (supra, n. 36), 181–90; EC, Communication from the Commission (supra, n. 29), para 3, recommending measures to promote standardisation.
  • N Gunningham and R Johnstone, Regulating Workplace Safety: Systems and Sanctions (OUP, 1999), 69.
  • Gunningham and Grabosky, Smart Regulation (supra, n. 3), 164; Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), 65–66.
  • See further Zadek, The Civil Corporation (supra, n. 36), 33–36; S Zadek, Third Generation Corporate Citizenship: Public Policy and Business in Society (London, Foreign Policy Centre/AccountAbility, 2001), 13–14. Avoidance of undercutting is part of the rationale for industry-wide self-regulation: see text accompanying nn. 81–90, supra. It also provides a motive for leading companies in an industry to press for mandatory regulation: see text accompanying n. 158, infra.
  • See Parkinson, Corporate Power and Responsibility (supra, n. 5), 266–71.
  • See S Wheeler, Corporations & The Third Way (Oxford, Hart, 2002), 126.
  • Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), at 378. On the concept of the “organisational field” and its effect on shaping values and behaviour in companies, see AJ Hoffman, From Heresy to Dogma: An Institutional History of Corporate Environmentalism (Stanford, Stanford University Press, 2001), esp 7, 144–48, and 202–03.
  • I Ayres and J Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (New York, OUP, 1992), 3.
  • Gunningham and Grabosky, Smart Regulation (supra, n. 3), at 12. See also Gunningham and Rees, “Industry Self-Regulation”, (supra, n. 45), at 396–97.
  • See Ayres and Braithwaite, Responsive Regulation (supra, n. 115), at 3; Gunningham, “Environment, Self-Regulation, and the Chemical Industry” (supra, n. 41), esp 93–95.
  • See Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), 365 and 397–400. Codes might be negotiated between members of the industry concerned, third parties, and government, for example, or there might be statutory backing for and state monitoring of privately drawn-up rules: see ibid 365–66 and National Consumer Council, Models of Self-Regulation: An Overview of Models in Business and the Professions (London, NCC, 2000) ch 2. See also K Gordon, “Rules for the Global Economy” (supra, n. 103), 7–8.
  • On reflexive law, see eg G Teubner, “Substantive and Reflexive Elements in Modern Law” (1983) 17 Law and Society Review 239; EW Orts, “Reflexive Environmental Law” (1995) 89 Northwestern University Law Review 1227; J Black, “Proceduralizing Regulation” (2000) 20 OJLS 597 and (2001) 21 OJLS 33. See also Grabosky, “Green Markets” (supra, n. 39), 420–23.
  • Gunningham and Grabosky, Smart Regulation (supra, n. 3), 93.
  • There are in addition general background problems of juridification and the “legitimacy crisis” that may result from ever-increasing reliance on substantive legal controls. For a discussion of these concepts, see Orts, “Reflexive Environmental Law” (supra, n. 119), 1258–62.
  • See generally Stone, Where the Law Ends (supra, n. 3); Ayres and Braithwaite, Responsive Regulation (supra, n. 115), 110–16; Gunningham and Grabosky, Smart Regulation (supra, n. 3), 44–47; Gunningham and Johnstone, Regulating Workplace Safety (supra, n. 109) ch 2.
  • See R Baldwin and M Cave, Understanding Regulation: Theory, Strategy and, Practice (OUP, 1999), 103–06. Unnecessarily costly standards may also be imposed, eg in the environmental field where specific technological pollution controls may be mandated, but the company could achieve the same or a lower level of abatement at a reduced cost by alternative means: see Gunningham and Grabosky, ibid, 44
  • Haines, Corporate Regulation (supra, n. 96) ch 8; Hoffman, From Heresy to Dogma (supra, n. 114), esp ch 4.
  • See generally Gunningham and Grabosky, Smart Regulation (supra, n. 3), 69–83; Orts, “Reflexive Environmental Law” (supra, n. 119), 1241–46; Hoffman, ibid, 178–79.
  • See Stone, Where the Law Ends (supra, n. 3), 94.
  • On the possibility of holding multinationals liable for their conduct in developing countries in their home jurisdiction, see H Ward, “Governing Multinationals: The Role of Foreign Direct Liability” Royal Institute of International Affairs Briefing Paper, New Series No 18, February 2001 and International Council on Human Rights Policy, Beyond Voluntarism, (supra, n. 2), 103–06.
  • International Council on Human Rights Policy, ibid, 11–12. Cf DW Drezner, “Bottom Feeders” 121 (November—December) Foreign Policy 64.
  • For a review of international law as it relates to companies and how it might be developed to impose direct, enforceable controls on them, see generally International Council on Human Rights Policy, ibid; Paul and Garred, Making Corporations Accountable (supra, n. 77).
  • In particular, “the need of developing states for foreign direct investment outweighed their desire to control multinationals”: International Council on Human Rights Policy, ibid, 144. See also Haufler, A Public Role for the Private Sector (supra, n. 48), 1; 15–19.
  • http://www.oecd.org/daf/investment/guidelines/ and http://www.ilo.org/public/english/employment/multi/tridecl/index.htm, respectively. See further International Council on Human Rights Policy, ibid, ch 5 and 99–103.
  • http://www.unglobalcompact.org/.
  • Edwards, NGO Rights and Responsibilities (supra, n. 49), 13. For a suggested model for a legally binding framework governing multinationals, see Friends of the Earth, Towards Binding Corporate Accountability (2002): http://www.foe.co.uk/pubsinfo/briefings/html/20020730133722.html.
  • See P Hirst and G Thompson, Globalization in Question (Cambridge, Polity Press, 1996) ch 8.
  • See Ayres and Braithwaite, Responsive Regulation (supra, n. 115), 110–16; Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), esp 366. The European Commission has stressed that codes of conduct etc should not be seen as a substitute for binding law: EC, Promoting a European Framework for Corporate Social Responsibility (supra, n. 40), para 22; Communication from the Commission concerning Corporate Social Responsibility (supra, n. 29), para 5.1
  • As noted earlier, the threat of state regulation may also have this effect, though the response is more likely to be a sectoral one than an individual company response. See also generally, Ayres and Braithwaite, ibid, who advocate a system of “responsive regulation” under which companies are required to devise and enforce their own rules subject to public supervision and an escalating public enforcement regime where self-enforcement fails.
  • On the problems of imposing a systems-based approach by law, see Gunningham and Johnstone, Regulating Workplace Safety (supra, n. 109), 310–13.
  • See Gordon, “Rules for the Global Economy” (supra, n. 103), 10–12.
  • See generally, ibid; International Council on Human Rights Policy, Beyond Voluntarism (supra, n. 2), 9.
  • See Haufler, A Public Role for the Private Sector (supra, n. 48), 76–78.
  • See ibid, 50. Haufler's overall assessment is that civil regulation has “changed some behavior, incrementally and unevenly. The evidence is scattered and difficult to analyze systematically. But firms such as Nike and Reebok do pay their workers in Vietnam more today than they did a few years ago. Companies such as BP Amoco and Shell have reduced their emissions of greenhouse gases and pollutants in measurable ways … but these changes are neither profound nor revolutionary, and in many cases they occur only at the margins”: ibid, 112.
  • V Brudney, “The Independent Director—Heavenly City or Potemkin Village?” (1982) 95 Harvard Law Review 597, 605.
  • For a discussion, see Parkinson, Corporate Power and Responsibility (supra, n. 5) ch 10.
  • See D Henderson, Misguided Virtue: False Notions of Corporate Social Responsibility (London, IEA, 2001), 79.
  • For acceptance of this interpretation by a critic of civil regulation, see M Wolf, “Response to Confronting the Critics” (2002) 1 New Academy Review 62, 62.
  • Ibid, 64.
  • See Secrett, “Under Pressure: Pressure Groups, Campaigns, and NGOs” (supra, n. 47), 7.
  • Eg NGO positions are often criticised as “crude and simplistic, poorly researched, and driven by fashion and sensation rather than loyalty to the facts”: Edwards, NGO Rights and Responsibilities (supra, n. 49), 19–20. But see also the response to this point, ibid.
  • See ibid ch 3; Willetts, “Political Globalization” (supra, n. 34), 211–15.
  • In the more formal arenas of UN bodies there are accreditation procedures for NGOs laying down criteria for participation: see Edwards, ibid, 21–22.
  • Wolf, “Response to Confronting the Critics” (supra, n. 145), 64–65.
  • See eg Zadek, The Civil Corporation (supra, n. 36), 18–20. See also Commission of the European Communities, Communication from the Commission (supra, n. 29), para 5.
  • See eg W Streeck and PC Schmitter, “Community, Market, State—and Associations? The Prospective Contributon of Interest Governance to Social Order” in W Streeck and PC Schmitter (eds), Private Interest Government: Beyond Market and State (London, Sage, 1985) 1; Rees, “Development of Communitarian Regulation in the Chemical Industry (supra, n. 44), 481.
  • See Gunningham and Rees, “Industry Self-Regulation” (supra, n. 45), 399.
  • See Grabosky, “Green Markets” (supra, n. 39), 420–23.
  • See Henderson, Misguided Virtue (supra, n. 144) ch 6; Wolf, “Response to Confronting the Critics” (supra, n. 145), 65.
  • See OECD, Private Initiatives for Corporate Responsibility: An Analysis (Paris, OECD, 2001), 20.
  • See Henderson, Misguided Virtue (supra, n. 144), 127–33; Wolf, “Response to Confronting the Critics” (supra, n. 145), 65.
  • See n. 27, supra.
  • See KPMG, KPMG International Survey of Corporate Sustainability Reporting 2002 (supra, n. 32), 16.
  • See Adams, The Case for Smart Legislation (supra, n. 28), 3, arguing that an effect of prescription is “low-grade, unadventurous, lowest common denominator reporting”, citing the examples of mandatory environmental reporting in Denmark and the Netherlands. See also Company Law Review Steering Group, Modern Company Law for A Competitive Economy: Developing the Framework (London, DTI, 2000), para 5.92 and Company Law Review Steering Group, Modern Company Law for A Competitive Economy: Completing the Structure (supra, n. 22), para 3.10.
  • Of the 49 top 100 UK companies that reported in 2002, 52% had the reports independently verified: KPMG, KPMG International Survey (supra, n. 32), 20.
  • D Doane, Market Failure: The Case for Mandatory Social and Environmental Reporting (2002), 2: http://www.ippr.org/research/index.php?current=28&detail=events. See also KPMG, ibid, 9.
  • EC, Promoting a European Framework for Corporate Social Responsibility (supra, n. 40), 16.
  • P Kirkman and C Hope, Environmental Disclosure in UK Company Annual Reports (Cambridge, 1992), 21.
  • See D Doane, Corporate Spin: The Troubled Teenage Years of Social Reporting (London, New Economics Foundation, 2000).
  • Doane, ibid, 5. See also Zadek, The Civil Corporation, (supra, n. 36), 203–05.
  • GRI, Sustainability Reporting Guidelines (supra, n. 19). For EC initiatives in this area, see n. 31, supra.
  • Doane, Corporate Spin (supra, n. 166), 5.

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