The SEAAR Movement in the United States

Possibly even more remarkable than this rapid acceptance of nonfinancial reporting in Europe, Japan, and Australia is the fact that, with a few notable exceptions, on our side of the Atlantic this SEAAR movement has largely failed to materialize. Although most U.S. companies now boast a strong program of corporate social responsibility, the approach by both government and the business community in the United States is on the whole markedly different from that found in Europe, Japan, and Australia.

Coming off of a series of devastating corporate scandals, when U.S. business leaders , politicians , and the media continually refer to the need for greater corporate social responsibility, the phrase has widely been interpreted to mean better corporate governance ” in terms of excessive executive stock options, off-balance sheet investments, or touting worthless stocks to investors. This emphasis on corporate corruption, however, can be misleading. It is true, of course, that many of the early tenets of corporate social responsibility originated in the United States, and certainly most U.S. companies use the phrase commonly on their Web sites and in their public relations announcements. Yet almost universally , these programs tend to have a strong emphasis on philanthropy and a marketing message of integrity that can appear disingenuous to skeptics.

Pointing out the growing gap in perception and enthusiasm for the SEAAR-type of CSR in the United Kingdom and the United States, the Holmes Report notes that It seems inconceivable that the U.S. administration ” particularly the Bush administration ” would create a cabinet level position devoted to corporate ethics. But that s just one difference between the approach to corporate social responsibility here and the approach in the UK. ^{[11 ]}

In fact, when President George W. Bush launched his initiative for Corporate Social Responsibility with much fanfare in the autumn of 2002, he did not mention nonfinancial reporting, the environment, labor or employment rights, or the growing responsibility for a global supply chain. The administration s focus (now sadly relegated to a URL link from the Whitehouse Web page), was exclusively on the corporate accounting fraud that had rocked the markets and discredited the SEC. Unlike the accepted wisdom among the rest of the OECD economies (with the possible exception of Canada), few U.S. company leaders seem to understand CSR to primarily involve applying international labor or environmental standards throughout their supply chain, or reporting on their social and environmental performance as part of their annual report.

Accordingly, comparatively few U.S. companies have adopted international standards or vigorous program of nonfinancial reporting. Of the more than 200 largest multinationals that are members of the United Nation s Global Compact, a forum designed to help corporations agree on standards of social and environmental policies in developing nations (see Chapter Eight), only five of the major U.S. companies ” Cisco Systems, Dupont, Hewlett-Packard, Nike, and Pfizer ” have joined. ^{[12 ]}

Similarly, in a joint 2002 study by the United Nations Environmental Program (UNEP) and the NGO SustainAbility, which ranked corporations according to the quality of their reporting on corporate governance, environmental and social polices, U.S. companies fared badly . Only seven of the top 50 reporting companies were American-based, and these tended to be well-established transnational companies (see Figure 5-3).

Figure 5-3: SustainAbility s Top 50 Companies, 2002

Moreover, except for those given by the Conference Board or BSR (Business for Social Responsibility), the two major U.S. forums in this area, there are comparatively few U.S. conferences concerned with CSR or SEAAR, and most U.S. business schools remain focused on traditional business accounting and ethics courses. Almost none of the major universities or business schools offer any courses on triple-bottom-line accounting. There are a few notable exceptions. Alice Tepper Marlin, the President of Social Accountability International, and her husband teach a course on CSR and SA 8000 at New York s Stern Business School, and Elliot Schrage, former Vice-President for Corporate Affairs at Gap, provides a seminar on CSR issues at Columbia. For most universities and business schools , however, CSR or ethical supply chain issues are usually omitted altogether, or else integrated loosely into other philosophy or management courses. And as the Holmes Report astutely noted, it is hard to imagine the Bush Administration pressing for a cabinet-level position for corporate social responsibility or mandatory triple-bottom-line reporting.

It is not that U.S. companies are not taking the issue of an ethical supply-chain seriously ” most U.S. companies have during the past decade put in place often very sophisticated processes and systems to demonstrate compliance with OSHA (Occupational Safety and Health Administration), EOE (Equal Opportunity Employment), or EHS (Environmental Health and Safety) regulations. The Global Environmental Management Initiative (GEMI), for example, is a nonprofit organization of leading companies dedicated to fostering environmental, health, and safety excellence and corporate citizenship worldwide. Through the collaborative efforts of its members, GEMI also promotes a worldwide business ethic for environmental, health, and safety management and sustainable development through example and leadership. Over the last 10 years , GEMI has developed a series of documents, reports , and tools that help business achieve environmental, health, and safety (EHS) excellence. ^{[13 ]}

It is simply that the vast majority of U.S. companies do not at this time seem to accept that the same level of monitoring, adherence, and reporting necessary for OSHA or EHS in the United States should apply to overseas operations, particularly if those operations are merely outsourced or subcontracted. Nor, in any case, do they see these types of activities, at home or abroad, as falling under the umbrella of corporate social responsibility. More to the point, in a litigious society, many companies in the United States are still simply hesitant to admit any relationship ” much less responsibility ” for overseas activities with regard to subcontractors or an extended supply chain and labor or environmental practices.

Over the past decade, says Paul Scott, Director at Next Step Consulting, it has become apparent that U.S. companies are reluctant to publish any environmental information not already in the public domain, or required by law. This is largely due to corporate lawyers protecting their companies from potential lawsuits by restricting the flow of such information ” considered necessary in view of the litigious nature of American culture, and the high costs associated with losing claims brought in U.S. courts.

This has had the unfortunate effect, concludes Scott, of discouraging even progressive, innovative companies from publishing anything more than generalized, anodyne reports with a strong public relations focus. ^{[14 ]}

The Director of Corporate Social Responsibility for one major U.S. multinational that is leading the way in European-style SEAAR in the United States recently described the differences between the European and U.S. approaches to sustainability issues as being like night and day. Although things have changed somewhat in the last 6 months, he concluded, sustainability, as a concept, is still not really understood in the U.S. There is a lot of pressure for this type of work to be done in Europe, he contends. The standards setting is being done over there; GRI has moved over there . . . they wish they had more visibility from their U.S. counterparts . . . but there is this huge disconnect in terms of the people in Brussels [and the U.S.].

The Holmes Report agrees: In the U.S., there s a greater focus on human resources issues, like diversity, or equal opportunity for women, and there s more direct corporate philanthropy. In the UK and Europe, it s more formalized , and there s more rigor applied to reporting social performance. ^{[15 ]}

That difference in perception and approach extends to the environmental side of the equation as well. In July of 2003, CERES, the U.S.-based coalition of NGOs, unions, and investors that founded the Global Reporting Initiative, surveyed 20 of the world s largest companies on their attempts to monitor performance and to put in place environmental policies that would reduce the risk of climate change. The results showed again that U.S. companies fell well behind the activities of their European counterparts. Based on an assessment of 14 different key activities that companies should be taking to help monitor and address environmental risk ” board-level reviews, performance monitoring, producing SEAAR reports ” the survey showed the dramatic divergence between the way that U.S. and European companies were approaching these issues. Among the petroleum producers , British Petroleum and Royal Dutch Schell had completed all of the 14 activities, but ChevronTexaco, ExxonMobil, and ConocoPhillips had only completed three or four of those activities each. GE and ExxonMobil had never even conducted a board-level review. ^{[16 ]}

In Europe, says Allen White, the cofounder and former acting CEO of the Global Reporting Initiative, you can talk about CSR reporting and be very comfortable that a) people understand it, and b) they are not afraid of it, and c) they are ready to go. There exists a common understanding. In the U.S. there is no such common understanding. ^{[17 ]}

^{[11 ]} In the UK, a More Formal Approach to Social Responsibility, Holmes Report, p. 3 at www.holmesreport.com.

^{[12 ]} Laura Turengano, UN Global Compact: Many US Companies in Wait-and-See Mode, Inside Giving, July 22, 2002 at www.globalpolicy.org/reform/business/2002/0722insidegiving.htm; see also Newsroom: Press Releases and Announcements, CERES, August 17, 2003 at www.ceres.org/newsroom/press/ceresirrcrel.htm.

^{[13 ]} See New Paths to Business Value: Strategic Sourcing ” Environment, Health and Safety, The Global Environmental Management Initiative, March 2001 at www.gemi.org/newpath.pdf .

^{[14 ]} Paul Scott, Reporting All Over The World, Environmental Finance, December 2000 “ January 2001, p. 36 at www. nextstep .co.uk/uploadedfiles/pdf/article5.pdf.

^{[15 ]} In the UK, A More Formal Approach to Social Responsibility, Holmes Report, pp. 3 “ 4 at www.holmesreport.com.

^{[16 ]} Tony Tassell, U.S. Groups ˜Worst at Tackling Climate Change, The Financial Times, July 10, 2003, p. 16; see also Corporate Governance and Climate Change: Making the Connection, CERES at www.ceres.org/newsroom/press/ceresirrcrel.htm.

^{[17 ]} Interview on August 12, 2003.