Corporate Social Responsibility and the Law : Foley Hoag LLP

CDP Water Disclosure, a program of the Carbon Disclosure Project, released its first water disclosure report (.pdf) last week.  The report summarizes the results of a survey of 302 companies from 34 countries regarding their water use and their management of water-related risks.  The findings highlight the degree to which water-related challenges are capturing the attention of a wide range of corporate stakeholders.

Of the 150 companies that responded to CDP’s questionnaire: 67% reported that responsibility for water-related issues lies at the Board or Executive Committee level; 89% have developed specific water policies, strategies, and plans; and 60% stated they have established water-related performance targets.

As companies evaluate approaches to water management, they must confront a wide range of operational, reputational, regulatory, and legal risks, including:

• scaled-back production or production interruptions due to water shortages in water-stressed areas;
• community opposition as a result of a company’s real or perceived impacts on local watersheds, and the potential loss of a social license to operate;
• regulatory changes leading to changes in available supply and/or higher costs; and
• litigation stemming from disputes regarding corporate usage of, and impacts on, local watersheds.

Notably, 96% of the respondents to CDP's questionnaire were able to identify water-related risks in their own operations, while only 53% were able to identify such risks in their supply chains.  This is surprising given the potential impact of supply chain concerns.  A 2008 report by JPMorgan Global Environmental, Social, and Governance Research found that the risks associated with water scarcity “may actually be greater in companies’ supply chains than in their own operations.”

As companies identify the water-related risks specific to their operations, the information they gather will increasingly inform dialogues with two distinct groups of stakeholders: investors and the communities living in the vicinity of company facilities. 

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On November 9, at a signing ceremony hosted by the Swiss Government in Geneva, fifty-eight industry-leading private security companies ("PSCs") signed an International Code of Conduct for Private Security Service Providers (.pdf). 

The publication and signature of the Code represents a milestone achievement for a multi-stakeholder initiative, launched in June 2009 and sponsored by the Swiss Government, aimed at creating a set of universally recognized standards for private companies engaged in providing security services.  The signing ceremony was attended by representatives of industry, civil society, and participating and supporting governments including Swiss Secretary of State Peter Maurer, U.K. Ambassador John Duncan, and U.S. Department of State Legal Advisor Harold Hongju Koh.

PSCs have received significant scrutiny recently, both in the United States and abroad, largely as a result of high-profile incidents in Iraq and Afghanistan.  A recent report of the Senate Armed Services Committee (.pdf) sheds light on the political challenges faced by PSCs in the United States as a result of both real and perceived fallout from some of those incidents.

Given that backdrop, the Code has received a largely positive reception, not only from within the private security industry but from non-governmental organizations ("NGOs"), many of which participated in the Code's development.  A representative of Human Rights First stated at the signing ceremony that the "Code is a strong document and an important step in building an effective scheme for improving this industry's human rights performance." 

Participants and observers have applauded the inclusion of concrete requirements governing vetting, training and conduct of PSC personnel as well as commitments to implement accessible incident reporting and grievance procedures aimed at preventing and/or enhancing the investigation of alleged abuses. 

Participants and observers have also recognized that while signature of the Code represents a major step forward, it is not the end of the process.  Future challenges include the establishment of objective and measurable standards consistent with the Code and the development of a transparent and effective oversight and auditing mechanisms to which participants will be expected to submit.  The Code calls for these objectives to be met within eighteen (18) months. 

Human Rights First noted that the "true value" of the Code "will depend on how it's enforced. Companies signing the Code have committed to establishing a mechanism for robust oversight and governance. The Code's credibility will rest upon the ability of that mechanism to hold signatory companies to account." 

Despite the challenges that remain, signature of the Code is a significant and positive step forward for an industry that, despite recent scrutiny, will continue to play a critical role in enabling operations in high-threat environments.

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Ten years ago today, plaintiffs filed an Alien Tort Statute (“ATS”) suit against Rio Tinto Plc alleging that they were the victims of numerous violations of international law as the result of Rio Tinto’s mining operations on the island of Bougainville, Papua New Guinea.  Almost ten years later, on October 26, an en banc panel of the Ninth Circuit Court of Appeals referred the proposed class action, Sarei v. Rio Tinto, to a mediator “to explore the possibility of mediation.”  Sarei v. Rio Tinto, 02-cv-56256 (9th Cir. October 26, 2010) (.pdf).

The selected mediator is scheduled to report before the end of November whether the case will proceed to mediation or whether it should be returned to the en banc panel of the Ninth Circuit for further consideration. 

In its long history, this case has already been before the Ninth Circuit several times.  In an earlier decision, Sarei v. Rio Tinto, 550 F.3d 822 (9th Cir. 2008), the Court had remanded the case to the District Court for the Central District of California, stating that certain claims brought under the ATS “are appropriately considered for exhaustion under both domestic prudential standards and core principles of international law.”  In July 2009, the District Court declined to find that a prudential exhaustion requirement was appropriate given the nature of the plaintiffs’ claims.   

There is certain merit to the Ninth Circuit’s attempt to find an alternate resolution to a case that could drag on for many years before reaching final resolution.  In a separate statement, Judge Reinhardt observed that “[i]f the mediation succeeds, we will simply have helped to resolve a complex legal dispute of great importance to the various litigants by means of a peaceful settlement rather than through extended litigation.” 

A recent paper (.pdf) published by the Corporate Social Responsibility Initiative at Harvard University’s Kennedy School of Government argued that “mediation has a legitimate and compelling role to play alongside litigation as a means of addressing human rights-related disputes between companies and individuals or communities.” Whether the Ninth Circuit’s attempt to find an alternate resolution to this case will be successful remains to be seen. 

Notably, the Ninth Circuit’s order provoked a vigorous dissent by Judge Kleinfeld, who argued that it was improper for the Court to refer the case to mediation before determining that it had jurisdiction to hear the case. Judge Kleinfeld stated that jurisdiction in the case was doubtful because the case involves foreign policy issues that raise political questions and because “we lack subject matter jurisdiction on account of extraterritoriality.”  He argued “it is risible to think that the first Congress wrote the Alien Tort Statute intending to adjudicate claims of war crimes committed abroad.” 

Judge Kleinfeld’s dissent is at odds with the vast majority of ATS jurisprudence in which courts have found that the ATS provides for jurisdiction over claims stemming from events outside the United States.  His dissent, however, highlights the fact that the Ninth Circuit has not yet ruled definitively on the appropriateness of jurisdiction in this case.  Whether mediation is appropriate is ultimately up to the parties, but the lengthy history of this case reflects the inherent inefficiencies of litigation as a means to resolve complex disputes and to vindicate rights. 

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