Corporate Social Responsibility and the Law : Foley Hoag LLP

The topic for today's #CSRChat on Twitter (hosted bi-weekly by Fenton) was “CSR and Corporate Philanthropy: Do the Two Align?” The chat fostered a lively debate and brought together a range of different viewpoints (all expressed in 140 characters!) on corporate social responsibility and philanthropic initiatives.

Reading through the discusssion, I reflected on the ways in which my role as an attorney has shaped my perspective on the distinctions between CSR and corporate philanthropy. In our practice, we advise clients on the development and implementation of policies and standards, and on strategies to manage both legal and reputational risk. Ultimately, this advice is intended to impact the management of a company's operations.

Effective implementation of corporate CSR standards requires strong accountability and oversight mechanisms, and requires buy-in from representatives across the company, not just from the people with CSR in their job titles. When I see companies that use CSR and philanthropy interchangeably in developing strategic initiatives, I worry about the degree to which this reflects a reluctance to integrate social and environmental commitments into day-to-day business management.

Last year, I published an article in the American Bar Association’s International Law News looking at some of these issues and the risks inherent in blurred distinctions between CSR and philanthropy. In the article, Distinctions with Differences: The Lawyer’s Role in Distinguishing CSR and Corporate Philanthropy (available here, at p.11 (.pdf)), I observed that:

CSR is about the core business functions of a company, and about the increasing demands of company stakeholders that companies be held accountable for the social and environmental impacts of their operations. …The expectations of those stakeholders are expressed in forms ranging from legislation and regulation to shareholder resolutions and disruptive protests. CSR is a strategic response to the changing nature of those expectations: stakeholders increasingly expect companies to abide by a wide range of proscriptive and normative standards. Against this backdrop, there are risks for companies that claim to have embraced CSR and then point to the glossy reports of their company foundation to demonstrate the degree of their commitment.

To be sure, a company’s philanthropic commitments are often aligned with its strategic vision and values and provide critical support to a range of external stakeholders. That said, effective implementation of CSR requires a level of internal, and external, commitment and engagement that goes beyond what is required for corporate giving programs.

You can follow me on Twitter @saltschuller and Foley Hoag @foleyhoag.

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On June 16, the U.N. Human Rights Council formally endorsed the Guiding Principles on Business and Human Rights prepared by the U.N. Special Representative for Business and Human Rights, Professor John Ruggie. The Human Rights Council's endorsement represents the conclusion of the Special Representative's mandate, which began in 2005. 

The Principles are intended to provide guidance on the implementation of the "Protect, Respect, and Remedy" Framework first introduced by the Special Representative in 2008. As observed in our earlier commentary, while the Principles are not law, they are likely to influence national law and policy in jurisdictions around the world. At the time of the endorsement, Professor Ruggie himself observed

The Council's endorsement establishes the Guiding Principles as the authoritative global reference point for business and human rights.

In his final presentation to the Human Rights Council (.pdf), delivered on May 30, Professor Ruggie noted that

For business enterprises, the Guiding Principles outline a human rights due diligence process. This entails assessing actual and potential human rights impacts; integrating and acting upon the findings; tracking the effectiveness of responses; and communicating how impacts are addressed. Human rights due diligence is meant to include dealings with third parties linked to the business enterprise.

In our experience advising companies on how to identify, prevent, and mitigate the adverse human rights impacts of their operations, Professor Ruggie's work has been a key reference point since the outset of his mandate.

The Principles provide high-level guidance applicable to all business enterprises, and many companies have already begun the hard work of interpreting how best to apply this guidance to their specific activities. In a manner appropriate to their industry and the scope of their operations, companies face the challenge of developing adequate mechanisms to assess the actual and potential human rights impacts associated with their activities. Companies must then determine how best to integrate the findings from these assessments into their management plans and into their dialogues and contracts, as appropriate, with business partners. While this work is challenging, ultimately it can play a key role in managing a company's legal, reputational, and operational risks.

In the resolution endorsing the Guiding Principles, the Human Rights Council also announced the formation of a new working group, consisting of five independent experts, to promote the effective dissemination and implementation of the Principles. The five experts will be appointed at the Council's eighteenth session in September 2011. As part of its work, the working group will host an annual Forum on Business and Human Rights.

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On June 3, the U.S. District Court for the Southern District of Florida declined to dismiss certain claims brought by Colombian plaintiffs against Chiquita Brands International ("Chiquita") alleging that the company knew, or should have known, that its material support for the United Self-Defense Forces of Colombia (“AUC”), a paramilitary organization, would lead to the death or torture of their family members. In Re: Chiquita Brands International, Inc., Alien Tort Statute and Shareholders Derivative Litigation, 08-1916 (S.D. Fla. June 3, 2011).

In March 2007, Chiquita admitted that it had provided payments to the AUC, stating that it had done so in order to ensure the protection of Chiquita employees and banana plantations in Colombia.  At the time of its admission, the company agreed to pay a $25 million fine for providing funds to an organization on the United States’ list of terrorist organizations and to cooperate in an investigation by the U.S. Department of Justice. 

After Chiquita's admission, cases were filed against Chiquita in several jurisdictions. Plaintiffs' claims were brought pursuant to the Alien Tort Statute ("ATS") and the Torture Victim Protection Act.  Plaintiffs also brought state law tort claims under the laws of Florida, New Jersey, Ohio, and the District of Colombia, as well as several claims under Colombian law.

Generally, to survive a motion to dismiss, plaintiffs are required to plead facts that, if accepted as true, state a claim to relief that is plausible on its face.  Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).  In its June 3 order, the District Court upheld plaintiffs' ATS claims for torture, extrajudicial killing, war crimes, and crimes against humanity. The Court dismissing several other ATS claims, including claims for terrorism, material support for terrorism, and for cruel, inhuman, and degrading treatment, finding that these claims were not actionable under the ATS. The Court upheld plaintiffs' TVPA claims for torture and extrajudicial killing.  Finally, the Court dismissed plaintiffs' state law claims, as well as claims brought under Colombian law. 

In upholding several of plaintiffs' ATS claims, the District Court recognized certain theories of indirect liabilty under the ATS, including aiding and abetting and conspiracy.  In upholding these indirect theories of liability, the Court stated that

[I]n order for Plaintiffs to allege that Chiquita is secondarily liable for the AUC's violations of international law, they must allege that Chiquita assisted or conspired with the AUC with the purpose or intent to facilitate the commission of the specific offenses alleged. Thus, to plead aiding and abetting liability, Plaintiffs must allege that (1) the AUC committed an international-law violation, (2) Chiquita acted with the purpose or intent to assist in that violation, and (3) Chiquita's assistance substantially contributed to the AUC's commission of the violation....To plead conspiracy liability, Plaintiffs must allege that (1) Chiquita and the AUC agreed to commit a recognized international-law violation, (2) Chiquita joined the agreement with the purpose or intent to facilitate the commission of the violation, and (3) the AUC committed the violation.

In upholding these indirect theories of liability, the Court cited to several appellate court decisions, including Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244 (2d Cir. 2009), Cabello v. Fernandez-Larios, 402 F.3d 1148 (11th Cir. 2005), and Aldana v. Del Monte Fresh Produce, N.A., 416 F.3d 1242 (11th Cir. 2005).  Notably, the Court rejected plaintiffs' agency theory of indirect liability, observing that "Plaintiffs point to no authority recognizing agency liability under international law."

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On May 25, forty-two countries, including the 34 countries that are members of the Organization for Economic Co-operation and Development ("OECD"), committed to promote an updated version of the OECD Guidelines of Multinational Enterprises.

The OECD Guidelines (.pdf) are a non-binding code of conduct containing recommendations for responsible business conduct in a global context. The countries that adhere to the Guidelines agree to promote the guidelines among the business sector. Notably, the revised OECD Guidelines reflect a new focus on business and human rights.

The Guidelines state explicitly that "[r]espect for human rights is the global standard of expected conduct for enterprises."  Respect for human rights means that companies "should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved" and should "[c]arry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts." The Guidelines note that this due diligence can be included within broader enterprise risk management systems "provided that it goes beyond simply identifying and managing material risks to the enterprise itself to include the risks to rights-holders." 

 The Guidelines observe that 

Enterprises can have an impact on virtually the entire spectrum of internationally recognised human rights. In practice, some human rights may be at greater risk than others in particular industries or contexts, and therefore will be the focus of heightened attention. However, situations may change, so all rights should be the subject of periodic review. (emphasis added)

In the complex social, political, and economic contexts in which companies operate, risks to human rights are constantly fluctuating.  Human rights due diligence is not a one-time event, and while certain human rights may be the focus of greater attention depending on a company's operating context, all internationally recognized rights should be considered as part of the due diligence process.

The new revisions to the OECD Guidelines reflect the tremendous influence and rapid adoption of the United Nations Framework for Business and Human Rights ("Protect, Respect, and Remedy"), which was put forward by the U.N. Special Representative for Business and Human Rights in 2008, and subsequently adopted by the U.N. Human Rights Council.  The Guidelines were drafted in order to be aligned with the new Guiding Principles on Business and Human Rights, which the U.N. Human Rights Council is expected to adopt later this month.

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