1. Introduction
The rapid rise of globalization has led to a number of negative impact on the community. The corporations derive profits whilst causing damage to the resources and involving in activities which deprive human rights. For initiating a sense of responsibility amongst the corporations the concept of corporate social responsibility came into being. The very idea of Corporate Social responsibility is for companies to be conscious of a social, economic and environmental level with the public as a whole. For the involvement of the communities which are likely to be affected by the acts of the corporation, stakeholder engagement came into being.
This paper will analyze the concept of Corporate social responsibility, on the needs of stakeholder engagement, the consultation process with the indigenous stakeholder and discuss the concepts of CSR and Indigenous stakeholder with reference to the Canadian Mining industry which actively involves both the concepts. This paper will finally analyze the outcome of the indigenous stakeholder engagement with regard to corporate social responsibility.
2. Corporate Social Responsibility
In the present day and age corporations are expected to show concern for the social impact that they have on the society. Corporate Social Responsibility is considered as an integral part of the corporate strategy for equalizing contradictions between profit and social responsibility. Is it a well-known fact that companies invariably contribute to environmental and social degradations and though companies follow CSR to counteract such happenings, the question is how beneficial are these steps taken by companies.
Corporate social responsibility has a long history, in 1759 Adam Smith introduced the idea of “invisible hand” guides business to the benefit of society. During the 19th century, in the reputed British company Cadbury the founders were of the view that business had a responsibility to address social issues. For the purpose of which the company moved to a location which was in the countryside to benefit the country population at large. Corporate social responsibility has been conceived on the basis of similar ideas amongst businesses and organizations.
Corporations are under high scrutiny for its actions in society. The profitability of companies greatly depends on the public image. Because of the growing public awareness of the society, no wrongful act of the corporations will go unnoticed. In order to deal with this setback in reaching the ultimate goal of deriving profits companies are required to prove to the society about being socially responsible. Corporate social responsibility is considered as a means of acknowledging the public about the social concerns of the corporations. Companies consider a CSR program as a necessary initiative for the executives to become aware of the possible conflicts caused and as a means to encourage the commitment of the executive body of the companies towards social welfare. A CSR program very often plays a crucial role in influencing the stock market assessment of the company and the morale of the staff working in the company.
The ultimate goal of a corporation is profit maximization, it is contemplated amongst scholars that CSR is considered as a wise investment if the contributions made towards social welfare is lesser than the financial benefits gained through it. However, Friedman disagrees with the above and states CSR cannot be justified by business.
A. Defining the term corporate social responsibility
CSR pertains to the behavior of the corporations whilst being conscious of the world around. On analysis of definitions with regard to CSR by different organizations, one will be able to gain a better understanding of the concept.
In the Corporate Social Responsibility: An Implementation Guide for Canadian Business, CSR is defined as “the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy, and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society” .
The International Organization for Standardization (ISO) uses the term ‘social responsibility' to define CSR as "The responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that:
• contributes to sustainable development, including the health and welfare of society;
• takes into account the expectations of stakeholders;
• is in compliance with applicable law and consistent with international norms of behavior; and
• is integrated throughout the organization and practiced in its relationships."
The Organization for Economic Cooperation and Development (OECD) defines ‘responsible business conduct' in its Guidelines for Multinational Enterprises as "The positive contributions that multinational enterprises can make to economic, environmental and social progress, and minimize the difficulties to which their operations may give rise."
From the above definitions, it can be understood that the crux of the concept of CSR is for corporations to carry on business in a transparent, accountable manner which is considered a socially responsible business conduct.
B. International regulations on Corporate Social Responsibility
Professor John Ruggie was appointed as the special representative by the then UN Secretary-General Kofi Annan, to address the issues concerning human rights with regard to transnational corporations and business enterprises of other nature.
It is evident from Ruggie’s approach with regard to the report that he understood that globalization had created a disjuncture amongst business activities and the capacity to govern such activities.
These "governance gaps" create an environment in which business-related human rights abuses can occur with relative impunity.
Ruggie was able to discover during the very primary stages of his research that “escalating charges of corporate-related human rights abuses are the canary in the coal mine, signaling that all is not well”. He recognized the need for states to control the activities of businesses. He quotes ("[i]n principle, public authorities set the rules within which business operates") and the reasons they may be reluctant to do so ("in the international arena states themselves compete for access to markets and investments, thus collective action problems may restrict or impede their serving as the international community’s ‘public authority’”).
In 2008, Ruggie proposed his report Protect, Respect and Remedy, in which he had expressed the need for participation of the state and the corporation in regulating the human rights violations. He asserts that the state owed a duty to protect against human rights violations which are committed by third parties and the corporation owed a duty to operate in a manner unharmful to the human rights of persons. The states are required to "take all necessary steps to protect against such abuse, including to prevent, investigate, and punish the abuse, and to provide access to redress. Through his report Reggie encourages corporations to comply with due diligence practices for avoiding any violations. Victims affected by the acts of human rights violations due to the acts of the corporations are to be made good by means of providing access to sanctions and remedies. Ruggie concluded his report stating that
The root cause of the business and human rights predicament today lies in the governance gaps created by globalization-between the scope and impact of the economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation. How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.
In the 2010 Draft Guiding Principles , Ruggie pointed out that "role that States should play to ensure that business enterprises domiciled in their territory and/or jurisdiction do not commit or contribute to human rights abuses abroad is a complex and sensitive issue" and that not all forms of "extraterritorial jurisdiction" are “equally controversial in all circumstances” . The need for state involvement in controlling the activities of corporations was emphasized a number of times whilst forming the guiding principles.
The United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles),: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework” was endorsed by the Human Rights Council in its resolution 17/4 of 16 June 2011.
As per the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles) , businesses owe a responsibility to respect human rights . Through the United Nations Human Rights Council resolution UN Guiding Principle was endorsed. The Guiding principles comprise of three chapters, state duty with regard to the protection of human rights, the corporation's responsibility for the protection of human rights and the means to access the remedy.
The corporations are expected under the UN Guiding principles to function in a manner to protect the human rights. The businesses are required to take all necessary steps to avoid any infringing acts which are likely to result in human rights impacts and are obliged to address the adverse impacts it is involved in . The corporations are expected to prevent or lessen the effects of any adverse human rights impacts which are caused due to the activities of the corporation. Businesses also owe the responsibility of framing policies and processes to be compiled by themselves regardless of the size, sector, operational context, ownership, and structure.
The Organization for Economic Co-Operation and Development(OECD) has developed a set of guidelines to be followed by multinational enterprises, hereinafter referred to as OECD MNE Guidelines which applies to all enterprises established in member countries. Canada was one of the original signatories to the 1976 OECD Declaration on International Investment and Multinational Enterprises and the associated Guidelines. “Canada continues to be an active supporter and promoter of the Guidelines, having participated in their periodic updates and contributed to the development of implementation guidelines of particular interest to the extractive sector. OECD is actively involved in the task of stimulating the economic progress of countries. The OECD MNE Guidelines “provide voluntary principles and standards for responsible business conduct consistent with applicable laws and internationally recognized standards.” and multinational corporations are expected to “take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders.”
The Chapter VI of the OECD MNE guidelines asserts that
Enterprises should, within the framework of laws, regulation and administrative practices in the countries in which they operate, and in consideration of relevant international agreements, principles, objects, and standards, take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development.
Enterprises are expected to engage in communication with the community who are affected due to the acts concerning environmental, health and safety of the enterprise.
The OECD Guidelines play a vital part in encouraging nation states to follow necessarily corporate social responsibility decisions to avoid the future activities of the corporation which is considered harmful to human rights. As per the OECD Guidelines , enterprises are expected to respect human rights by means of avoiding any infringing human rights acts, by addressing any impacts so caused by the corporation, frame necessary policies and determine means to prevent or mitigate adverse human rights impacts. Unlike the chapter on environmental protection, the chapter on human rights explicitly recommends that enterprises “have processes in place to enable remediation” for addressing
3. Indigenous stakeholder
Stakeholder engagement of indigenous persons is believed to be beneficial to the community as a whole. The indigenous community will be able to reach environmental protection, employment opportunities, the establishment of educational facilities and overall a voice in the future activities of the corporation. Through stakeholder engagement, the stakeholder will be able to establish a more comfortable means of communication with the corporation. However, there is uncertainty on the effectiveness of indigenous consultation on behalf of the corporation.
There is a need for adoption of a more practical approach on behalf of the indigenous community for making the integration between the community and corporation more direct. The community is under an obligation to invoke their position as stakeholders of corporation and function in a manner required by the given position. The concerns of the community must be made clear whilst it comes to the notice of the community. Without voicing the concerns on behalf of the overall community the corporation may have little or no knowledge of the said concern.
The indigenous community has to observe a more practical method whereby the communication with the corporation which is affecting the community should be more direct. In the paper Preparations for Stakeholder Engagement it was held that “In recent years, an increasing number of First Nations are adopting a proactive approach to engaging as stakeholders, and developing principles, processes, practices, tools, and techniques that enable them to attain their goals”. Through holding stakeholder rights the community will be able to invoke a more powerful position in getting their voices heard rather than being holders of abstract human rights.
It is to brought into attention that “there are a very few resources directly targeted at the knowledge needs of First Nations to either effectively respond to the overtures of corporations or to develop proactive approaches to engage corporations which are represented by a significant gap in knowledge with consequences for the speed and effectiveness of the development of the strategic capabilities of First Nations.”
In 2013, Professor Knox detected the indigenous community suffered from violations of rights due to the environmental harms caused by the corporations. He noted that because of the failure on the part of the states to clearly distinguish the rights of the ingenious community results in the misuse of the situation. The companies are likely to use this “as an excuse not to apply the minimum international standards applicable to indigenous rights.”
By way involvement of the indigenous population, the corporations will be obliged to function without causing any harm. The continued watch of the indigenous community will enable them to attain environmental, social and economic welfare. The decisions about the resource management will be based keeping in mind the long-term interest of the indigenous community by avoiding any future exploitations. Yet it is important that there is a need for “sufficient time and number of consultations for stakeholders to consider the information and its implications and to present their views, and for project proponents to fully understand Indigenous views and values”
Through the consultation process the community is given a voice and obligation of the corporation to hear out the concerns and take needed actions. Also, corporations by means of indigenous consultation will be able to avoid business instability.
A. Stakeholder Engagement
Stakeholder engagement is a vital characteristic of the CSR and it is important for the continued success of the organizations. Stakeholder theory arose as a corporate managerial model The very idea of stakeholder inclusion dates back to 1984, proposed by Freeman. The concept is connected to a tradition that sees business as an integral part of society rather than an institution separate and purely economic in nature. All people with an interest in an organization are considered as its stakeholders.
During the middle of the 1980s, the stakeholder approach was developed. In the article Strategic Management- A Stakeholder Approach the ultimate motivation behind the concept of stakeholder management was to device a framework which was a means to address the troubles of managers regarding the concerns of environmental issues. It was marked by the author that “our current theories are inconsistent with both the quantity and kinds of change that are occurring in the business environment of the 1980’s…A new conceptual framework is needed”.
Stakeholders are “persons or groups who are or could be directly or indirectly created by a project or activity.” Stakeholder engagement must be carried out during the early stages, for the recommendations and ideas to be taken into consideration in the working of the corporations. The very concept of Corporate Social Responsibility involves a range of stakeholders. Since the corporations are dependent on a number of other constituencies such as the consumers, employees, suppliers and local communities in order to survive and prosper they not only owe a responsibility to the shareholders.
Through the engagement of stakeholders who are the persons directly affected by the actions of the companies, the companies will be able to structure their course of action. “CSR implicates seeing the company as integrated with, rather than isolated from, society and the environment.” The stakeholders have a prima facie understanding about the negative effects caused due to the acts of the corporation and it is the stakeholder who is affected to a great extent, hence it becomes only rightful that the stakeholders are involved in questioning the corporation on its day to day activities.
In many instances, corporations do consider stakeholder engagement as a setback concerning its operation. However, it is to be noted that through stakeholder consultations organizations will be able to make choices in a way which will not involve future legal implications and human rights violations. The stakeholders will be able to contribute by way of advising the corporation before the decision or any action has been initiated.
As previously mentioned a number of stakeholders are actively involved in every corporation. Stakeholder who is employees of the organization, through consultation will be able to benefit in a manner that their working conditions are improved and the corporation has the benefit of undisrupted service on the part of the employees. Through the involvement of stakeholder belonging to the local community, the insights pertaining to the environmental effects on basis of the working of the corporation and the possible means of reducing any likely human rights violations can be attained. Hence through stakeholder engagement, the corporation and stakeholder mutually benefit from one another.
The stakeholder approach was considered as a means to respond to this very challenge. Stakeholder was considered as “any group or individual who is affected by or can affect the achievement of an organization’s objectives”. Though the idea was devised the concept of stakeholder engagement was still considered novel and premature in nature until the term was used at the Stanford Research Institute. As per the Stanford Research Institute , the managers required to realize the apprehensions of shareholders, employees, customers, suppliers, lenders, and society for the purpose of developing the objectives of stakeholders.
According to R. Edward Freeman:
With all of the research cited above, it might legitimately be asked whether organization theorists and managers need a "new" concept such as "stakeholder." While this criticism is well taken, I can reply that words make a difference in how we see the world. By using "stakeholder," managers and theorists alike will come to see these groups as having a "stake." "Stakeholder" connotes "legitimacy," and while managers may not think that certain groups are "legitimate" in the sense that their demands on the firm are inappropriate, they had better give "legitimacy" to these groups in terms of their ability to affect the direction of the firm. Hence, "legitimacy" can be understood in a managerial sense implying that it is "legitimate to spend time and resources" on stakeholders …
Stakeholder involvement is considered vital as community engagement is an important component of consulting with the Crown and with Third Parties. In turn, this is considered to lead to a better identification of likely impacts and needed accommodations. “stakeholders themselves can contribute important knowledge to help identify potential or actual impacts on themselves or their surroundings.”
It can also contribute to more equitable and sustainable social development in the community by giving those who have a right to be heard the opportunity to be considered in decision-making processes.
The OECD Stakeholder Engagement Guidelines sites the significance of engaging with stakeholders in terms of both avoiding adverse impacts to human rights and the environment and contributing to business value through the attainment of a “social license to operate” while improving corporate risk profile . Further, the Guidelines goes out to state that the stakeholders “for whom the risk of adverse impacts is greatest or the potential adverse impact is severe or could become irredeemable” are to be given priority for due diligence purposes. Indigenous peoples are considered as one of the prime stakeholders suffering from the adverse impacts of the actions of corporations.
The stakeholder engagement on behalf of the ingenious community is considered as a means for deriving economic and social opportunities from the corporations. Through stakeholder, engagement corporations will avoid any disruptions which may arise whilst the operation of the project.
The corporation benefits considerably higher than the indigenous community through stakeholder engagement. The corporation is given the necessary approval to operate through these consultations and the labor needs of the company can be met simultaneously by the persons belonging to the indigenous community. It is crucial to understand that “There is no common model or ‘one best way’ for stakeholder engagement. The guides exhibit a number of differences in both areas of emphasis and level of comprehensiveness in how they approach stakeholder engagement”. The consultation process on behalf of the corporation creates business certainty and also enables the business to attain the required government approval for the operation of the business through the engagement of the indigenous community.
B. Methods of indigenous stakeholder engagement
For the purpose of the engagement of stakeholders, corporations follow different methods. Such as creating aboriginal relation teams, adopting a process for the engagement of aboriginals, by way of funding the first nation to participate in the engagement or by entering into a memorandum of understanding with the community to come to a clear understanding about the relationship with the corporation and subsequently address the commitments between the parties. The engagement of stakeholder can be by communication, consultation, dialogue, and partnerships. In communication, the information is shared in a one-way manner. Whilst consultation, the stakeholder views are taken into consideration for the purpose of making informed decisions. In Dialogue, there is an exchange of information and concerns on behalf of both the parties and this enables the mutual understanding of stakeholders. Finally, through partnerships, both the indigenous persons and the community will be able to grow together whilst offering equally to the development and deriving the gains equally. However, partnerships amongst corporations and indigenous community face a fair share of difficulties.
C. Benefits of indigenous stakeholder engagement
Corporations benefit from the consultation and engagement of indigenous population. Firstly, the corporations will be able to create a positive relationship with the community it is to closely work with, for the very purpose the corporations are required to receive consent from the indigenous people. Secondly, businesses use aboriginal consultation and engagement for the purpose of attaining permits and certifications. The Indigenous community has special powers in procuring the necessary documentation required for the initiation of the company. Thirdly, without getting into the bad books of the related indigenous community, the business will be able to work freely without the opposition and the workforce involvement from the community will remain uninterrupted. Fourthly, the community will be able to offer the necessary workforce with prior knowledge about the area of operation and through mutual cooperation both the corporation and community will be able to grow. Finally, the indigenous population due to their longstanding culture and heritage in the country will be able to advance the procured knowledge and exposure for the benefit of the corporation.
The advantages of stakeholder engagement in the indigenous perspective are a handful. Through the community expressing their concerns pertaining to the environmental degradations, the community will be able to protect and preserve the environment from being exploited by the corporation.
The Aboriginal community will be able to give guidance to the corporation keeping the wellbeing of the community in mind. Corporations often carry out development measures such as, offering education, construction of facilities etc. through which the community will be able to greatly benefit. The community will be able to put forward its demands before the corporation because of the relationship between them.
This will help them get employment opportunity because of the operation of the corporation in areas close to the indigenous settlement which can be made possible by means of stakeholder engagement. Some companies also offer equity ownership in corporations, which in turn will develop the community as a whole in the long run and a way for the community to grow along with the company.Through stakeholder engagement, the indigenous population will be able to increase wealth whilst protecting their heritage.
D. Shortfalls of stakeholder engagement of indigenous community
Though Stakeholder engagement of Indigenous community has a fair share of benefits, they suffer from a number of shortfalls. The primary reason being that the corporations are unclear as to the means of achieving the needful. Corporations carry on consultation with the aboriginal community and the concerns of the community are voiced out, due to the lack of a framework for corporations on the means of answering concerns during the engagement process, the consultation goes to waste. Which results in the corporations being unable to derive results through indigenous stakeholder engagement.
Secondly, there is a need for government intrusion for the purpose of corporations to comply with and perform the necessary demands of the indigenous community. Only through the government mandate the human rights violations are answered by corporations and remedied. Without the intrusion of the government, the corporations turn deaf ears to the concerns of the indigenous community. The corporate communications are fabricated in a manner such that the public image of the corporation is conserved.
The corporation functions cautiously with the knowledge that the stakeholder can turn against them. For reducing the power of the impact, the indigenous stakeholders are given little to no power. The corporations are under an obligation not to go against the indigenous stakeholder once the stakeholder gains power. For this very reason corporations give little or no power to the stakeholder whereby securing the future of the firm.