danette wineberg and phillip h. rudolph, “corporate social ... · 60 acc docket may 2004 by...

60 ACC Docket May 2004

By Danette Wineberg and Phillip H. Rudolph

Corporate SocialResponsibilityWhat Every In-House Counsel Should Know

You are sitting at your overflowing desk, contemplating how you are going to make it to your son’s

soccer game this afternoon, when your phone rings. An in-house lawyer from a significant licensing

partner, Widgets Unlimited (“WU”), is on the line. Your company, “Global Promotions” (“GP”), while not

the largest player in your market, is nevertheless a significant licensee of several very well recognized

global brands, including WU. GP produces millions of items annually containing other companies’ trademarks.

May 2004 ACC Docket 61

Danette Wineberg and Phillip H. Rudolph,“Corporate Social Responsibility: WhatEvery In-house Lawyer Should Know,”ACC Docket 22, no. 5 (May 2004); xx-xx.Copyright © 2004 Danette Wineberg andPhillip H. Rudolph, and the Association ofCorporate Counsel. All rights reserved.

Danette Wineberg and Phillip H. Rudolph,“Corporate Social Responsibility: WhatEvery In-house Lawyer Should Know,”ACC Docket 22, no. 5 (May 2004); xx-xx.Copyright © 2004 Danette Wineberg andPhillip H. Rudolph, and the Association ofCorporate Counsel. All rights reserved.


Dispensing with the formalities, your WU friendinforms you that, pursuant to its licensing agree-ment with GP, WU has had auditors visiting GP’sproduction facilities around the globe, evaluatingthe employment and human rights performance ofthese facilities. “I’ve got a stack of reports on mydesk,” she says, “and they don’t paint a pretty pic-ture. The potential damage to our brand’s imageand reputation is immeasurable. Management ispressuring me to wipe these suppliers off of ourapproved list and, barring this, there has been talkat the senior levels of canceling our licensing rela-tionship with GP. We’ve got to get our arms aroundthis issue, and fast.”

Your mind races. You have spent little time con-sidering human and labor rights issues in thirdworld production facilities used by your company.Indeed, GP doesn’t own any of its production facili-ties, but outsources its production to third parties,who almost certainly subcontract aspects of thisproduction to other vendors. These relationshipsare managed by your supply chain group, which hasalways appeared to have a good handle on produc-tion issues. But obviously this telephone call hasraised serious red flags.

WU’s apparent insistence that production facili-ties be terminated creates immediate business chal-lenges, since orders and production requiresignificant lead time, and products are expected onstore shelves without interruption. Does WU’s con-tract with GP permit such a demand? And WU is acritical strategic partner of GP. Does it have thelegal right to simply walk away from this relation-

ship on the basis of issues discovered in productionfacilities half way around the world?

From the risk management standpoint, there arethird parties running around your production facili-ties generating critical reports that you have notseen and over which you have no control. If thesereports contain information that could expose GPto legal or brand risk, this situation is untenable.For example, you are aware that the U.S. Customsregulations preclude the importation of goods intothe United States if they are produced using unlaw-ful child or forced labor. Is it possible that thereports sitting on your counterpart’s desk containevidence of such production issues? Additionally,you read in a recent advance sheet about companiesbeing subject to RICO claims and claims undersomething called the Alien Tort Statute for activi-ties they may be involved in overseas. Does GP facepotential legal exposure under these laws or others?Almost as chilling, however, as the finite issues youwere able to spot, are the countless possible issuesthat you simply don’t yet know anything about.

The soccer game is off. Your day (and countlessdays to come) will be spent reviewing your contractwith WU, reviewing whatever contracts you mighthave with your company’s vendors, commissioninglegal research, meeting with your supply chain man-agement team, and addressing the increasingly agi-tated demands of senior management.

CSR—BECOMING PART OF BUSINESS-AS-USUAL

As the corporate world continues to grapple withthe implications of operating in a global economicenvironment, the concept of corporate socialresponsibility (CSR) has become a critical elementof day-to-day business activity. As the above sce-nario demonstrates, a company’s compliance withnational, state and local laws and regulations mayno longer provide sufficient protection from seriouslegal, regulatory, business, or brand risk. Anexpanding array of sophisticated corporate stake-holders, including increasingly active and engagedshareholder groups, non-governmental organiza-tions (NGOs), business partners, plaintiffs’ lawyersand others are exerting a growing influence over themanner in which companies large and small, publicand private, conduct business.

Danette Wineberg is Vice President, GeneralCounsel and Secretary of The Timberland

Company, and is responsible for the managementand administration of the Legal and Global

Business Alliances functions worldwide. Shepreviously served as General Counsel for Little

Caesar Enterprises, Inc. She is available [email protected].

Phillip H. Rudolph is a Partner in the CorporateSocial Responsibility practice group of Foley

Hoag LLP. Previously, Phil was Vice President andInternational General Counsel for McDonald’s

Corporation, where he developed the company’svendor compliance program and served on the

company’s CSR Steering Committee. He isavailable at [email protected].


In-house lawyers will always play a more tradi-tional role in helping a company react to situationssuch as the one described above. But you shouldalso play a central role in building a business casefor programs that enable management to anticipateand avoid such issues. This article will explain thelegal and regulatory developments that compel yourcompany’s (and Legal Department’s) active involve-ment in CSR issues, and will offer suggestions onhow to develop a business case for CSR leadership.(Look for an article on the nuts and bolts of build-ing such a program in a future ACC Docket article.)

CSR: What Is It, and Why Should You Care? Corporate social responsibility has been defined as:

The contribution that a company makes in soci-ety through its core business activities, its socialinvestment and philanthropy programs, and itsengagement in public policy. That contribution isdetermined by the manner in which a companymanages its economic, social and environmentalimpacts and manages its relationships with dif-ferent stakeholders, in particular shareholders,employees, customers, business partners, govern-ments, communities and future generations.1

Although CSR is related to, and overlaps in somerespects with, the concepts of corporate governanceand ethics, it is nevertheless distinct. Governance isa baseline standard that focuses on compliance withrules and regulations. Ethics is a broader, values-based concept that transcends a limited and literalfocus on rules and regulations. As with governanceprograms, however, ethics programs tend to beinternally focused and, despite their emphasis onvalues, generally retain a heavy rules-based flavor.

In contrast, CSR tends to be more values-basedand externally focused, addressing a broader arrayof corporate stakeholders such as internal stake-holders (e.g., employees, shareholders), externalstakeholders (e.g., communities, customers, NGOs,and other activist groups), and entities that mightbe thought to have the characteristics of both (e.g.,suppliers, socially responsible investor groups(SRIs), and licensing partners). CSR encompasses afocus by management not merely on the economicbottom-line, but also on the company’s impact oncommunity, the environment, and society at large.

Recent developments in the CSR arena under-score the need for active involvement by in-house

attorneys. Worldwide, on both the legal and the reg-ulatory fronts, activities that used to be well beyondthe purview either of the lawmakers or the courtshave become the focus of intense scrutiny by bothbodies. In addition, voluntary and quasi-voluntaryprivate initiatives have evolved to fill a perceivedgap between what is desired and what is required.

In case you’re still not convinced that building aCSR program is an part of your responsibility, takea look at some of the more significant legal, regula-tory, and quasi-regulatory developments that haveoccurred in the CSR arena over the past severalyears: This list is offered by way of example onlyand is not exhaustive.

• Numerous federal lawsuits are pendingagainst U.S. corporations asserting claimsunder the Alien Tort Statute.2 This long-dormant law has recently been resurrectedwith some success against multinationalsfor alleged complicity in human rightsabuses perpetrated by the governments ofcountries in which these corporations eitherdo business or source goods.3

• The California Supreme Court recently heldthat Nike, Inc. was not entitled to FirstAmendment protection for public state-ments—allegedly running afoul ofCalifornia law—that were made in defenseof workplace practices in third-world pro-duction facilities.4 After granting certiorariand holding oral arguments, the UnitedStates Supreme Court returned the case tothe California trial court without decision,after which the lawsuit was settled. As aresult, it remains uncertain what can andcannot be communicated to stakeholderswithout creating potential liability or simplyrunning the risk of an expensive lawsuit inCalifornia.5

• In September 2002, more than two dozenof America’s biggest clothing retailers set-tled—to the tune of $20 million dollars—aclass-action lawsuit claiming that allegedsweatshop abuses on Saipan, a U.S.Territory, violated the federal RICO statuteand the Alien Tort Statute.6

• In 2001, France passed legislation mandat-ing disclosure of social and environmentalissues in companies’ annual reports.7


ONLINE:• ACC’s committees, such as the Corporate and Securities

Law Committee, the Law Department ManagementCommittee, and the International Legal AffairsCommittee,are excellent knowledge networks and haveemail lists to join and other benefits. Contact informationfor ACC committee chairs appears in each issue of theACC Docket, or you can contact Staff Attorney andCommittees Manager Jacqueline Windley at202.293.4103, ext. 314, or [email protected] or visitACCA OnlineSM at www.acca.com/networks/ecom-merce.php.

• ACC Corporate Responsibility web page, ACC OnlineSM

available atwww.acca.com/legres/corpresponsibility/index.php.

• ACC Ethics web page, available on ACC OnlineSM avail-able at www.acca.com/practice/ethics.php.

• Business for Social Responsibility, available atwww.bsr.org.

• CAUX Roundtable Principles for Business, available athttp://www.itcilo.it/english/actrav/telearn/global/ilo/code/caux.htm.

• CCBE Report, CSR and the Role of the Legal Profession:A Guide for European Lawyers Advising on CorporateSocial Responsibility Issues, available at www.ccbe.org.

• CERES Principles, available athttp://www.bsdglobal.com/tools/principles_ceres.asp.

• CSR Europe, available at www.csreurope.org.

• Dow Jones Sustainability Indices, available at www.sus-tainability-index.com.

• Ethical Corporation, available at www.ethicalcorp.com.

• European Parliament–Committee on Employment andSocial Affairs, Report on the Communication from theCommission Concerning Corporate Social Responsibility(2003), available at http://europa.eu.int/comm/employ-ment_social/soc-dial/csr/sipade2.pdf.

• FTSE4GOOD, available at www.ftse4good.com.

• Global Sullivan Principles of Corporate Responsibility,available at http://www.globalsullivanprinciples.org/.

• SRI World Group, Inc., available at www.csrwire.com.

• The United Nations Global Compact, available atwww.unglobalcompact.org.

• World Economic Forum, available at www.weforum.org.

ON PAPER:

• JOHN ELKINGTON, CANNIBALS WITH FORKS (New SocietyPublishers 1998).

• HARVARD BUSINESS REVIEW ON CORPORATE RESPONSIBILITY

(Harvard Business School Press 2003).

• MUNRO LEAF, HOW TO BEHAVE AND WHY (UniversePublishing, 1946, reprinted by HarperCollins PublishersInc. 2002).

• PAUL HAWKEN, AMORY LOVINS & L. HUNTER LOVINS,NATURAL CAPITALISM (Back Bay Books, Little Brown andCompany 1999).

• BOB WILLARD, THE SUSTAINABILITY ADVANTAGE (NewSociety Publishers 2002).

• Michael Yaziji, Turning Gadflies Into Allies, HARVARD

BUSINESS REVIEW, February 2004, at 110-115.

If you like the resources listed here, visit ACC’s VirtualLibrarySM on ACCA OnlineSM atwww.acca.com/resources/vl.php. Our library is stocked withinformation provided by ACC members and others. If youhave questions or need assistance in accessing this informa-tion, please contact Staff Attorney and Legal ResourcesManager Karen Palmer at 202.293.4103, ext. 342, [email protected]. If you have resources, including redacteddocuments, that you are willing to share, email electronicdocuments to Managing Attorney Jim Merklinger [email protected].

From this point on . . .Explore information related to this topic.


• Belgium, France, Germany, Sweden and theUnited Kingdom each have laws requiringpension funds to disclose how social, ethicaland environmental issues are taken intoaccount in their investments.8

• In May 2001, the SEC clarified that share-holder divestment campaigns and consumerboycotts can be considered material, andthus subject to disclosure under SEC rules.9

Corporations under investigation by govern-ment entities for violation of labor or envi-ronmental laws have been subject to SECcomplaints filed by shareholders alleginginadequate disclosures of such investiga-tions, as well as lawsuits alleging the provi-sion of misleading investment information.10

• Last August, the United Nations Sub-Commission on the Promotion andProtection of Human Rights issued its“Norms on the Responsibilities ofTransnational Corporations and OtherBusiness Enterprises with Regard to HumanRights.”11 The Norms are intended to codifybinding human rights standards under inter-national law, and call for member states toimplement legal mechanisms to enforcethese standards and for U.N. monitoringand enforcement of corporate compliance.

MAKING THE BUSINESS CASE FOR CSRLEADERSHIP

Business leaders around the globe are coming toappreciate more and more the importance of con-ducting business in a socially responsible manner.As the World Economic Forum (WEF) notes, “In

recent years corporate citizenship has become anincreasingly important issue for chief executives,chairpersons, boards of directors and executivemanagement teams, not as a nice to have, charitable‘add on,’ but as a fundamental element of goodbusiness practices, corporate governance and effec-tive leadership.”12 As a global survey commissionedby the WEF in 2003 concluded:

For most business leaders there is a com-pelling case for taking action on issues relatingto global corporate citizenship: First, an indi-vidual business case, that in today’s worldgood corporate citizenship makes sound busi-ness sense. It is increasingly in the sharehold-ers’ interests for a company to have a clearpurpose and set of values, not just a matter ofpublic relations and avoiding negative public-ity. Second, a broader case, that business pros-pers in societies that are prosperous. As such,business leaders and the owners of businesseshave a direct interest in the process of global-ization continuing and extending its benefits tomore people around the world.13

While no one in management is likely to disagreewith these sentiments, there can, as we know, be agap—sometimes a significant one—between whatsenior management identifies as a need, and what itis willing to pay for. As in-house counsel, you facethe challenge of persuading these folks to put theirmoney where their mouths are.

CSR Business DriversIf your company doesn’t have a CSR program,

you are going to have to sell the powers-that-be onthe need for one. You will, of course, need to tailoryour approach to the specifics of your business.But, as you will see, there is no scarcity of persua-sive arguments that can be advanced in support ofsuch a program.

1. Your business partners demand it. As ourhypothetical illustrated, no company is an island.Yours has business partners, licensors, licensees,franchisees, suppliers, customers, and other formsof alliances with entities that are driven by stake-holders of their own. Whether yours is a majormultinational business or a smaller company, whatyou do impacts an extensive web of business rela-tionships, and each of those relationships is drivento expect more from your client.

WHETHER YOURS IS A MAJORMULTINATIONAL BUSINESS OR A

SMALLER COMPANY, WHAT YOU DOIMPACTS AN EXTENSIVE WEB OF

BUSINESS RELATIONSHIPS, AND EACHOF THOSE RELATIONSHIPS IS DRIVEN

TO EXPECT MORE FROM YOUR CLIENT.


Many of these expectations are baked explicitlyinto your legal arrangements. For example, it isincreasingly common for vendor contracts or trade-mark licenses to spell out in detail an expectationthat your company will comply in all respects notsimply with applicable laws and regulations, but withcompany “codes of conduct” as well.14 These codesset minimum labor and human rights standards. If

your business sources goods from developing coun-tries, or relies on vendors that do so, these code-of-conduct expectations require careful attention fromthe legal department, particularly insofar as they helpdefine the legal relationship between the parties.

Moreover, if your company is a multinationalthat relies heavily on outsourced supply chain part-ners and vendors, you should have your own codeof conduct, and your legal agreements should con-tain clearly defined expectations regarding compli-ance with that code. Finally, if your company andyour supply chain “partners” each have their owncodes, you will need to spend time with your coun-terpart reconciling your respective expectations.Because these issues are becoming more central inbusiness and legal negotiations, clear companystrategy and active legal department involvementare critical.

2. Your shareholders demand it. While share-holders used to be perceived as single-minded indi-viduals motivated by an insatiable thirst for profits,the interests of today’s shareholders are not nearlyso easy to define. In addition to the usual differences(for example, the interests of individual investors arelikely to differ in some respects from those of multi-state pension funds, day-traders, or institutionalinvestors), issues-based investors and funds haverecently become more prominent and influential.

Socially responsible investing (SRI) is an invest-ment process that considers the social and environ-mental consequences of investments.15 SRI hastaken off in the last two decades, triggered by theeffectiveness of investor-led campaigns to combatapartheid in South Africa.16 Assets in professionallymanaged, socially-screened investment portfoliosincreased 36% between 1999 and 2001.17 In 2003in the United States alone, $2.16 trillion dollars(one out of every nine dollars under professionalmanagement), was being invested through use ofsome form of a SRI screen.18 In 2003, 310 proxyresolutions on social issues were filed, representingan increase of 15% from 2001.

SRI funds are not the only shareholders promot-ing corporate action on issues of social importance.In 2003, state and city treasurers and controllersjoined SRI fund managers to call for an increasedfocus on risks and effects of climate change.19 AndTIAA-CREF—one of the largest pension funds inthe world—has recently been challenged by its ownshareholders to divest in a major global oil companyout of concern for alleged human rights abusesinvolving the company’s operations in Tibet.20 Fully70% of companies questioned in a 2003 surveyacknowledged an expectation that the interest ofmainstream investors in CSR issues will increase.21

As CSR demands on companies increase, and asSRI and related shareholder activism moves moreto the center from the periphery, careful, thoughtfuland strategic analysis needs to be brought to bearon issues that are linked, but not premised solelyupon, to traditional notions of maximizing share-holder value. Understanding and meeting often-con-flicting shareholder expectations will require activeinvolvement of those within your legal department.

3. Other key stakeholders demand it. In today’sbusiness environment, non-governmental organiza-tions (NGOs)—non-profit groups whose constituen-cies represent public issues that are impacted by thespecific activities of particular organizations or com-panies—have come to play a central role in the waybusiness is conducted. The American Red Cross,Amnesty International, Greenpeace, and People forthe Ethical Treatment of Animals are examples ofNGOs. There are thousands of NGOs, and theirsizes, strengths and tactics are equally variable.

In an earlier, purely shareholder-focused era,companies tended to avoid NGOs with little fear of

IF YOUR COMPANY IS A MULTINATIONAL THATRELIES HEAVILY ON OUTSOURCED SUPPLY

CHAIN PARTNERS AND VENDORS, YOUSHOULD HAVE YOUR OWN CODE OF CONDUCT,

AND YOUR LEGAL AGREEMENTS SHOULDCONTAIN CLEARLY DEFINED EXPECTATIONS

REGARDING COMPLIANCE WITH THAT CODE.


negative consequences. Avoidance in today’s worldis neither feasible nor wise. NGOs have tools andresources that make them formidable and oftenvaluable participants in today’s social dialogue.

For example, NGOs enjoy significant credibilitywith stakeholders. Recent research suggests that theaverage consumer has greater faith in NGOs thanin corporations.22 NGOs also benefit from special-ized expertise that is generated through their grass-roots foundations and their laser-like focus onsingle issues. These characteristics enable them todevelop a level of depth and understanding ofissues that typically far outstrips a company’s prac-tical ability to do the same. The scope of NGOs’impact on the corporate environment is also attrib-utable to their efficiency in utilizing inexpensive,efficient tools such as the Internet that enable themto mobilize a global army of stakeholders instantlywith the mere click of a mouse.23

As you press your business case to management,understand the impact NGOs can have on a com-pany’s business. For example, the effectiveness ofNGO efforts to undermine consumer demand inEurope for genetically modified crops destroyedMonsanto’s ability to market a product that it spentmillions of dollars developing.24 Similarly, NGOscan be and are quite effective in shaping legislationand in forcing changes in industry standards. It isoften far wiser to be engaged in these efforts thanto stand on the sidelines.

And if these examples fail to demonstrate theimportance of the legal department’s role in CSR,refer your management to an NGO calledEarthrights International, which has published a“how-to” manual on filing lawsuits against corpora-tions for their alleged CSR missteps. This readilydown-loadable manual is “directed toward non-lawyers who want to learn about this type of litiga-tion, and possibly participate in a lawsuit.”25 Inshort, it’s point, click and sue.

4. Your customers demand it. Managing reputa-tion and brand equity was the most frequentlylisted business driver for CSR among participantsin a World Economic Forum 2002 survey.26

Conversely, a 2002 “Voice of the People” GallupInternational Survey found that companies areamong the least trusted of any of the 17 institutionstested, representing a significant and widespreaddecline in trust of companies over the previous two

years.27 In fact, when asked how they form impres-sions of companies, one in two citizens surveyed ina 1999 “Millennium Poll” of thousands of con-sumers located throughout 23 countries on six con-tinents cited labor practices, business ethics,responsibility to society at large, or environmentalpractices.28 (See “Global Perception of the Role ofCorporations,” below) Forty percent of these citi-zens have at least thought about punishing a com-pany they viewed as not socially responsible.29

Similarly, 73% of companies analyzed in a study bySAM Sustainable Asset Management listed “reputa-tion enhancement” as one of the key areas wherecorporate citizenship activities add to their valuegeneration or competitiveness.30

GLOBAL PERCEPTION OF THE ROLEOF CORPORATIONS

In 1999, Environics International Ltd., in cooperationwith The Prince of Wales Business Leaders’ Forum and TheConference Board, conducted and published the results ofthe Millennium Poll of thousands of individuals fromaround the world. What follows are some highlights:• Fully half the population of 23 surveyed countries (from

six continents) care about the social behavior of compa-nies.

• Two of three polled want companies to exceed their his-torical role of making profit, paying taxes, employingpeople and obeying laws; they want a focus on contribu-tion to broader societal goals.

• Active charitable or community efforts do not satisfypeople’s expectations—there are ten areas of socialaccountability rated higher by citizens around the world.

• Citizens in 13 of 23 polled countries think their countryshould focus more attention on social and environmentalgoals than on economic goals in the first decade of themillennium.

• In forming impressions of companies, people focus oncorporate citizenship ahead of either brand reputation orfinancial factors.

• One in five consumers report either rewarding or punish-ing companies based on perceived social performance.

• Opinion leader analysis indicates that public pressure oncompanies to play broader roles in society will increasesignificantly over the next few years.


5. Your employees want it. Employee recruit-ment, retention and motivation are increasinglylinked to how employees perceive a corporation’scontributions to society. The best talents want towork for the best companies, and CSR leadership isnow perceived as a quality possessed by the best.The World Economic Forum’s 2002 CEO Survey onGlobal Corporate Citizenship found that employeemotivation was second only to brand and reputa-tion as the most important factor in making thebusiness case for corporate citizenship.31

6. Your company’s bottom line demands it.Seventy percent of CEOs surveyed in the 2002 FifthGlobal CEO Survey agreed that “corporate socialresponsibility is vital to the profitability of any com-pany.”32 Indeed, a recent survey of executives from350 major companies in Europe found that “73%agreed that [integrating responsible business prac-tices] can significantly improve profitability.”33 Thestate of research on this subject is still in its formativestages, but some good data has been developed in thepast few years. For example, studies have shown thatCSR leadership companies have both outperformedtheir peers financially and have better employee rela-tions, community relations, products, and diversitymeasures.34 Similarly, a study by the Centre forTomorrow’s Company showed that companies thathave engaged proactively in stakeholder relationshipsare more successful than their counterparts.35

7. Your competitive environment requires it. A2002 Survey of CEOs across Europe found that78% of the chief executives agreed that integratingresponsible business practices makes a companymore competitive.”36 Stated simply, “A company’s‘license to operate’ depends on its overall sustain-ability performance which, to be successful,requires as much focus be given to environmentaland social influences as profitability.”37

8. Regulators expect and appreciate it.Companies that adopt a more proactive approach toCSR build valuable credibility with regulators.“Many companies that have integrated social andenvironmental aspects into their business planshave found that they can improve relations withlegal and political entities.”38 Regulatory expecta-tions are increasing as well. Recently, the UnitedStates Sentencing Commission approved proposedamendments to the U.S. Sentencing Guidelines39

that condition a company’s ability to receive a

reduced culpability score or reduction in fine rangeupon the establishment and maintenance of a com-pany-wide compliance program. These amendmentare intended to “‘promote an organizational culturethat encourages a commitment to compliance withthe law’ (not just violations of criminal code.) Thisproposed addition is intended to reflect the empha-sis on ethics and values incorporated into recentlegislative and regulatory reforms as well as theproposition that compliance with all laws isexpected behavior within organizations.”40

Getting Your Message AcrossThe business case for CSR leadership is not one-

size-fits-all. You have to find the one that fits yourcompany and its goals and culture. Resist the temp-tation to promise instant, positive bottom-lineresults. Many corporate actions require modestinvestments that pay off over time in savings andbrand protection. The trick is to demonstrate tomanagement how such an investment fits into yourcompany’s broader business strategy and culture.

We offer three useful paradigms for doing so.41

Choosing one does not mean excluding the others.There are also other ways to make the case. Mixand match. Work from your own experience andknowledge of what works with your management.

• Story Telling. Develop tangible examples ofsuccess stories from other similarly situatedcompanies—don’t be shy about benchmark-ing with your counterparts elsewhere. Also,look within your own organization forinspiration. Has one division stimulatedreputational gains with a new approach tocommunity relations? Has a novel idea inHuman Resources borne unexpected fruit interms of employee satisfaction? Find theseeds of CSR within your company, and usethem to encourage the development of morestrategic programs.

• Tradition of Excellence. Many highly-respected companies and leaders in CSRfeel that it is hardly necessary to justify CSRleadership any more than they would justifyleadership in product quality. Stated simply,excellent companies deliver excellent finan-cial results, and CSR leadership shouldappeal naturally to a company that pursuesexcellence in all things. Fifty-one percent of


CEOs surveyed by the Conference Board in2000-2001 cited “company traditions andvalues” as a leading driver of social involve-ment.42 Grab management’s attention by cit-ing your company’s tradition of excellence.

• Risk Avoidance. Although not necessarily themost inspirational way to sell CSR leadership,risk avoidance is a very good reason for com-panies to embrace such leadership. There areprominent examples of companies and indi-viduals (e.g., Royal Dutch Shell, Nike, Wal-Mart, Kathie Lee Gifford) that, for the simpleaccident of being caught in a perfect storm ofNGOs, socially-responsible investors, andconsumer awareness, paid a dear price foran apparent absence of preparation. Many ofthese examples are precisely the types of dis-cussions that you engage in with manage-ment on more traditional issues. Presentedcorrectly, this is a perfectly appropriate wayto capture management’s attention.

HOW TO BECOME MANAGEMENT’S BEST FRIENDON CSR

There is often a wide gap between demonstratingthe need for an effective program and building sucha program. There are several important things thatyou, as a leader in your company, can do to helpyour management build an effective, strategic CSRprogram, and to assure that your legal departmentplays a central role in such a program:• Secure senior management and board buy-in:

This effort simply cannot work if your company’sleadership does not understand or support it. Itcannot fail if they do. The strategic nature ofthese issues will of course present challenges in aclimate driven by quarterly reports—it is tough tobe strategic in three-month intervals. Moreover,management’s focus on overhead tends to de-emphasize cost centers in favor of profit centers.No question, some level of up-front investmentand ongoing maintenance is necessary, whichmakes this a larger issue for smaller companies.But CSR programs need not cost a fortune. Makethe most effective case, and develop structuresthat enable periodic value-added reporting tosenior management and the board.

SOCIAL RESPONSIBILITY DONERIGHT—THE TIMBERLAND

PERSPECTIVEThree main areas are the focus of social responsibility

programs at The Timberland Company: community involve-ment, global labor standards, and the environment.Infusing all programs is Timberland’s belief—led by CEOJeffrey Swartz—that doing well and doing good are inextri-cably linked.

Working with environmental organizations, Timberlandconcentrates its work in the challenging areas of energy(conserving), chemicals (organic cotton and water-basedadhesives initiatives), and resources (recycling and use ofsustainable products). Timberland monitors vendor compli-ance with its code of conduct, works with vendors on con-tinuous improvements, and seeks a greater impact throughpartnering with other organizations to implement a varietyof strategic programs intended to improve workers’ livesand the communities in which they live. The functionresponsible for this area of business, Global BusinessAlliances, reports to the general counsel.

Timberland believes in strengthening communities every-where through hands-on volunteering and communityinvolvement. The core of such work is Timberland’s Path ofService™ program, which provides every Timberlandemployee with 40 hours of annual paid leave for commu-nity service. This service can take many forms. One oppor-tunity for community service is a global, corporate-wideannual event called Serv-a-palooza, during whichTimberland employees, vendors and community partnerscome together in a day of service at sites around the world.Employees lead projects in small villages from South Africato France, in large cities from Canada to Germany, and inrural communities from New Hampshire to Spain. Counselin Timberland’s legal department invites outside counsel toparticipate in the event. Timberland recently expanded vol-unteer opportunities for employees by offering a ServiceSabbatical, allowing employees to contribute to their com-munities in a deeper, more long-term way, by serving in afull-time capacity over a period of up to six months.

In addition, Timberland’s legal department has its owncommunity service initiatives, resulting from its long-stand-ing partnership with the New Hampshire-based non-profitOdyssey House, which operates a local residential treat-ment program for troubled teen


• Destroy silos. CSR success depends upon cross-functional cooperation. Functional silos are yourenemy—do whatever is possible, without destroy-ing your credibility, to break them down. Forgealliances with those in other areas who are par-ticularly skilled at cross-functional efforts, andwork with them to move the process forward.

• Encourage Meaningful Stakeholder Engagement.While avoiding stakeholders altogether is a badidea, trying to engage with all stakeholders willproduce paralysis—or worse. Your company’sefforts should focus on identifying and engagingthose with whom your company can work con-structively to achieve mutually beneficial goals.There will not be complete harmony in your dia-logues, so be sure you define and manage expec-tations at every step of the engagement process.

• Do not make CSR a marketing program. It doesneither your company nor its program any goodto empower the cynics who write off CSR as“left-wing do-gooderism.” Remember, your criti-cal constituencies—consumers, investors, andNGO’s—do care. If they get even a whiff thatyour CSR program is a glossy façade, it and youwill lose credibility, and that is an asset that isvery difficult to regain. But don’t shut out yourcompany’s media relations and public relationsmanagers, either. Invite them to participate in thedevelopment of your company’s CSR strategy,and you will facilitate cross-functional under-standing and to help manage how your CSR mes-sages are being delivered to your stakeholders.

• If yours is a global company, make your programrelevant globally. Too often, programs founder

because they have been created without sufficientsensitivity to local cultural norms. CSR programsshould be managed centrally, but should be tai-lored to local sensitivities and differences. Involveyour local markets in program development.

• Do not confuse tactics with strategy: SuccessfulCSR programs require holistic, inclusive, andlong-term thinking. Avoid the pressure toaddress immediate problems or issues withoutconsidering how they fit into the larger picture.

• Stay ahead of the curve: While you may be newto the CSR arena, there is already considerableactivity and change in this field, and the futurepromises more. Subscribe to newsletters, maga-zines, and e-publications. Attend conferences.Network. In the process, you are likely to findthat the CSR world is interesting, fun, and emo-tionally rewarding and fulfilling.

THE NEW DAY HAS DAWNED

CSR is not a passing fad or fancy. It is graduallybecoming a recognized and required part of doingbusiness, whether your business is a major multina-tional corporation or a more modestly sized, localenterprise. With globalization and the informationtechnology boom, companies have become subjectto an array of pressures, pressure groups, and pres-sure points of unparalleled diversity and scope. Aform of global grass roots democracy is beginningto replace traditional shareholder influence intoday’s business world.

If your company finds itself in a reactive ratherthan proactive mode, brand and reputational dam-age can be difficult to overcome. As in-house coun-sel, you are uniquely positioned to help yourcompany build a strategic platform that willenhance its value to stakeholders while minimizingpotential brand and legal risks.

This presents a tremendous opportunity for youand your legal team. Important stakeholders—shareholders, business partners, regulators, employ-ees, NGOs, and others—care deeply about theseissues and are likely to reward your company forleadership in this area. Embrace this leadershipopportunity and you will add value and enhanceyour department’s strategic importance to yourcompany, its owners, and its management.

CSR IS NOT A PASSING FAD OR FANCY.IT IS GRADUALLY BECOMING A

RECOGNIZED AND REQUIRED PART OFDOING BUSINESS, WHETHER YOUR

BUSINESS IS A MAJOR MULTINATIONALCORPORATION OR A MORE MODESTLY

SIZED, LOCAL ENTERPRISE.


NOTES

1. WORLD ECONOMIC FORUM GLOBAL CORPORATE

CITIZENSHIP INITIATIVE, FOLLOW-UP QUESTIONNAIRE ON

THE WORLD ECONOMIC FORUM CEO STATEMENT, GLOBAL

CORPORATE CITIZENSHIP: THE LEADERSHIP CHALLENGE FOR

CEOS AND BOARDS (2002), available at http://www.weforum.org/pdf/GCCI/GCCI_CEO_Questionnaire.pdf (last visited April 20, 2004).

2. 28 U.S.C. §1350 (1994). 3. See, e.g., The Presbyterian Church of Sudan v. Talisman

Energy, Inc., 244 F. Supp. 2d 289 (S.D.N.Y. 2003);Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir. 2002);Khulumani v. Barclays National Bank, No. 02-CV5952(E.D.N.Y. filed Nov. 12, 2002); Ntzebesa v. Citigroup,Inc., No. 02 Civ. 4712 (S.D.N.Y. filed June 19, 2002);Bano v. Union Carbide Corp., 273 F.3d 120 (2d Cir.2001); Bigio v. Coca-Cola, 239 F.3d 440 (2d Cir. 2001);Beanal v. Freeport-McMoran, Inc., 197 F.3d 161 (5thCir. 1999).

4. Kasky v. Nike, Inc., 119 Cal. Rptr. 2d 296 (2002), cert.dismissed, 71 U.S.L.W. 4602 (U.S. June 26, 2003) (No.02-575).

5. See Deborah Glass and Thomas H. Clarke, Jr.,“Warning: Kasky v. Nike Can be Harmful to YourCompany’s Health” ACC Docket 22, no. 4 (April 2004).

6. Doe v. The Gap Inc., No. 99-329 (C.D. Cal. filed Jan.13, 1999); Union of Needletrades Industrial and TextileEmployees v. The Gap, No. 300474 (Cal. Super. Ct. filedSept. 23, 1999); Doe v Advanced Textile Corp, 214 F.3d1058 (9th Cir 2000). For more information on the law-suits and settlement, see http://www.globalexchange.org/campaigns/sweatshops/saipan/.

7. See William Baue, New French Law Mandates CorporateSocial and Environmental Reporting, available athttp://www.socialfunds.com/news/article.cgi/article798(last visited April 20, 2004).

8. See, e.g., EUROPEAN BUSINESS CAMPAIGN ON CORPORATE

SOCIAL RESPONSIBILITY, IT SIMPLY WORKS BETTER!CAMPAIGN REPORT ON EUROPEAN CSR EXCELLENCE 2003-2004 55-56 (2004).

9. See Corporate Sunshine Working Group, FrequentlyAsked Questions, at www.corporatesunshine.org/faq.html (last visited Mar. 4, 2004).

10. See Michelle Chan-Fishel, After Enron, 32 ENVT. L. REP.10965, 10972, available at http://www.corporatesunshine.org/afterenron.pdf (last visited April 28, 2004).

11. Norms on the Responsibilities of TransnationalCorporations and Other Business Enterprises withRegard to Human Rights, U.N. Sub-Commission on thePromotion and Protection of Human Rights, 55th Sess.Agenda Item 4, at 1, U.N. Doc.E/CN.4/Sub.2/2003/12/Rev.2 (2003), available athttp://www.unhchr.ch/Huridocda/Huridoca.nsf/0/64155e7e8141b38cc1256d63002c55e8?Opendocument.


CITIZENSHIP INITIATIVE, supra.

13. TASK FORCE OF WORLD ECONOMIC FORUM CEOs, JOINT

STATEMENT - GLOBAL CORPORATE CITIZENSHIP: THE

LEADERSHIP CHALLENGE FOR CEOS AND BOARDS CEOS

10 (2002), available at http://www.weforum.org/pdf/GCCI/GCC_CEOstatement.pdf.

14. For an example of such a code, see http://www.timberland.com/timberland/download/english%20feb02.pdf

15. SOCIAL INVESTMENT FORUM, 2003 REPORT ON SOCIALLY

RESPONSIBLE INVESTING TRENDS IN THE UNITED STATES 3(2003).

16. Id. at 5. 17. SARAH ROBERTS, JUSTIN KEEBLE AND DAVID BROWN, THE

BUSINESS CASE FOR CORPORATE CITIZENSHIP 4 (Arthur D.Little 2003).

18. SOCIAL INVESTMENT FORUM, supra at i. 19. See William Baue, UN Institutional Investor Summit

Considers Opportunities of Addressing Climate Change,at http://www.sri-adviser.com/article.mpl?sfArticleId=1277 (Nov. 26, 2003).

20. See Press Release, TIAA-CREF Challenged Over Issuesof Corporate Governance and Social Responsibility, athttp://www.csrwire.com/article.cgi/2337.html (Dec. 16,2003).

21. WORLD ECONOMIC FORUM, VALUES AND VALUE

COMMUNICATING THE STRATEGIC IMPORTANCE OF

CORPORATE CITIZENSHIP TO INVESTORS 12 (2003). 22. Michael Yaziji, Turning Gadflies Into Allies, HARV. BUS.

REV. (February 2004), at 111. 23. See generally id.24. Id. at 114.25. EARTH RIGHTS INTERNATIONAL, EARTH RIGHTS LITIGATION

MANUAL (2003) available at http://www.earthrights.org/legalmanual/litigationmanual.pdf (last visited Mar. 4,2004).


CITIZENSHIP INITIATIVE, FINDINGS OF A CEO SURVEY ON

GLOBAL CORPORATE CITIZENSHIP 14 (2002).27. WORLD ECONOMIC FORUM, VOICE OF THE PEOPLE GALLUP

INTERNATIONAL SURVEY (2002) available at http://www.weforum.org/site/homepublic.nsf/Content/Annual+Meeting+2003%5CResults+of+the+Survey+on+Trust#II (last visited Mar. 4, 2004).

28. ENVIRONICS INT’L LTD., MILLENNIUM POLL ON CORPORATE

SOCIAL RESPONSIBILITY EXECUTIVE BRIEFING (1999). Seealso CONE/ROPER, CAUSE RELATED TRENDS REPORT

(1999), (American consumers and employees supportcause-related activities of corporations, and companiessee benefits to brand reputation, image and bottom lineby engaging in such activities).

29. See ENVIRONICS INT’L LTD., supra.30. WORLD ECONOMIC FORUM, VALUES AND VALUE, supra at 24.31. WORLD ECONOMIC FORUM GLOBAL CORPORATE

CITIZENSHIP INITIATIVE, FINDINGS OF A CEO SURVEY ON

GLOBAL CORPORATE CITIZENSHIP 14 (2002).32. PRICEWATERHOUSECOOPERS, 5TH GLOBAL CEO SURVEY

(2002), cited in WORLD ECON. FORUM GLOBAL CORP.CITIZENSHIP INIT., FINDINGS OF A CEO SURVEY, supra. See


also, UNITED STATES COUNCIL FOR INTERNATIONAL

BUSINESS, ADVANCING CORPORATE RESPONSIBILITY (noting“Improved performance in [CSR issues] is frequentlycited as generating intangible assets, such as employeecommitment and customer brand loyalty, that may leadto improved financial performance.”) (2002) availableat http://www.uscib.org/index.asp?documentID=2573.

33. See BUSINESS IN THE COMMUNITY, FASTFORWARD

RESEARCH (2002), available athttp://www.bitc.org.uk/docs/FastForward_DL.pdf. [.]

34. See, e.g., Samuel B. Graves and Sandra A. Waddock,Beyond Built to Last . . . Stakeholder Relations in“Build to Last Companies”, 2000 BUS. AND SOCIETY

REV. 105(4): 393-418, cited in REED, supra.35. Id.36. BUSINESS IN THE COMMUNITY, supra.37. Press Release, ConocoPhillips, Education and Innovation

Equal Global Economic Opportunities and CompetitiveAdvantage (quoting Tom Knudson, Vice President ofHuman Resources, Information Technology and

Corporate Communications) (March 2002), athttp://www.conocophillips.com/news/nr/rel_con_02_30.asp.

38. UNITED STATES COUNCIL FOR INTERNATIONAL BUSINESS,supra.

39. The amendments were unanimously approved by theU.S. Sentencing Commission at public meeting on April8, 2004. They are expected be submitted to Congress onMay 1, 2004, and could become law as early asNovember 1, 2004.

40. U.S. SENTENCING COMMISSION, PROPOSED AMENDMENTS

TO SENTENCING GUIDELINES 58 (January 13, 2004), page60 (emphasis added). The amendments are contained inU.S.S.G. §8B2.1. A copy of the Commission’s Report isavailable at www.ussc.gov/2004guid/rfJan04.pdf.

41. See REED, supra (four business case frameworks identi-fied by World Resources Institute).

42. THE CONFERENCE BOARD, CORPORATE CITIZENSHIP IN THE

NEW CENTURY 10 (2002).

danette wineberg and phillip h. rudolph, “corporate social ... · 60 acc docket may 2004 by...

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