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Topic: CSR codes in global supply networksHow effective are CSR measures such as voluntary supply chain labour standards codes and certification schemes in improving the lives of workers in developing countries? In addressing that question, you should consider the practical and political obstacles to formulating, implementing and enforcing effective CSR measures, and arguments for and against the view that such codes, even if successfully implemented and enforced, would be of marginal benefit or would do more harm than good.
You are not required or expected to use materials other than assigned course readings, and you are expected to make use of all readings that are relevant to the points you are making. The readings assigned for winter weeks 2-7 will be most directly applicable. Skilfully incorporating concepts from other units of the course (such as those relevant to the fall term assignment, and on normative CSR debates) is a plus, but avoid padding the paper with undigested or weakly integrated material.


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Winter Week 2: Consumer
and Investor Activism
SOSC 3040
Corporate Social Responsibility
Ethical Consumption/Investment

Civil regulation via market
Avoidance of buying products or shares of
immoral/ socially irresponsible enterprises
Buying products /shares of good enterprises
“Clean hands”, integrity (nonconsequentialist)
Create market incentives for responsible
enterprise (consequentialist)
Civil regulation campaigns via social
● CR
now often supported by slick
media use:
● E.g this clever ad in support of a palm
oil boycott, and this counter to Pepsi
CSR spin
● England:
Slavery abolition movement
● Boycotts of sugar, rum, cotton etc
● Quaker practice 1750-80
● 1791 failure of slave trade abolition bill
! widespread sugar boycott !
1807 Act
● 1845: American Quakers, abolitionists
establish “free produce” association,
US 1950s-70s
● Civil
Rights Movement:
● boycotts of segregated stores, transit,
businesses that discriminated in hiring
● Anti-Apartheid Movement:
● Boycotts of products from South Africa
● Anti-War Movement:
● Boycotts of consumer products made by
firms that supplied Vietnam War
◦ E.g. plastic wrap made by Dow (napalm mfg)
Effectiveness of Boycotts

Significance in relation to major change (e.g.
S.A.) debated—can be important for
particular firm (e.g. Nike, Nestle)
Klein et al: bad publicity + boycott hurts
brand image more than bad publicity alone.
Friends of the Lubicon example
Daishawa pulp mill logs traditional
lands of Lubicon Cree in northern
Makes cardboard packaging for
fast food
Friends of the Lubicon campaign:
all 40 companies approached by
FofL switched from Daishowa as
supplier of paper packaging
(pizza boxes, bags etc), at least
after picketing by FofL activists
Company sues activists and loses
Limitations of Boycotts

Hard to get enough people to participate
◦ Klein study: 16% participation rate, 4%
decline in market share
◦ People, esp. boycott participants,
overestimate how many people participate

Promotion expensive
● Message “sticks” in a few cases but hard
to predict
● Works best with branded consumer
Ethical Consumption
● Positive
ethical consumption
advantage: “good” firms have incentive
to promote as CSR/marketing
● BUT effectiveness diluted by spin,
“greenwashing” !
● 3d party certification, NSMD
● More effective in Europe
Investor Driven Civil Regulation

Two investor strategies for encouraging
● 1. Ethical/ Socially Responsible Investing
◦ Passive/ screening approach
◦ Invest in more socially responsible firms

2. Shareholder Activism
◦ Invest in less socially responsible firms
◦ Use shareholder democracy to press “from within”
for more CSR
Two Kinds of Ethical Investment
screening approaches:
● Positive (e.g. “Ethical” Mutual Funds’”):
invest in “good” firms that pass CSR
● Negative (e.g. divestment campaigns
directed at institutional investors):
avoid/ divest from particular firms or
classes of firms targeted as particularly
Two Kinds of Ethical Investor
Prudential: premised on business case
for CSR: CSR! better investment
(higher returns and/or lower risk)
◦ Reasons to be skeptical of this
Normative: investor willing to accept
lower returns for ethical reasons
Normative ethical investing undermines
Friedman’s principal-agent critique of
Ethical Investing as Civil Regulation
● Increases
demand for shares of
responsible firms!
● Boosts share price! rewards,
protects management of responsible
● NOTE: This does not make the
company more profitable
Critical issues
● Compare
civil regulation vs “clean
hands” motives for ethical investment/
● Consider that almost all ethical
investment/ divestment involves shares
in the secondary market (not IPOs)
● Therefore “investment in the
company” does NOT go to the
Limitations of strategy

Increasing demand for shares of responsible
firms! boost price/earnings ratio! less
attractive investment for “non-ethical”
● Depresses relative price/earnings ratio of
less responsible firms! their shares
become a “good buy”
◦ Notes that “unethical funds” [e.g. Barrier] do well

Market restores equilibrium; little over all
effect on stock market?
An Empirical Test of “Limitations”

Kumar et al (2002) found that stocks of firms
with South African operations out performed
the market following Mandela’s approval of
the lifting of divestment sanctions in 1993,
suggesting that investors’ avoidance of
those stocks had depressed share prices.
● Implication: if there is enough focus on a
single issue, it can make a difference to
share prices
Further Research on Limitations of
Ethical Investment Strategy

Allen Goss (2011) econometric study finds
over-all no relationship between CSR and
equity financing! confirms limitations
● Divestment by ethical investment !
purchase of shares by others
● E.g. Norwegian pension fund divested $180
M worth of Barrick Gold shares due to
human rights concerns ! no effect on
Further Limitations
● Ethical
investors usually “price
takers”—don’t affect share prices (too
small a proportion of investment to
make a difference)
● Most “ethical screens” are very crude,
porous—little difference between
portfolios of ethical funds & other
mutual funds
CSR and debt financing
! risk of default ! cost of
● Allen Goss finds lenders (banks, bond
market) demand higher interest from
firms with very bad social performance
● BUT very good social performance
does not result in lower interest
● Esp. for small firm, too much CSR
might increase borrowing costs
CSR-related shareholder activism
● Active
strategy: buy stocks of
“unethical” or “irresponsible” firm, and
then advocate as shareholder to
change corporate policy [e.g., filing
proposals to be voted on by
shareholders at AGM]
● Note: most shareholder activism not
CSR related, focused on shareholder
CSR Resolutions (at AGM)
● Resolutions
usually non-binding
(except where firm by-laws stipulate)
● CSR resolutions seldom garner
majority support BUT may influence
executives even at 10-20% of votes.
● CSR resolutions often framed in
business-case terms to appeal to $oriented investors
Monk findings: Resolutions in 81 top
corporations 2000-3
● 55%
Corporate Governance-related
● 38% CSR-related,
● 7% “crossover”
● Support for CG resolutions 20-30%,
● Support for CSR resolutions <10% CSR Resolution Issues (Monk study) ● 47% social, human rights or animal welfare related, ● 28% environmental, ● 14% re employment equity, ● 9% re: political lobbying or campaign donations. Exxon Shareholder Activism ● One of the top venues for shareholder activism; ● Over half CSR, especially environmental issues such as Arctic drilling, alternative energy & global warming ● Climate change related resolutions attracted up to 20% pro-votes Barriers to success ● Management usually recommends against shareholder resolutions ● Institutional investors (e.g. insurance companies, mutual funds and pension funds) usually vote as management recommends [e.g., b/c fund managers want to manage firm’s pension fund, or just due to policy] General assessment of shareholder activism ● Goss finds “hard” shareholder activism (resolutions, proxy fights) ! small, temporary effect on social performance of corporation ● “Soft” advocacy (lobbying of management, etc.) more difficult to assess quantitatively CSR and CG activism ● CSR shareholder activism depends on conditions advocated by CG advocates ◦ e.g. transparency and oversight of executives by Board of Directors. ● BUT if investors only interested in $, this might make it harder for executives interested in CSR Human Rights and Extractive Industries SOSC 3040 Corporate Social Responsibility Extractive Industries: Controversy ● Canadian mining companies accused of violating human rights and environmental standards in Latin America, Africa and Papua ● Norway pension fund divests from Barrick Gold because of abuses at Pogera Mine, Papua Review questions ● What does “divest” mean? ● What potential effects could divestment by a big investor (like Norway fund) have on a company (like Barrick)? What effect did it have? Review questions ● ● ● What are the main perspectives on CSR introduced last term? What perspective is this passage from Investing in Conflict an example of? “Ethical investment” funds do their part by investing heavily in companies like Goldcorp, misleading their clients into believing that large-scale mining is environmentally and socially responsible….Meanwhile, NGOs like World Vision use mining company money to carry out projects in affected communities, and groups like the Canadian Foundation for the Americas (FOCAL) work to convince people in resistance that they should dialogue with the mining sector.” Reviewing CSR and Development ● Distinguish issues involving: ● Corporations and agriculture ● Manufacturing (esp. labour-intensive) ● Extractive industries (e.g. mining, oil) Differences ● Labour-intensive sectors—agriculture and (esp.) light manufacturing, “artisanal mining” ● CSR issues mainly relate to treatment of workers (wages, working conditions) ● Industrial extractive sector creates fewer (but possibly well-paid) jobs ● More negative impacts on nonemployees! social conflict Artisanal v industrial mining ● ● ● ● ● ● Artisanal Incl. “raiding”/ gleaning industrial mines Corporations as purchasers Labour intensive Dangerous, poorly paid, child labour, etc. Conflict minerals (e.g. “blood diamonds”) ● ● ● ● ● ● Industrial FDI, often Canadian Corporations as producers Capital intensive; relatively little local employment Environmental impacts, displacement Conflicts with security forces Civil Regulation: Complications ● Efforts by civil society & CSR to control human rights abuses, child labour, environmental and health hazards etc. in artisanal mining-“blood diamonds”, gold, coltan etc. ● can benefit big business at expense of poor? Direct and indirect human rights issues re extractive industries ● ● ● ● 1)Expropriation of land, displacement 2)Destruction/impairment of livelihoods and property due to environmental impacts 3) Opposition, resistance, conflict between opponents and supporters, repression 4) Distribution of wealth generated 1) Land Acquisition/ Displacement ● Also relevant to plantation agriculture —e.g. oil palm in Ghana) ● Problems: ● Informal, traditional or feudal land tenure systems ● Community reliance on/ occupation of common or “public” lands 2. Environmental and other externalities ● Air, water and soil pollution, vibration ● Depletion of groundwater, drying up of streams ● Social disruption due to influx of outside workers, increased income inequalities 3. Conflict & Repression ● 3. Corporate collusion with or instigation of violent repression of project opponents and other community advocates ● Issues: to what extent are companies responsible for state or local non-state violence against company opponents? ● To what extent are companies responsible for “rogue” actions of security forces they employ? E.g. Barrick in PNG “The world is deadlier than ever for land and environmental defenders, with agribusiness the industry most linked to killings” --Global Witness 2018 Report ● ● 207 environmental activists murdered world wide in 2017: 46 killed resisting big agriculture ◦ Eg. palm oil, coffee, tropical fruit and sugar cane plantations, cattle ranching ● ● ● 40 killed resisting mining 23 killed resisting logging 23 killed resisting poaching Killings of environmental activists 4) Distribution of wealth ● Giving back to the community: positive responsibilities to assist development; Impact-Benefit Agreements (IBAs) ● How much of wealth extracted ought to go back to community in infrastructure, services, clinics, libraries etc.? ● How should this be decided and carried out? Extractive Industries: Negative and Positive Responsibilities ● Negative duty = duty not to do something ◦ Eg. “do no harm” ● Positive duty = duty to do something ◦ E.g. philanthropy ● Complaints that corporations harm communities and that they fail to return wealth from resources “owned” by community often go hand in hand, but raise distinct issues. Extractive Industries: Negative and Positive Responsibilities ● Jenkins: CSR framed in terms of merely negative responsibilities [do no harm] may not address poverty ● Idemudia: positive action [e.g. funding community development projects] may be poor compensation for failures re negative responsibilities Criticisms of industry CSR approach ● Doesn’t address “resource curse” –macro economic weakness of resource-based development ● Doesn’t adequately address local negative impacts of resource development that outlast temporary economic boom of mine ● Local sourcing would do more for local economy than CSR spending Week 10 SOME CONFLICTS INVOLVING CANADIAN MINING COMPANIES Barrick Gold—North Mara ● ● ● Open pit gold mine in NW Tanzania— extremely poor area Mine site closely ringed by villages ◦ Displaced local farmers and artisanal gold miners; ◦ people attracted from elsewhere “Intruders” from local villages invade mine site to glean waste ore! process to extract gold North Mara--Issues ● ● ● Environmental impacts similar to previous cases Economic benefits e.g. electrification BUT benefits fall short of what was promised by mine developer (before bought by Barrick) Violence between intruders and mine staff, security, police ◦ 5 intruders killed by police in 2011 ◦ Frequent injuries on both sides Progera, Barrick Gold, PNG ● Assaults and rapes of gleaners and locals by security ● Eventually Barrick offers compensation ($, training) ● Some accept, others sue ● Suits settled for 10x amount offered Fenix Project time-line • • • • • • • Proposed open-pit nickel mine, Guatemala 2006-7: Skye Resources (Canadian firm), via hired armed Fenix security, military and police, evict Mayan villagers from mine site 2008: Skye acquired by HudBay (another Canadian mining firm) 2009: village leader killed in confrontation at mine site March 2011: HudBay sued (in Toronto) by villagers: Choc v HudBay Sept 2011: HudBay sells Fenix to Russian company 2013 HudBay accepts jurisdiction of Canadian court, case to proceed Choc: suit HudBay position ● ● ● ● ● We were granted rights to land—plaintiffs were there illegally Security forces acting in self-defense when attacked by Mayans; rape claims false Mine was developed by subsidiary, not us Violence was not reasonably foreseeable, so we had no duty to try to supervise subsidiary Sue subsidiary in Guatemalan court, not us in Canadaian court Choc: Plaintiff position ● Mining rights granted by military dictatorship, Mayans reclaiming ◦ Mayan claim upheld by Guatemalan court in 2011 ● HudBay controlled subsidiary and directly controlled security forces ● HudBay should have known that violence likely, given Guatemalan context ● HudBay’s own CSR PR indicated close involvement, care for local Araya v Nevsun Resources ● Re Bisha copper & zinc mine, Eritrea ● BC based firm Nevsun main investor in mine ● Claim: Nevsun in collusion with military dictatorship uses slave labour in mining ● Workers sue Nevsun in BC courts ● Nevsun motion: throw out case— Canadian courts don’t have jurisdiction ● BC courts reject motion, issue of whether lawsuit can proceed in Canada to be decided by Supreme Court of Canada El Dorado project, El Salvador ● ● ● ● ● Project proposed by Vancouver-based Pacific Rim Mining Mine opposed by locals because of threat to water etc 2008: El Salvador government refuses to grant environmental approvals Company: approvals denied only because we didn’t pay bribes Pacific Rim sues El Salvador for $77M under CAFTA investor-state provision El Dorado, continued ● ● 2010-2011: four opponents of El Dorado project murdered after getting death threats re: anti-mine activism 2012: International investment disputes settlement tribunal rejects Pacific Rim suit on jurisdiction grounds (not really a US company) but agrees to hear case under El Salvador law Context: Civil War ● ● ● ● Civil wars in Guatemala (1978-96), El Salvador (1980-92) Right-wing authoritarian governments & wealthy vs leftist rebels Assassination, torture, rapes and massacres commonly used by govt. forces against suspected rebel sympathizers (esp. in Guatemala, indigenous people) War over but problems of violence and legal impunity remain pervasive Review/discussion questions ● Why is gold mining in particular so controversial? ● Why has mining given rise to violence? Who are some of the parties? ● Under what circumstances are Canadian mining companies responsible for violence linked to their projects? Why? THE MARLIN MINE CASE E.g.: Marlin Mine, Guatemala ● ● ● ● ● 5 square km gold & silver mine in Guatemalan highlands 2005-2017; possible expansion/ extension Lowest cost, most profitable mine operated by Goldcorp (Canadian firm) Largest single taxpayer in Guatemala Local Mayan people: 80% in “absolute poverty”—subsistence agriculture & remittances from relatives in US Goldcorp Marlin Mine, Guatemala Marlin Mine: Short-Medium Term Environmental Concerns • • • • • • • • Removal of farmland and forests Dumping of waste rock and tailings consumes more land Blasting! vibration damage, stress to people and animals, clouds of choking dust Ore treated with vast amounts of water! drying up wells and streams Ore also treated with cyanide! if escapes can poison people, fish and livestock Air pollution from smelting “Tailings — vast quantities of finely crushed and processed ore rock — must be disposed of safely once they have been exposed to cyanide”; Marlin Mine: Long-term Environmental Concerns ● “Acid mine drainage (AMD) results from the exposure of sulfide-rich crushed rock (tailings and waste rock) to rainfall. AMD can contaminate local waters with heavy metals such as aluminum, arsenic, cadmium, lead, nickel and zinc that would otherwise remain buried in intact rock.” ◦ Unlike short-term cyanide and dust hazards, can persist long after mine closed Marlin Mine—Issues re options ● ● ● ● ● Mine had 11 year lifespan Unless major investment in rehabilitation of land, local communities will be left worse off despite modest economic benefits in short term Local communities get about 5% of mine revenues via wages and investment in local infrastructure, CSR Guatemalan government gets 6% of mine revenues via taxes and royalties Most of economic benefit to Guatemala via procurement of supplies and equipment (mostly not local) Social impacts ● Provided ~ 1000 well paid jobs for locals ● "The legacy of that will remain after the mine is closed. Our values had been ones of empathy, solidarity, sharing and love of nature. But today, the mine has become a value in this community. Money is now a value. We have never had money before and it is tearing us apart.” – local opponent What Should Goldcorp Do? ● ● ● ● 2005 referendum of 2400 local people: 94% vote “no” to mining Goldcorp share value increased by 1400% over10 years—Marlin m ... Purchase answer to see full attachment

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