Podcast: What’s the Moral Cost of Doing Business Today?

November 19, 2014
by Sarah Childress Senior Digital Reporter, FRONTLINE Enterprise Journalism Group

A man walks past an electronic board showing the stock price of Toyota Motor Corp., center, in Tokyo, Japan, Wednesday, Feb. 9, 2011. (AP Photo/Shizuo Kambayashi)

Today, most companies openly talk about their obligations to the people and places where they work. More than 70 percent of the 500 biggest US-traded companies now issue reports on their efforts to engage in corporate sustainability or responsibility — up from 20 percent in 2011, according to the Governance & Accountability Institute.

But what do those reports mean? How responsible should corporations be for what happens around them? And what’s the best way for consumers to tell which companies are getting it right?

FRONTLINE spoke to two experts to talk about the obligations — and costs — of doing business in our global world.

Listen Now

[soundcloud id=”177665035″]


xml feed

Christine Bader

Christine Bader
Author of The Evolution of a Corporate Idealist: When Girl Meets Oil. A visiting scholar at Columbia University, Bader has worked for BP, and served as adviser to the U.N. special representative on business and human rights.

Arvind Ganesan

Arvind Ganesan
Director of the Business and Human Rights division at Human Rights Watch. Ganesan leads the watchdog group’s work to expose human rights abuses linked to businesses. He also has helped to develop industry standards to prevent abuse.


FRONTLINE: In recent years, we’ve seen a great shift in the business world towards corporate social responsibility. But what does that really mean? Is that just more corporate jargon intended to put consumers at ease? We’ve seen enough corporate disasters in recent years to question whether companies really care about their impact in the world. But maybe they shouldn’t have to. How responsible should companies be for human rights abuses or environmental fallout; these are for-profit organizations, after all. They have shareholders to answer to. Perhaps when things go wrong, that’s just the cost of doing business.

I’m Sarah Childress, and for today, in the latest FRONTLINE Roundtable, we’ve invited two people who’ve wrestled with these questions in different ways. Christine Bader, a scholar and lecturer at Columbia University, and the author of the book, The Evolution of a Corporate Idealist: When Girl Meets Oil. It’s about her work at the oil giant BP. We also have Arvind Ganesan, director of the business and human rights division at Human Rights Watch, who works to expose abuses by corporations and set new guidelines for accountability.

FRONTLINE: So I want to jump right in and talk about the state of corporate social responsibility as it is today. Today lots of companies talk about corporate responsibility, but that wasn’t even a notion a few decades ago. It seems like companies operated pretty much with impunity. So Arvind, you know a lot of the history of this. What was the pivotal moment when things really started to change?

ARVIND GANESAN: I think it was probably around 1998-2000. There had just been a lot of exposures and scandals regarding companies. So you had issues with Shell in Nigeria and BP in Colombia in the oil industry, where they had serious issues around human rights problems with their security forces. And then at the same time you were getting exposes about people like Kathy Lee Gifford and the Gap and apparel problems in Central America and other parts of the world. And I think that really started the momentum towards getting companies to pay attention to human rights issues and highlight that they had human rights responsibilities as well.

CHRISTINE BADER:Companies have learned that they always need to act like somebody is watching, in part because now, somebody’s always watching.

FRONTLINE: But there’s still not a lot of laws that bind companies to good behavior, right? I know we have the Foreign Corrupt Practices Act, and that prohibits companies from engaging in bribery, but there are not a lot of laws preventing other abuses, right?

GANESAN:No, and this is one of the fundamental problems, but it’s slowly changing as well. It was completely alright to ban bribery abroad in the United States in the late seventies, but it took years for other countries to take on that role. And even today, governments and companies are very resistant to having laws in place that might make it illegal to be involved in serious human rights abuses abroad, like forced labor, or torture, or killings, or something like that, which seems kind of bizarre in 2014, but that’s the reality.

FRONTLINE: But why is that?

GANESAN: It comes down to two very fundamental issues. One is that companies, as a general rule, do not want to be regulated at all, and secondly, in the last 20 years certainly, governments have been very reluctant to regulate the private sector, and that is a big part of why the whole business and human rights movement has come up, is because the two key actors really weren’t doing their jobs. But that’s changing today. There are slowly but surely more and more laws coming in to place. They’re modest at present, but there are certainly more than there were even a few years ago.

BADER: One point I would debate with Arvind is the point about companies not wanting regulation at all. Companies do want regulation when it is smart and enforced consistently, but that’s often not the case.

FRONTLINE: So you think that companies really want more regulation, they want more rules?

BADER: Companies want guidance where there is none, and so the incidents that Arvind’s pointed to, of BP in Colombia, Shell in Nigeria, the lack of guidance around how are governments supposed to conduct their security in places where governance is weak, or governments are recovering from conflict, that’s what led those companies to get together with Arvind and his organization and other human rights groups, and the U.S. and U.K. governments to get together and say, “Look, there is no guidance, can we please come up with some guidance, because there’s no regulation and we don’t have any.” So they came up with a code of conduct, the Voluntary Principles on Security and Human Rights, that companies are using because it’s actually helpful.

GANESAN:I would actually disagree with that. On issues like human rights, or labor issues, or environmental issues, or anti-corruption issues, there is almost no history of companies acting out of enlightened self-interest. I think the precursor to all of that is people exposing serious problems out there that create a kind of public momentum to change, and the answer to that may be the voluntary initiatives that Christine and I have been involved in, but there is still a heavy resistance to regulation and that’s happening today. There are voluntary initiatives in, for example, the oil industry, that allow companies to expose what they’re paying the governments, and there are also laws being proposed to do the exact same thing. In the U.S., for example, the companies that have supported the voluntary measure vociferously opposed the legal and regulatory measure that would do the same thing, so I’m a little bit more skeptical of the willingness of the industries to be regulated on these grounds, even though I agree with the point in general that they want to be on stable business ground.

FRONTLINE: Christine, you worked for BP for many years, so give us a real-world example of what’s happening at BP. How did they operate, how did they think about operating in other countries?

BADER:Sure so I can give the example of my first assignment in BP when I joined in 2000, and that was on a liquefied natural gas project in West Papua, which is a pretty remote environment, and there’s not a lot of government presence, and this was a place where the national military had a mandate to protect the project we were working on – it was a massive gas project – but this was not a place where the military was liked. We realized that establishing a big military presence would cause a lot of social strife, as had happened in other parts of that province, on other extractive projects. So one of the first things we did was reach out to human rights experts to try to help figure out some guidance, because there’s no road map here.

FRONTLINE: You’ve talked before about your experience when you first got an up-close look at what was going to happen with the project.

BADER:You know, one of the challenges I think of international business is that very few executives see the impact of their decisions on people and communities at the tippy-toes of their supply chain. When I joined BP, I of course understood theoretically what the company did – we keep cars moving and we keep the lights on – but it was really my first trip out to Indonesia, when I really saw with my own eyes the impact of our work, which made me commit to trying to make sure we were respecting international human rights principles, and doing everything we could to make sure communities were protected. At that point, to get out there from Jakarta, from Indonesia’s capitol, I had to take an overnight commercial flight, and then a small seaplane, and then a helicopter the rest of the way in, and that last stretch in the helicopter, all you could see was very dense rainforest, but not a lot of human settlement, and then just out on the horizon I could make out the rig, and there was a village nearby of 127 households that was going to have to relocate to make way for the plant, and I had in my mind what the image of this facility was going to look like. I’d seen the sketches; it was going to be a modern, gleaming, industrial facility, and I started to get really uncomfortable. I had just joined the company and I thought, “Oh my goodness, we’re bringing such dramatic change to this place. I don’t know if I feel comfortable being part of this.” But luckily I was there with one of the senior vice presidents in the company, who was in charge of environmental policy, and she immediately saw the distress on my face, and she looked at me and said, “That’s exactly why we’re here. We’re going to get this right.”

FRONTLINE: But ultimately, and you talk about how you work to minimize harm, but ultimately, BP did end up clearing the forest, they did end up moving those people who had been living there.

BADER:Yes, that’s right. People get resettled all the time. I live in Manhattan and people have to move for the 2nd Avenue subway, but there are international standards for resettlement. People have to be consulted, to make sure they understand their options, people have to be compensated if their livelihoods are impacted. One of the things we did out there in Indonesia is we started the consultation process over again because it wasn’t clear that ARCO, which had made the discovery, had actually done consultations to international standards, so we found the guy who literally wrote the book on the resettlement standards for the World Bank, and hired him to advise us on how to do the resettlement according to international standards, and the folks who lived there ended up picking two different sites to move to, which were much better than the sites that they were supposed to move to when we got there. It had much better water access, and this was a fishing community, so we did it to international standards.

GANESAN:I think what Christine describes also illustrates a more fundamental point. All the steps BP took are steps it chose to do, and not ones it was necessarily obliged to do, so in our experience, in as recently as the last couple of years, we’ve seen some mine sites in Uganda and elsewhere where none of those steps were taken, because there was no obligation to do so, and instead, and so for exploration people would literally show up in peoples houses and start digging, without any consultation or anything, and I think it goes to the fundamental point which is that if a company chooses to do the right thing, then there’s nothing preventing it from doing it, but there are many companies out there that aren’t obliged to do the right thing, and they don’t. And that’s why the Indonesia project was over ten years ago, and that’s why in our own experience we’re still documenting situations of oil, gas, mining, and other companies still today are making these mistakes, in part because they haven’t put the policies, procedures, and standards in place to do the right thing. But in part, there’s no real requirement for them to do so, and the big change has to be that those changes are understood everywhere. And it goes back to your earlier point about anti-corruption law. Anti-corruption law doesn’t mean people are going to bribe, it just means that they’re going to be a lot more careful about it, and they’re going to be held accountable for it, hopefully, if they do. And that’s the value of having standard rules that are slowly developing.

BADER: It’s so true that BP wasn’t obliged to take those steps, and that other companies aren’t doing so because they aren’t obliged, but it is still extraordinary to me how companies don’t understand that this is in their best interest, because if they don’t then their operations get disrupted, which not only causes harm to people, but costs them a lot of money.

FRONTLINE: And what about the obvious counterargument here, that companies are here to make a profit, and it’s not their responsibility to worry about economic fallout or other abuses that they may not be directly responsible for. Where is the line?

GANESAN: Well in a lot of the areas we cover they are directly responsible, and I’ll give you an example. Canada has the largest mining industry in the world. about 60% of the publicly-listed mining companies in the world are in Canada, even though it’s only about .04% of the population overall. And there have been a series of issues with major Canadian mining companies, notably Barrick [Gold Corporation] and HudBay [Minerals], where they’ve been accused and in the case of Barrick acknowledge that their security staff were engaged in a pattern of gang rapes a few years ago, and they’re actually taking a number of steps to address that problem, and so the question is not so much whether or not it’s the role of business to do business and just ignore what they might consider the peripheral elements of it, it’s that it isn’t appropriate to go and do business abroad, if that involves things like sexual violence and gang rapes, or child labor, and forced labor, and other things, and it’s in those cases where there’s a clear responsibility to do something about it. Take where I am in Washington D.C., or New York, or elsewhere. If you heard that a department store or somewhere else had a bunch of security guards in the store that were gang-raping women, or they were hiring children or something, people would generally be outraged and something would be done about it. The difference is it’s abroad, the laws don’t really have the scope to cover them, local governments may not pay attention, or may even be part of the problem, so just because it’s far away doesn’t obviate the responsibility any more in those cases.

FRONTLINE: Christine, you did this in China, making the case that companies need to worry about these issues. There was a Chinese company that was partnering with BP, so you had to convince them to conduct their project up to BP standards. So tell us what happened there and how they reacted.

BADER: I’ll tell you the story of when I first got there. I was working on a BP joint venture with Sinopec, China’s state energy company, because we were going to be building a large petrochemical facility near a large town with a population of about 30,000 people. We would be bringing in a migrant workforce of about 15,000, which, you know, could be a little disruptive, so I was there to make sure the dormitories were up to international standards, to conduct a social impact assessment, which was a study we were doing in part for the report but more as a vehicle for communicating with local communities, local party officials. So I barreled in there saying, “Okay, we are here to protect the human rights of our workers in the community.” I’d never lived in China before; I’d never worked with a Chinese company before, and as you can image, that didn’t go over very well. I didn’t get thrown out of the company or anything, but people sort of looked at me blankly and sort of said, “We’re a chemical company. What are you talking about?” So finally I had to shut up for a while and listen to how people talked about their work and what motivated them, what they were worried about, what they were paid to do. And so finally when I came back and said, “Okay, I understand that you guys want this to be a world-class model project. And if that is the case, this is what the world-class models do, so we need to use them here. And they were like, “Oh okay, why didn’t you say so?” So how do you get companies to go beyond national law, and in some cases where national law doesn’t even exist, go beyond the local practices, and I have found in my experience that I have to try lots of different arguments and tools in my toolkit to make the case.

GANESAN: The best outcome for us would be to not have to do this work at all. So to the extent that companies can be more proactive and preventative, to make sure that when they do their work, when they set up operations, that they’ve already taken into account potential human rights problems is better for everyone. So we always try to promote the idea of proactiveness and doing the kind of due diligence and preparation to prevent these things from happening, because it’s getting to the point where Human Rights Watch is starting to research you as a company or an institution, then something has already gone pretty wrong, and it’s always better to have standards in place.

BADER: I could not agree more. The things that I think Arvind and I both want to see companies do are exactly the kind of proactive due diligence that he was just talking about, and I think the challenge for companies to get their head around is that the stuff that we want them to do in terms of human rights and sustainability is this deeply unsexy stuff of corporate process. This is not the kind of thing that you can take a photo of for their website or the sustainability report. We’re talking about embedding human rights considerations into how they’re allocating their resources, and what they do before they decide which markets to go into and which products to launch.

FRONTLINE: That brings up an interesting question. There are lots of consumers today who are interested in social responsibility, in making sure that the companies that they’re giving their money to are doing things in the right way. So if these are internal processes – as you say, deeply unsexy processes that companies are putting in place – how can a consumer tell whether a company is genuine?

BADER: One thing that consumers could look at – and I’ll put this forward and caveat it a bit – is whether these companies have signed onto some of these voluntary initiatives. We mentioned the Voluntary Principles on Security and Human Rights, for the extractive industries, there’s the Global Network Initiative for the tech sector, and in the wake of the Rana Plaza factory collapse in Bangladesh, two different initiatives have sprouted up, committing brands to invest in factory safety. Now I say that, but the challenge is that these initiatives vary widely in terms of what they actually require companies to do once they’ve signed on.

GANESAN: I would look at the development of anti-corruption laws. Prior to 1977, when the Foreign Corrupt Practices Act passed, I’m certain that there were plenty of companies that would not voluntarily bribe foreign officials while abroad, but now that the law is in force, and more importantly, now that similar laws have gone into force in other countries around the world, the public would probably be more comfortable with the fact that it’s illegal, rather than just rely on the enlightened self-interest and will of individual companies. In the evolution of standards on human rights, I think we do need to transition from those companies that are clearly trying to do the right thing into an environment where everyone’s obliged to do the right thing.

GANESAN: Even if there are laws in place to regulate or address this behavior, at the end of the day, one of the key things I’ve learned is if the leadership of a company doesn’t believe in these issues, in protecting human rights or acting responsibility, and by extension doesn’t incentivize the staff of their company to do it, then it’s not going to happen. And so laws are of course important when things go wrong, or to make sure things go right, but without internal leadership to drive this forward, you’re not going to see progress, and that’s why even with strong anti-corruption laws, you’re still seeing multibillion dollar settlements of companies, and what you learn at the end of the day is that there was a culture of tolerating or even promoting bribery. So internal leadership is crucial, not just in companies, but in any institution to see the right things happen.

BADER:Part of the challenge of getting this right, especially inside companies but even more broadly, is that no one gets rewarded for what doesn’t happen. And so how do we incentivize the right behavior? So one woman I interviewed was a supply chain manager for a multinational, and she told me how livid she was when one of her company’s internal awards, which are really prestigious in a big company, went to one of her colleagues who managed a big safety disaster. Because she was like, “Are you kidding me? I’ve prevented like 20 of those.” It’s really hard to reward from that, and I think that a lot of corporate responsibility or safety or ethics work is preventing bad things from happening. So I’m always on the lookout for how do you better reward prevention and the absence of bad things happening. I think it’s quite a challenge.

FRONTLINE: We’re coming up at the end of our time here, but I do have one final question; I’d love to hear from both of you on this. Given the rapid change that we’ve seen over the past few decades in this environment, what can we expect to see in the next five or ten years?

GANESAN: I think what you are seeing is that a number of governments are beginning to regulate elements of how businesses should react responsibly, and most notably what they’re doing is they’re putting rules in place that require companies to disclose on various things that relate to human rights. So in Canada, and in the E.U., and in the U.S., there are rules about oil, gas, and mining companies disclosing their payments to the government, or whether or not their sourcing conflict minerals from the Democratic Republic of Congo. And in Europe there are more expectations that publicly-listed companies have to disclose whether or not they have human rights policies in place. And so I think you’re going to see a sort of slow and steady growth of a requirement to disclose, and if I go even further over the next ten years, you may even see laws that say, “Look, if you don’t have those policies in place, or if you do something wrong, you are going to be held accountable for them. There are very nascent and still controversial treaty negotiations with the UN on regulating transnational companies, which are going to be controversial, but I think it’s a long term sign that rules are coming, and for companies it’s better to pay attention and get ahead of that trend than to wait for it to happen

BADER: So one area I think we’ll see some progression over the next few years is about definition and clarity about what we’re expecting from companies and I think that’s where human rights as a framework to talk about corporate responsibility is really important, because human rights, there are international instruments – the Universal Declaration of Human Rights is a set of 30 rights and freedoms, and the problem with corporate responsibility and sustainability is that there is no universal declaration, and that’s why you get so much eye-rolling when you start to even talk about this topic, which is that corporate responsibility is kind of whatever a company thinks it should be. And then finally, exactly what Arvind talked about, about transparency and disclosure. I think an increased level of transparency can only be a good thing, because we all need a more sophisticated understanding of how companies really operate and what some of the internal discussions are, and why companies keep getting this wrong, even though from the outside it seem so obvious why they need to get it right.

That was Arvind Ganesan, director of the Business and Human Rights Division at Human Rights Watch, and Christine Bader, a lecturer at Columbia University and author of The Evolution of a Corporate Idealist: When Girl Meets Oil.

I’m Sarah Childress. You can download more Frontline Roundtables on iTunes. And watch Firestone and the Warlord, our investigation with ProPublica into one corporation’s longstanding relationship with the wartorn nation of Liberia. It’s available anytime online at pbs.org/frontline.

In order to foster a civil and literate discussion that respects all participants, FRONTLINE has the following guidelines for commentary. By submitting comments here, you are consenting to these rules:

Readers' comments that include profanity, obscenity, personal attacks, harassment, or are defamatory, sexist, racist, violate a third party's right to privacy, or are otherwise inappropriate, will be removed. Entries that are unsigned or are "signed" by someone other than the actual author will be removed. We reserve the right to not post comments that are more than 400 words. We will take steps to block users who repeatedly violate our commenting rules, terms of use, or privacy policies. You are fully responsible for your comments.

blog comments powered by Disqus
Support Provided By