Last month, Canada's Ethical Funds published a brief called Winning the Social License to Operate.

The focus is on how companies can reduce the risk of local opposition to their extractives operations by making use of the "latest evolving standards" around what is called free, prior and informed consent (FPIC) of indigenous communities.

As the report points out, local opposition to resource extraction has been running high in many areas of the world. Canadian mining and energy companies in particular have run into recent controversies, including in Guatemala, India, and Canada itself.

But while the brief is aimed at the Canadian extractive sector, it is also relevant to investors and companies in other countries.

In providing a succinct overview of FPIC, the nine-page document outlines some of the guidelines and standards that are developing around the issue, and suggests specific engagement strategies for stakeholders ranging from indigenous to "permanent non-indigenous" communities to NGOs.

As one of its ten "action items", Ethical Funds calls on companies to "consider lobbying government to put an ecosystem based land-use planning process in place – one that respects lands, rights, and ways of life of Indigenous Peoples" (the brief points to Canada's Boreal Leadership Council as a specific example of this kind of lobbying).

Social investor encouragement of corporate lobbying for the public good is an important development, and it's taking place in areas such as the environment, labor rights and (as in this example), community impact.

It speaks to the growing debate about the role of corporations in development and, more broadly, the question of whether and how companies can have a positive impact on society as opposed simply to doing no harm. And as the brief underscores, the failure of extractive companies to "deliver on the promise of development" is one of the main factors behind persistent local opposition to their operations.

There have been at least three interesting developments over the past month in the area of Corporate Social Responsibility (CSR) reporting by companies based in developing countries, or so-called "emerging markets".

In late January, the Social Investment Research Analyst Network (SIRAN) and KLD launched a report on the state of CSR reporting in these countries, entitled "Sustainability Reporting In Emerging Markets".

The report, which focused on companies in three sectors in seven countries, was meant not only as a benchmark for the level of corporate disclosure on ESG factors. It was also intended to "create an advocacy campaign to encourage further improvements in sustainability reporting".

In February, the Argentine NGO Center for Human Rights and Environment reported that the city of Buenos Aires had passed a law requiring companies with over 300 employees to publish annual sustainability reports, using indicators from the Global Reporting Initiative (GRI) G3, the AccountAbility 1000 standard for reporting, and Brazil's Instituto Ethos. Companies with fewer than 300 employees may report on a voluntary basis.

Also in February, four small Chilean fruit and wine companies, with advice from GRI, published an "aggregated" sustainability report, describing the companies' environmental and social impact (Ethical Performance, February 2008, volume 9, issue 9).

Ethical Performance noted that the report was the first of its kind anywhere in the world, and that it was "being cited as the way forward for small and medium-sized enterprises", which often have trouble publishing reports on their own. Ethical Performance also reported that GRI was pressing for more such aggregated reporting, particularly in emerging markets.

These developments are only first steps, and as the SIRAN/KLD report notes, "sustainability reporting has yet to become a common practice in emerging markets". However, rising investor interest in these regions underscores the importance of both benchmarking and advocacy efforts around corporate transparency.

German footwear producer Adidas has recently begun to disclose its global supplier list publicly.

The company followed a number of other footwear and apparel companies in doing so: in mid-2005, Nike became the first major footwear company to publish a list of all of its suppliers globally on its website, after labor rights groups had pressured the company (and its peers) for several years on this issue. Levi Strauss started publishing its list later that year.

Timberland states in the FAQ section of its website that it releases the names of its supplier factories to "code of conduct specialists and other locally-based NGOs" with which it works. Puma's website FAQ section says that its list of suppliers is publicly available on the website of the Fair Labor Association (to which Puma provides a link), but after looking on FLA's site for several minutes, I gave up.

Disclosing supplier lists is important for several reasons. For one thing, it shows a good faith effort by the company to maintain transparency in the management of its supply chain.

For another, in principle, such disclosure allows anyone to check up on whether suppliers are complying with international labor standards in general, and company codes of conduct in particular. (In practice, however, it may be another thing actually to get access to these factories).

Further, as the International Textile, Garment and Leather Workers Federation (ITGLWF) noted last week upon Adidas's announcement, transparency in supply chain management "breeds a much keener attention to detail in supplier relations".

As a next step, the Federation called on Adidas to disclose the names and locations of the suppliers that manufacture for its licensees. In the past, some companies have stated that, for legal reasons, they could not release the names of licensee suppliers.

From within the world of SRI, one gets the impression that a key aspect of global supply chain management is how to uphold and improve labor standards for workers producing the things that you and I use every day.

Human rights groups, labor unions, social investors, international organizations, academics and a number of companies have spent years on this question, and there are now annual conferences devoted entirely to labor rights in supply chain production.

So when I came across a brochure recently for the upcoming Tenth Annual European Supply Chain & Logistics Summit 2008, to be held in Germany in May, I was surprised to find almost no mention of labor standards. I was even more taken aback when I saw that scheduled speakers include company representatives from industries, such as technology and electronics, that have been hit by allegations of supply chain labor violations.

Other sectors represented include food and beverages, retail, and automotive; industries that have historically had supply chain labor rights problems. But the conference is also aimed at sectors that need to learn more about this area, including pharmaceuticals, manufacturing, telecommunications, and yes, financial services.

There is one 35-minute session, over the course of three days, that covers "Integrating Ethics Into Your Supply Chain: Corporate Responsibility". And there is one other relevant but tiny mention in the 7-page brochure: in the nomination categories for the annual supply chain award, the "Social Responsibility Award" is mentioned as one of ten categories in which nominees for supply chain excellence can distinguish themselves.

On the bright side, there are three whole sessions on environmental concerns in the supply chain, and one session each on patient safety and healthy food.

To the criticism that labor rights seem almost invisible on the agenda, the planners might respond that the conference is, after all, aimed at people in logistics, operations, inventory, purchasing and procurement, not those in the labor compliance or CSR divisions. But that is precisely the point. Cutting edge thinking on supply chain labor rights is that some of the most serious problems are embedded in companies' own decisions and actions, such as their purchasing practices.

The idea is that, without better integration of the buyers and logistics folks on the one hand with the folks who oversee labor rights protection on the other – or, more radically, without rethinking how to better integrate factory workers and trade unions into the supply chain labor rights equation, as global textile union leader Neil Kearney has argued forcefully – we will not succeed in figuring out how to uphold these rights.

Perhaps this conference will cover some aspects of this question within its sessions on "risk management" or how to "build effective relationships" with suppliers. But from studying the agenda, it doesn't seem a good bet.

As long as high-profile conferences purporting to bring together "leading senior level" supply chain executives leave labor standards largely out of the equation, their claims to "debate the key issues" and offer the "latest best practice" in supply chain management will continue to ring hollow.

In September, Burma was on the front pages of global media, the result of the Burmese military junta's violent crackdown on the peaceful, pro-democracy protests spearheaded by Buddhist monks. Images of soldiers bludgeoning protesters, in one case shooting a Japanese photographer at close range (he later died), held the world's attention for a number of days.

As of December, the story continued to unfold, mostly without the benefit of front-page coverage, as the media had moved on to other issues. The BBC reported that the UN had confirmed at least 31 deaths in the crackdown.

Later in the month Congress passed a bill aiming to tighten sanctions against Burma. The legislation is meant to close loopholes that allow Burmese gems to be imported through third countries, as well as those that provide the junta access to US banks to launder money in third countries.

The House had proposed these measures in October, shortly after Jewelers of America, the main industry group for jewelry retailers in the U.S., called on Congress to add gemstones mined in Burma to the Burmese Freedom and Democracy Act of 2003. The Act bans imports from Burma to the U.S.

The EU also announced in October that it would impose a ban on investment in and importation of Burmese timber, metals and gems.

Groups advocating democracy in Burma welcomed these developments. But human rights advocate Salil Tripathi pointed out recently that western human rights activists should be pressuring the governments supporting the Burmese junta, rather than focusing on western companies, as the latter no longer have the leverage needed to move the Burmese government.

In this vein, Seth Mydans noted in the International Herald Tribune that neither sanctions nor "friendly persuasion and engagement" by Burma's nearest neighbors had worked in the past. The article quoted experts who said sanctions had to be supplemented by much greater diplomatic pressure and coordination by the international community.

India, China and Thailand, to name a few countries, continue to trade with the regime, and China maintains a veto on the UN Security Council, which hampers that body's ability to take stronger actions.

In the meantime, pressure continues for the last western companies in Burma – among them Total and Chevron – to leave; shareholders have continued to press Chevron publicly to get out.

Western companies operating in Burma have argued that they have helped ordinary Burmese citizens via development programs and job creation, and that companies that have no concern for human rights could move in to take their place if they move out.

In response to such arguments, Burma activist and senior advisor for shareholder advocacy at the AFL-CIO, Simon Billenness, said that the amount that Chevron and Total spent on these community projects "pales in comparison to the hundreds of millions of dollars of revenue the pipeline provides the military regime."

Further, he noted, there might not be a huge difference between western companies and "Chinese oil companies operating in Burma".

In fact, human rights groups have turned their attention to Asian companies operating there. Just after the crackdown began, Human Rights Watch (HRW) publicly called on "Chinese, Indian, Thai and other companies" to "ensure their operations do not contribute to or benefit from human rights abuses" in Burma.

In November HRW published a detailed report on foreign oil and gas companies providing a "crucial source of support" to the Burmese junta. The group also called on the UN Security Council to place targeted sanctions on petroleum industry investment in Burma, and issued a report on the crackdown.

The US House of Representatives' recent unanimous vote to award the Congressional Gold Medal (the highest civilian honor in the U.S.) to Burmese opposition leader and Nobel Peace Prize recipient Aung San Suu Kyi is expected to bring needed attention to the plight of the Burmese people.

The picture emerging is of a need to target all possible leverage points on the Burmese junta, including governments, western and non-western companies active in Burma, and the United Nations. Social investors, along with their allies in the human rights community, are working to keep the pressure on corporations and to keep Burma on the front burner.

In October, the US Court of Appeals for the Second Circuit ruled that a lawsuit by victims of apartheid in South Africa against 35 US and European companies could proceed.

The ruling reversed the dismissal in 2004 of the case, filed under the Alien Tort Claims Act (ATCA), by the U.S. District Court for the Southern District of New York. Companies involved include BP, Exxon, IBM, Citigroup, General Motors and Ford.

In its decision, the appellate court ruled that the district court had "erred" in ruling that the plaintiffs could not argue under ATCA that the companies had aided and abetted human rights violations by the apartheid government of South Africa.

Legal scholar Anthony Sebok, in a column in FindLaw on October 23. , points out that the reversal might be a "pyrrhic victory" for the plaintiffs, as, for technical legal reasons, it sets a high bar for them to show the defendants' liability under ATCA.

It could therefore set a precedent that could make future ATCA cases hard to win. But Sebok notes that the reversal "does keep the case alive, providing a possible setting for settlement".

Interested readers should turn to Sebok's column, which is the first in a two-part series.

An update to Liz Umlas' July post: Mandatory CSR?

In September 2007, Ethical Corporation noted that Malaysia was also putting laws in place around corporate social responsibility (CSR) (and in September 2006, that country's stock exchange began requiring public companies to report on CSR-related initiatives). Here is the link to the article in Ethical Corporation.

Two recent articles point to some interesting developments - from some unlikely sources - regarding corporate social responsibility (CSR) and regulation.

In the UK, a report commissioned by Tomorrow's Company concluded that companies should push for CSR laws. Ethical Performance noted in July that the report says that "while voluntary initiatives are the best way forward, 'they subsequently need to be translated into national regulation that is then rigorously and uniformly enforced'." Ethical Performance goes on to emphasize that most of the ten people on the panel that undertook the inquiry were from the business community, not from non-governmental organizations (NGOs).

Also this month, Indonesia passed a law making CSR - broadly understood as the implementation of "environmental and social responsibility programs" - mandatory for companies, apparently becoming the first country to do so. Erin Lyon wrote in CSR Asia Weekly that business opposition to an earlier draft had led to a narrowing of the bill to cover only "companies with an impact on natural resources".

Lyon was skeptical of the new law, citing questions about how such a law would be implemented, how the government would actually sanction violators, and whether it would be "a new avenue for corruption". She also expressed concern that the financial sector was to be explicitly exempt from the CSR law, a move that would weaken its effect given that sector's crucial role in advancing the incorporation of environmental and social factors in corporate activities.

Indonesian business consultant Noke Kiroyan wrote in the Jakarta Post that the law was "a manifestation of the muddled thinking around CSR", and argued that the term CSR had not even been defined clearly in the legislation.

There seem to be serious reservations about the new Indonesian law. At the very least, though, will the developments in the UK and Indonesia advance the debate on whether CSR can or should be mandated?

Or will legal requirements implemented in the absence of any kind of clear consensus or understanding of what CSR entails do more harm than good?

Prior to its merger with Chevron in 2001, Texaco was involved in controversial legal proceedings related to its activities in Ecuador between 1969 and 1990. In May 2003, attorneys representing 30,000 indigenous Ecuadorians filed suit against Chevron seeking to collect $1 billion in damages for oil pollution in Ecuadorian forests and rivers 30 years before. The case went to trial in an Ecuadorian court in October 2003, and was pending as of March 2006.

Attorneys for Ecuadorian indigenous peoples appealed a May 2001 decision by a federal judge in New York to dismiss attempts to sue Texaco in U.S. courts. The U.S. courts determined that Ecuador was the appropriate jurisdiction. In August 2002, a U.S. federal appeals court upheld the May 2001 dismissal. Nevertheless, the appeals court ruling allowed that a verdict against the company reached in an Ecuadorian court would be enforced in the U.S. Legal action was originally brought in November 1993 by representatives of Ecuadorian indigenous communities and settlers from eastern Ecuador. The plaintiffs included 100 residents of Ecuador and nearby Peru.

The suit alleged that between 1969 and 1990 the company was responsible for practicing extensive deforestation, depriving local communities of land, contaminating rivers with oil spills and production waste, and polluting the atmosphere by burning off gas. In October 1998, a federal appeals court reinstated the suit against Texaco in a New York federal court after it had been dismissed a first time.

Last week, Reuters reported that Chevron was complaining that it was getting an "unfair trial" in Ecuador. A Chevron lawyer stated: "We will not hesitate to go to international tribunals to review what we believe is an unfair trial and lack of due process in this country."

Ironically, back in 2002 ChevronTexaco insisted that the case belonged in Ecuador, not in the U.S. Here's a passage from a company press release from 2002:

SAN FRANCISCO, Aug. 19, 2002 -- ChevronTexaco today issued the following statement regarding the United States Court of Appeals for the Second Circuit decision on Aug. 16 affirming the District Court's decision to dismiss the Aguinda v Texaco, Inc. and Jota v Texaco, Inc. litigation:

"ChevronTexaco is pleased with the ruling of the U.S. Court of Appeals affirming the lower court's dismissal of these claims and ruling that the cases brought by these plaintiffs do not belong in the U.S. judicial system. "This ruling vindicates ChevronTexaco's long-standing position and the arguments we have made to the court: The appropriate forum for this litigation is Ecuador because the plaintiffs are in Ecuador, the operations were in Ecuador, the state oil company -- with which the Texaco subsidiary was a minority partner, and which continues to operate the oil fields today -- is in Ecuador. The evidence is in Ecuador; and the remedies sought by plaintiffs can only be obtained in Ecuador."

KLD will be following the case with interest.

I just skimmed this report in preparation for the OnValues/Who Cares Wins conference I'm attending this week, which is focusing on emerging market investment.

The report is from Association for Sustainable & Responsible Investment in Asia (ASrIA), and it's on the lack of disclosure of environmental, social and governance (ESG) factors by Asian companies listing on the Hong Kong Stock Exchange. In addition to being a good overview, the report gives some idea of the proxy ESG indicators one can use when looking at companies that disclose very little information, such as staff turnover, expenditure on pollution control equipment, etc.