Legal Framework for CSR in United States of America

Legal Framework for CSR in United States of America

Legal Framework for CSR in United States of America

With the corporate social responsibility movement gaining more and more momentum in the consumer, investment and legal spheres, expectations towards companies have increased significantly. The USA is one of the top players in economic aspects of globalization. CSR encompasses issues that can be purely internal, but also situations involving the behaviour of corporations doing business abroad.

CSR is a form of soft law. It is not required by USA statutes or regulations, i.e., “hard law”, but is nonetheless seen as obligatory by most corporations because of consumers’ expectations and internal norms. This section will provide an overview of the legal framework in the American system in respect of CSR.

The US markets for labour and capital are fairly unregulated as there are low levels of welfare state provisions. Consequently, many social issues, such as education, healthcare or community investment have traditionally been at the core of corporate social responsibility (CSR) in the American context.

CSR initiatives and communicating activities within the areas of philanthropy, stewardship, volunteerism and environmental affairs are not treated as a regulatory compliance issue in the United States of America (USA or U.S.).

Therefore, CSR in the USA is often characterized by voluntary societal engagements by businesses as they are not obliged to undertake social and environmental responsibility practices. Such laudable behaviours are also referred to as corporate citizenship initiatives.[1]. Social responsibility and corporate citizenship encompass responsible behaviours that go beyond financial reporting requirements.

The U.S. government continuously reiterates their commitment to corporate social responsibility (CSR). This is exemplified in their comprehensive approach to providing support and guidance on areas of corporate conduct and sustainable behaviours. The U.S. secretary of state’s agenda is to ensure effective coordination and partnerships with individual bureaus and offices in order to harness global economic tools that advance U.S. foreign policy goals on responsible initiatives.

For example, the U.S. Bureau of Economic and Business Affairs (EB) lead a corporate social responsibility team. Its primary purpose is to promote responsible business practices and fostering sustainable development whilst building economic security.[2] This team provides guidance to American companies and their stakeholders to engage in corporate citizenship.

EB’s CSR team supports major areas of responsible corporate conduct, including: ‘good corporate citizenship’, ‘human rights’, ‘labour and supply chains’, ‘anticorruption’’, ‘anticorruption’, ‘health and social welfare’, ‘contribution to the growth and development of the local economy’, ‘innovation, employment and industrial relations’, ‘environmental protection’, ‘natural resources governance’ including the Kimberley Process, ‘transparency’, ‘transparency’, ‘trade and supply chain management’ and supply chain management’, ‘intellectual property’ and the ‘women’s economic empowerment’ among other issues.

Most of EB’s corporate policies are drawn from the Organisation for Economic Co-operation and Development (OECD) ‘Guidelines for Multinational Enterprises’ and from U.S. national contact point for the guidelines (as explained hereunder).

EB’s CSR team also works with the U.S. National Contact Point (US NCP) and manages the Secretary of State’s Award for Corporate Excellence (ACE) programme.[3] The EB’s role is to engage with business, trade unions and civil society to bring economic prosperity, respect for human rights and good corporate citizenship.

Good Corporate Citizenship and Human Rights

The Bureau of Democracy, Human Rights and Labour’s (DRL’s) offices of International Labour Affairs, Internet Freedom, and Business and Human Rights also work with companies, civil society including unions, NGOs and government agencies to implement policies that respect human and labour rights.[4]

The DRL team focuses on engaging stakeholders on key issues at the intersection of business and human rights. DRL has also implemented the United Nations (U.N.) Guiding Principles on Business and Human Rights. These principles are grounded in recognition of:

(a) “The states’ existing obligations to respect protect and fulfill human rights and fundamental freedoms;

(b) The role of business enterprises as specialised organs of society performing specialised functions, required to comply with all applicable laws and to respect human rights;

(c) The need for rights and obligations to be matched to appropriate and effective remedies when breached.[5]

In 1998, DRL set up a Human Rights and Democracy Fund (HRDF) to fulfill the bureau’s mandate of monitoring and promoting human rights and democracy in the global context. The HRDF fund was designed to act as the department’s “venture capital” fund for democracy and human rights issues, including; the promotion of democratic principles and personal liberties.

Such programmes enabled the U.S., “to minimise human rights abuses, to support democracy activists worldwide, to open political space in struggling or nascent democracies and authoritarian regimes, and to bring positive transnational change”. DRL’s important efforts have brought positive change as its funding of HRDF has grown from $7.82 million in 1998 to over $207 million in 2010.[6]

In parallel, an ‘Office to Monitor and Combat Trafficking in Persons (TIP) works with business leaders to prevent and stop human trafficking. TIP does this by advancing the Luxor Guidelines, which focus on corporate policy, strategic planning, public awareness, supply chain tracing, government advocacy and transparency to reduce forced labour in supply chains.

In 2015, TIP Office awarded over $18 million in grants and cooperative agreements to combat human trafficking. This office continues to fund an emergency global assistance project that provides services on a case-by-case basis for individuals that have been identified as trafficked persons.

Moreover, TIP is involved in a number of other projects that comprise partnerships with governments, civil societies, and other key stakeholders. These collaborative agreements increase capacity and raise awareness of human trafficking.

For example, TIP supported the new Child Protection Compact (CPC) in Ghana as it worked in liaison with Ghanaian ministries to address child trafficking. The TIP office also awarded $5 million to the International Organisation for Migration (IOM) and to the ‘Free the Slaves’ initiative.[7]

Anti-corruption

The corruption undermines sound public financial management and accountability at all institutional levels: It deters foreign investment in many countries, it stifles economic growth and sustainable development, and it distorts prices, and undermines legal and judicial systems.[8] The high-level, large-scale corruption by public officials is also referred to as kleptocracy.

It can have a devastating effect on democracy, the rule of law, and economic development. Those who contribute to such corruption by paying or promising to pay bribes or by giving other undue advantages to foreign public officials will undermine good governance and alter fair competition.

The U.S. has long led by example in its enduring fight against corruption. Through its Foreign Corrupt Practices Act (FCPA) in 1977, the U.S. became the first country to criminally penalise its nationals and companies that bribe foreign public officials in commercial transactions. In fact, the United States denies safe haven to egregiously corrupt officials and other public figures as specified in the Presidential Proclamation 7750 (of January 2004).

Read also: Legal Framework for CSR in United Kingdom

Moreover, the United Nations Convention against Corruption (UNCAC) has also provided a framework for international cooperation against corruption, including preventative and enforcement measures.

The U.S. government has participated in drafting U.N. legislative guide materials prior to its implementation and enforcement.[9] The USA is also member of the OECD’s Anti-Bribery Convention where EB represents the U.S. Department of State within the OECD Working Group on Bribery in International Business Transactions.

The Bureau of International Narcotics and Law Enforcement Affairs (INL) promotes anti-corruption, internationally and supports CSR by fostering clean business practices; by engaging the business community in anti-corruption efforts and promoting a level playing field.[10]

This bureau fights international crime, illegal drugs and instability abroad. It helps foreign governments to build effective law enforcement institutions that counter transnational crime spanning from money laundering, cybercrime, and intellectual property theft to trafficking in goods, people, weapons, drugs, or endangered wildlife.

INL’s remit is to combat corruption by helping governments and civil society build transparent and accountable public institutions[11] fights injustice and promotes laws and court systems that are fair, legitimate and accountable by:

  • “Make courts and legal systems more fair and transparent;
  • Develop judges, prosecutors, and investigators who are highly skilled and accountable;
  • Improve correctional facilities and prisoner treatment standards;
  • Encourage women to join law enforcement and legal fields;
  • Combat gender-based violence and hate crimes and aid survivors

Health and Social Welfare

There is a wide array of U.S. governmental programmes that may have contributed directly or indirectly to health and social welfare. Many corporate citizenship programmes are concerned with the economic and social well-being of individuals and families.

The term “social security” is used to cover a large portion of the field of social welfare. This term first came into general use in the United States in 1935, during the Great Depression, when the Social Security Act was passed. This particular act was included in the Atlantic Charter that was signed by the President of the United States and the Prime Minister of Great Britain on August 14, 1941.

Later, in 1944, this act was adhered by 26 Allied governments at the International Labour Conference in the Declaration of Philadelphia. The terms “social security” and the “Federal Old-Age”, “Survivors and Disability Insurance” (OASDI) have become synonymous with the US governments’ programmes that are designed to prevent destitution; by providing protection against major personal economic hazards such as unemployment, sickness, invalidity, old age, and the death of the breadwinner. In a sense, social security is primarily an income maintenance programme which, in addition to providing cash benefits, may be accompanied by constructive social services in order to prevent or mitigate the effect of certain hazards.[12] (SSA, 2017).

In the United States, public education was not considered as a social welfare activity, probably because it is taken for granted, since its inception 125 years ago. On the other hand, public health and vocational rehabilitation are not included within the Social Security Act, but are present in separate Federal laws (SSA, 2017).

However, medical care and cash benefits have always been provided under the workmen’s compensation laws. These laws cover work-injuries and members of the armed forces and their dependents, and veterans who are entitled to medical care at public expense.

Interestingly, landmark reform on the Patient Protection and Affordable Care Act (PPACA), and the Health Care and Education Reconciliation Act (HCERA) of 2010 (H.R. 4872) was passed and enacted through two federal statutes. PPACA was signed in March 23, 2010.

This act which is also known as ‘Obama care’, provided the phased introduction over 4 years of a comprehensive system of mandated health insurance with reforms that were designed to eliminate “some of the worst practices of the insurance companies”, including pre-existing condition screening and premium loadings, policy cancellations on technicalities when illness seems imminent, annual and lifetime coverage caps, among other issues.

It also sets a minimum ratio of direct health care spending to premium income; and creates price competition that was bolstered by the creation of three standard insurance coverage levels to enable like-for-like comparisons by consumers; and a web-based health insurance exchange where consumers can compare prices and purchase plans (PPACA, 2010). This system preserves private insurance and private health care providers and provides more subsidies to enable the poor to buy insurance.

Notwithstanding, the Health Care and Education Reconciliation Act of 2010 (H.R. 4872), which amended PPACA (that was passed a week earlier), was enacted by the 111th United States Congress and became law on March 30, 2010 (Reuters, 2010). This latter act (H.R. 3221) also incorporated the Student Aid and Fiscal Responsibility Act (SAFRA) expanded federal Pell Grants to a maximum of $5500 in 2010 and tied grant increases to annual increases in the Consumer Price Index, plus 1%.

Therefore, SAFRA ended the practice of federal subsidisation of private loans. This has translated to cutting the federal deficit by $87 billion over a period of 10 years. Recently, there were other significant reforms and ideas that have been proposed, including a single-payer system and a reduction in fee-for-service medical care.[13]

 

 

[1] M.S. Fifka, ‘Corporate citizenship in Germany and the United States-Differing perceptions and practices in transatlantic comparison. Business Ethics: A European Review, 22 (4), 2013, pp. 341-356

[2] EB CSR, ‘Corporate Social Responsibility, Bureau of Economic and Business Affairs.’ Retrieved 6th  April, 2021, from http://www.state.gov/e/eb/eppd/csr/

[3] Ibid

[4] DRL Programs, ‘Human rights and democracy fund: Bureau of democracy, human rights and labour’ (2015). Retrieved 6th April, 2021, from http://www.state.gov/j/drl/p/

[5] ‘United Nations guiding principles business and human rights’ (2011)  Retrieved 17th April, 2021, from http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf

[6] DRL Programs: Human rights and democracy fund (2015). Retrieved 17th April, 2021, from http://www.state.gov/j/drl/p

[7] Office to monitor and combat trafficking in persons, (2015). Retrieved 17th April, 2021, from http://state.gov/j/tip/

[8] U. S. strategy to internationalize efforts against kleptocracy: Combating high-level public corruption. Denying Safe Haven, and Recovering Assets, (2006). Retrieved 6th April, 2021, from http://2001-2009.state.gov/p/inl/rls/fs/70365.htm

[9] Ibid

[10] Bureau of International Narcotics and Law Enforcement Affairs (INL) (2015). Retrieved 6th April, 2021, from http://www.state.gov/j/inl/

[11] Ibid, INL, 2015

[12] Social welfare in the United States (2017). Retrieved 6th April, 2021, from http://www.ssa.gov/history/aja964.html

[13] New York Times, (2013), ‘Health Care’s road to ruin’ Retrieved 8th April, 2021 from http://www.nytimes.com/2013/12/22/sunday-review/health-cares-road-to-ruin.html?_r=0

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