Corporate accountability can be defined as the ability of those affected by a corporation to hold corporations to account for their operations. This concept demands fundamental changes to the legal framework in which companies operate. These include placing environmental and social duties on directors to complement existing duties on financial matters, and legal rights for local communities to seek compensation when they have suffered as a result of directors failing to uphold those duties (Friends of the Earth, 2005).
Instead of urging companies to voluntarily give an account of their activities and impacts to improve their social and environmental performance, the corporate accountability ‘movement’ believes corporations must be ‘held to account’ – implying enforceability. This is a more radical position than that of CSR (corporate social responsibility) advocates. Over the years, NGOs and local stakeholders around the world have fought countless campaigns against companies over specific issues. Sometimes, firms have been brought to court. Well-known cases have arisen under the US ATCA (Alien Tort Claims Act) statute demanding compensation for the environmental liabilities (or ecological debts) left behind by companies.
Consumer campaigns have persuaded thousands of shoppers to buy recycled paper, fair trade and organic coffee, tea, chocolate and bananas, GM-free food, timber that has been certified as sustainable by the Forest Stewardship Council (FSC), and so on. This is called Green Consumerism. From a corporate accountability perspective, green consumerism and voluntary CSR places a focus on the consumer and on the individual company (often located in the North) and ignores the issues of social and environmental justice for communities (often located in the South).
This begs the question of whether it is right for Northern governments to put the onus on individual and corporate voluntarism, while sitting back and doing nothing as indigenous communities are pushed off their land and rainforests cleared to produce cheap bauxite, oil or gas, or palm oil for Northern consumers. NGOs say that if we are serious about social and environmental justice, the time has surely come to mainstream common standards on social and environmental performance. The way to do this is through changes to the legal framework that would allow people to hold corporations to account for social and environmental wrongdoing.
As summarised in a report commissioned by the United Nations Research Institute for Social Development (Utting and Clapp, 2008), the emerging corporate accountability agenda includes proposals to establish institutional mechanisms that hold corporations to account, rather than simply urging companies to improve standards or to report voluntarily. Corporate accountability initiatives promote complaints procedures, independent monitoring, compliance with national and international law and other agreed standards, mandatory reporting and redress for malpractice.
Friends of the Earth (2005) Briefing: Corporate Accountability [Accessed Nov 28, 2012 from http://www.foe.co.uk/resource/briefings/corporate_accountability1.pdf]
Utting, P., Clapp, J. (2008) Corporate Accountability and Sustainable Development, Delhi: Oxford University Press – India.
For further reading:
Bendell, J. (2004) Barricades and boardrooms: a contemporary history of the corporate accountability movement. Geneva: United Nations Research Institute for Social Development.
Shamir, R. (2004) Between Self-Regulation and the Alien Tort Claims Act: On the Contested Concept of Corporate Social Responsibility. Law & Society Review, 38: 635–664. doi: 10.1111/j.0023-9216.2004.00062.x
Utting, P. (2008) The struggle for corporate accountability. Development and Change, 39(6), 959-975.
Earthrights International: The Alien Tort Statute – [www.earthrights.org/legal/alien-tort-statute]
Global Policy Forum: Alien Tort Claims Act [http://www.globalpolicy.org/international-justice/alien-tort-claims-act-6-30.html]
This glossary entry is based on a contribution by Tom Bauler
EJOLT glossary editor: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos