Legal dimensions of international corporate social responsibility of multinational enterprises

The main purpose of the work is to discover the need for international regulation of transnational companies, and to analyze a legal character of CSR.

A notion of corporate social responsibility is discovered in the works of many Ukrainian and foreign researchers. Evolution of the notion is revealed in the works of G. Akerlof, P. Drucker, L. Hrytsyna, S. Lytovchenko. The development of legal character of corporate social responsibility was studied by F. Kotler, F. Kolot, L. Petrashko, I. Bantekas, J. Ruggie.

The need for regulation of transnational company appears as a result of their capacity to influence government policy and practice. The financial strength of most MNEs and the desire of developing countries to attract foreign investment give the former a significant advantage in investment negotiations with the host state. It means the MNE may impose favourable concessions regarding minimum wages, security measures, limitations in technology transfers, taxation, and others. The larger the investment is, the greater the economic dependence of the host state [1]. Similarly, the larger the democratic deficit of states' public governance, the more likely it is that corruption will be rife and pressure to sustain the particular investment status will be maintained. The company will likewise apply significant pressure to the home state in order to achieve the same results at an inter-governmental level, to win contracts, or to promote a political regime that will safeguard the interests of the subsidiary. On a more global level, it has been multinational enterprises that have persistently lobbied industrialized states toward trade liberalization through the lifting of tariffs and domestic subsidies.

Generally, there could be following characteristics of global business [2]: a) MNEs are necessary participants in the structure of international law, but that current “soft law" does not by itself constitute a sufficient platform by which to recognize international legal personality; b) MNEs substantially outstrip less developed countries in financial and technological terms, and as a result; c) they are able to influence the policy and practice of LDCs. Moreover, they operate across a range of national borders, their operations directly or indirectly affecting a multitude of stakeholders, including individuals and states, who are bearers of direct rights and duties under international law.

All these statements raise the thought that even with such enormous power of MNEs their activities should respond the common norms of social and ethical behaviours. If this is the case, social responsibility has a complex, ambiguous relationship with law, as it generates types of regulation in areas where legislation should exist or, in some cases, actually does. It deals with issues which are already covered by conventions, resolutions, or recommendations on an international level, or positive law on a national level. It, therefore, deliberately sets itself up in competition with international labour law and national legislation. Social responsibility forms the basis of new forms of self-regulation by companies, who produce their own resources or reference documents, based, to a great extent on social law sources. There may or may not be a relationship with the existing legal system and, if there is, it is really ambiguous, as it aims both at closeness to the rule of law and separateness from it, or even its marginalization. This ambiguity comes to a head when corporate social responsibility is the subject of a global framework agreement, signed by company management and trade union organizations.

Corporate social responsibility is a way, where as a result of mounting public pressure, consumer awareness, and other forces, the MNE is forced to self-regulate in the sphere of human rights and the environment. The emergence of corporate influence in fields previously seen as sovereign prerogatives of the state - particularly the areas of soft law and human rights - has created a need for the main actors in international relations to get involved in CSR as an attempt to provide an ethical overall framework, and has forced many lawyers to venture out towards the very limits of law as they perceive it today. Most of the main international or regional institutions (the UN, particularly through the Global Compact launched by Kofi Annan, the European Union, the World Bank, the OECD and even the NGOs) have already put in place programmes entirely dedicated to creating and promoting an ethical code for and in partnership with businesses.

The scope of CSR could be summed up in the “triple bottom line" [1] theory (“people, planet, profit"): a business, no matter where it - directly or indirectly - carries out its activity, must be judged according to three criteria: how it treats its employees, how its activity affects the environment, and how much profit it makes. There is no doubt that the largest multinationals - particularly those that are the most “suspect" environmentally or in labour law terms (oil companies, fast-food chains, etc.) - know that they are already under the constant and sometimes highly critical eye of civil society [3]. However, for companies not in the media spotlight, in other words the vast majority, the idea of imposing strict rules on themselves which go beyond the existing legal requirements is still highly unattractive in cost/benefit terms.

International legal instruments addressing MNE issues are channelled in two ways: a) through binding treaties in which state entities are the direct addressees of rights and obligations, but which directly affect and have a domestic impact upon MNE operations, and b) “soft law" that is directly addressed to MNEs. Examples of the former include the vast majority of International Labour Organization (ILO) conventions, industrial pollution-related treaties, and others, while examples of “soft law" include the OECD Guidelines, the UN Norms on the Responsibilities of Transnational Corporations and other Business Enterprises, the Preamble to the 1948 Universal Declaration on Human Rights (UDHR), [4] and others.

Generally, there are four types of CSR sources. The responsibility accruing from each one of these is subject to both subjective and objective variables. These sources comprise public international instruments, NGO guidelines (some of which encompass a CSR evaluation system), individual business codes of conduct, and domestic legislation relating to CSR [5]. Each will be examined in turn.

- Integrated product policy (environmental issues);