Striving to remain ethical in strife-torn countries
Written by Sir Mark Moody-Stuart
One of the privileges of living and working in 10 different countries is seeing the development and evolution of a country at close quarters over several decades. Much has been written about the “resource curse”— the paradox that countries with abundant oil, gas and mineral resources are economically poorer than countries with fewer of those resources.
As a geologist, I acknowledge that the charges of distortion of an economy by a dominant resource sector are sometimes accurate. Resource income can distort exchange rates, have negative effects on agriculture and manufacturing and, in some cases, lead to corruption. But such negative effects are by no means inevitable.
For example, from what in the ’60s was a country with no medical care and little education, Oman is now a modern economy boasting a bicameral parliament with women members, good education and a university drawing students from neighboring countries, healthcare praised by the United Nations Development Programme and a flourishing stock exchange. Similarly, Malaysia has evolved from a simple economy dependent on primary products to a modern manufacturing and service economy. On the other hand, the picture in Nigeria has been very mixed and the outcomes often unhappy.
Taking Responsibility
If one takes some pride, as I do, in seeing positive outcomes, one must also feel responsibility where resources have played a role in less positive outcomes. The dominant determinant of outcomes is, in fact, government and national leadership. While Oman and Malaysia have enjoyed long periods of leadership committed to the development of the economy and society, Nigeria has suffered for half of the last 40 years from military rulers who often put their own interests first.
So what are the responsibilities of a company where the government spends revenue unwisely or, in the worst case, steals it and perhaps has a questionable record on human rights? There are three options for an international company and for countries concerned about the situation. First, continued engagement in the economy coupled with efforts to improve the situation. Second, withdrawal and a breaking off of economic connections, and last, economic sanctions.
For continued involvement, a company should clearly apply everywhere the same global standards and company values in its own operations. But in the absence of an effective government, this is unlikely on its own to lead to positive results. Negative events and dissatisfaction in society are likely to render operations unsustainable. Something more is needed.
An encouraging development in the last 20 years is the growth of coalitions between civil society organisations, responsible companies, and others. These coalitions address very specific issues and demonstrate an effective way forward. Groupings such as the Forest Stewardship Council or work on sustainable fisheries started in areas of traded goods. The Voluntary Principles for Security and Human Rights were then also developed, as was the Extractive Industries Transparency Initiative (EITI) and the Kimberley Process for conflict diamonds.
These initiatives have real impact. As part of the EITI process, the 18 candidate countries and 26 compliant countries not only agree to independent audits of revenue, a process which has covered $1.225 billion of revenue for 197 fiscal years, but the government is also required to commit to establish a multi-stakeholder group to oversee the implementation of the EITI. In many countries, an independent body to comment on government actions is a major step forward.
The largest of these multi-stakeholder coalitions is the United Nations Global Compact (UNGC). More than 8,000 companies in 140 countries employing over 55 million people have committed themselves to embed the principles of the major UN conventions on human rights, working conditions, the environment and anti-corruption in their day-to-day operations and to report publicly with regular frequency on how they are doing this. In this, they are joined by civil society organisations and labour unions. UNGC Local Networks are active in more than 100 countries and bring together companies large and small, national and international, with other stakeholders to address priority issues. These groupings can have real impact in influencing governments in the interests of society.
Difficult Choices
The option of withdrawal from a country is not very practical for a resource company with major assets and employees on the ground. The Canadian company Talisman was pressured by the Canadian government and civil society to withdraw from Sudan. In private, human rights groups now admit that this did not result in any tangible benefit. Although the successor operators from China, Malaysia and India are doing a responsible job, they are probably somewhat less engaged with civil society organisations than was Talisman. So attitudes are changing and will continue to change as cooperation between civil society and companies increases.
A decision on economic sanctions is for governments and the UN. However, the experience of the sanctions that have been applied to Iran for more than 30 years is not encouraging. In my experience, every time sanctions prevented normal economic engagement in the oil industry, the rational technocrats lost influence and the extremists benefited. The private sector has been almost destroyed and such economic activity as continues is in the hands of the government and its cronies. There are those who claim that sanctions have at last forced engagement, but I believe the cost in economic terms and in 30 years of wasted time has been enormous. I would also argue that the positive changes in Burma are more as a result of ongoing engagement by some companies and by the neighbouring ASEAN countries than of Western sanctions. It is encouraging that the government of Myanmar is now supporting the involvement of companies in the UNGC Local Network there.
I believe there is a real role for the continued engagement of responsible companies in countries with governments good and bad. The seminal work of John Ruggie in preparing UN Guiding Principles for Business and Human Rights is very helpful to this. However, to ensure that companies do indeed behave responsibly, it is essential that they report very transparently on all aspects of their operations and also engage and cooperate not just with their shareholders, but with civil society both locally and internationally.
This article draws on ideas and cases from the book Responsible Leadership: Lessons from the Front Line of Sustainability and Ethics, available for purchase from Greenleaf Publishing.
