Beyond Auditing Financial Crisis and Competitiveness Challenges Remaking

‘Beyond Auditing’, Financial Crisis and Competitiveness Challenges: Remaking Global Governance Standards/Norms 5 th ESRC Seminar Series on ‘Changing Cultures of Competitiveness’, 17 th April 09 Ngai-Ling Sum Politics and International Relations Lancaster University

Outline: Six Parts • Building on existing research on Wal-Mart • ‘Going beyond auditing’ • Scaling Up Corporate Social Responsibility (CSR): 2 Stages • ‘Responsible Competitiveness’ as an Emerging Knowledge Brand • Recontextualizing for developing countries • Concluding remarks

I Building on Existing Research • Wal-Mart/ASDA’s bargain model of retailing • Price-value competitiveness – ‘Always Low Prices’ – Low cost accumulation strategy • Labour issues and Wal-Mart watching by SACOM and similar movements • Adopting and enhancing self-regulated corporate social responsibility (CSR) • Managerial focus on codes of conduct, factory inspection, certification, auditing, reporting, scorecards, etc.

• Foucault: a process of rarefaction – selective thinning of major elements (e. g. , CSR) + thickening of other aspects (e. g. , codes of conduct, reports, audits, scorecards, best practices, etc. ) – Technification and managerialization of the social • More ‘corporate audit responsibility’ than ‘corporate social responsibility’ (Sum 2009) • Recognizing some of these problems as private governance failure

II ‘Going Beyond Auditing’ • Corporate-consultancy-NGO talks of ‘going beyond auditing’ • For example • ‘To help bring trade justice to workers’ (ETI Training Programme 2005) • ‘Identifying the root causes of noncompliance’ (Ethical Trading Action Group 2006)

III Scaling Up CSR in 2 Stages • Towards ‘responsible competitiveness’ • 2 overlapping stages • 2001 -9: the rise of responsible competitiveness • 2007 -9: consolidation and extension

First Stage: 2001 -9 • Nodal actors in discursive network of networks – Simon Zadek + Account. Ability – Harvard Kennedy School of Government + John Ruggie + Global Compact – Research institutes, corporate organizations, labour organizations, NGOs, etc. • Producing discourses & knowledging apparatuses around ‘responsible competitiveness’ – Chaining ‘corporate social responsibility’ with ‘competitiveness’ at corporate and national levels

‘Responsible Competitiveness’ • Corporate level ‘Responsible competitiveness’ stands for markets that reward business practices that deliver improved social, environmental and economic outcomes • Country level ‘Responsible competitiveness’ means economic success for nations that encourage such business practices through public policies, societal norms and citizen actions. [Account. Ability http: //www. accountability 21. net/default 2. aspx? id=982]

‘Responsible Competitiveness’ Competitiveness of nations Corporate social responsibility Source: Zadek 2003

“Responsible competitiveness is about making sustainable development count in global markets. It means markets that reward business practices that deliver improved social, environmental and economic outcomes; and it means economic success for nations that encourage such business practices through public policies, societal norms and citizen actions”. (Zadek & Mac. Gillivray, 2007)

Stage 1 Rise of a New Knowledge Brand of ‘Responsible Competitiveness’: 2001 -2007 Major Actors and Institutions Characteristics Discourses/Knowledging Apparatuses ‘One of the leading big-picture global thinkers’, ‘Citizen Zadek’, ‘Madonna of CSR’ Dr. Simon Zadek Account. Ability Promoting Accountability for Sustainable Development + Responsible Competitiveness Consortium Books and reports Set up Account. Ability and ETI CEO of Account. Ability Involved in the building of the UN Social Compact Senior Fellow of the Harvard Kennedy School – CSR Initiative (2004) MFA Forum convenor ILO’s World Commission on Social Dimension of Globalization Civil Corporation (2001) Established in 1996 Not-for-profit organization Global think tank Reports, journals + index The Logic of Collaborative Governance (2006) CSRI No. 17 Governing Collaborative Governance (2006) CSRI No. 23 Corporate Responsibility and the Competitive Advantage of Nations (2002) Responsible Competitiveness: Corporate Responsibility of Clusters in Action (2003) The State of Responsible Competitiveness Report (2007) The Responsible Competitiveness Index (2003) Accountability Forum (journal) AA 1000 Standard and Series (2008)

MFA Forum Established in 2004 Not-for-profit organization A collaboration of brands and retailers, trade unions, NGOs and multi-lateral institutions in the textile and garment sector after the MFA Building Success: Indicators of Progress Purchasing Practices Research

search MFA Forum • home | • about MFA Forum | • participants | • publications and research | • contact us | MFA Forum in Brief The MFA Forum is a not-for-profit, participation-based open network established in early 2004 to address key concerns that were predicted with the end of the Multi-Fiber Arrangement. The Forum works as a collaboration of brands and retailers, trade unions, NGOs and multi-lateral institutions in the textile and garment sector. It aims to improve sustainability while promoting social responsibility and competitiveness in national garment industries that are vulnerable in the post. MFA trading environment.

Major Actors and Institutions Characteristics Harvard Kennedy School Ruggie, Zabek and others of Government Corporate Social Responsibility Initiative Discourses/Knowledging Apparatuses Research reports (e. g. , Building Linkages for Competitive and Responsible Entrepreneurship 2007 with UNIDO) Training on CSR Prof. John Ruggie Kirkpatrick Professor of International Affairs in Harvard Kennedy School of Government Faculty Chair of the HKS’s CSR Initiative Constructivist theory in international relations (Ruggie 1982, 1983) International norms shape/create actions Assistant Secretary-General and Chief Advisor for strategic planning to United Nations Secretary-General Kofi Annan (1997 -2001) Norms are productive (not constraining) Norms-changing and learning strategies are the core in search of the common good Special Representative of the UN Secretary-General on business & human rights (2005 -) Norms-mediated regulation (soft law) of business community Founder of the UN Global Compact and the 10 Principles Global governance and Global Compact (Ruggie 2002, 2003)

Index, reports and standard Learning Forum in Brazil 2003 Launching of the Responsible Competitiveness Index Global Policy Dialogue Collaborative efforts of public institutions, business and civil society Leaders Summit 2007 State of Responsible Competitiveness Report ISO 26000 standard on Social Responsibility (2008) UN Global Compact Five core UN organizations in Global Compact Building Linkages for Competitiveness and Responsible Entrepreneurship (2007) Responsible Entrepreneur Achievement Programme 2007 (software tool) UNIDO UNEP UNDP Aligning with UN’s Millennium Goals and the Global Compact especially the ’ 10 Principles’ County Carbon Competitiveness Index Launching CSR project in development countries ILO/IFC Better Work 2006 Commission on Human Rights Norms on the Responsibilities of Transnational Corporations 2003

Greenleaf Publishing CSR publications Journals and Books ‘Sustainability, Responsibility and Accountability’ Journals Journal of Corporate Citizenship Account. Ability Forum Books Tomorrow’s History (2004) Learning to Talk (2004) Rising the Bar (2004) Putting Partnership to Work (2004)

Stage 2 2007 -9: Financial crisis and competitiveness challenges • Challenges of the crisis upon corporations and nations • The intensification of the discourse on ‘responsible competitiveness’ • Moving onto stage 2 – wider discursive resonance and chaining as well as suturing • Mediated and recontextualized by Obama, Saudi Arabia’s Global Competitiveness Forum, UNEP, banking communities, etc. – Obama – ‘Hold Corporations Responsible’ (2008) + middle east dialogue – Saudi Arabia emerging as another nodal point – imagined as the ‘House of Wisdom’ and coordinating the Global Competitiveness Forum - adopting ‘responsible competitiveness’ as its central theme 2009 – UNEP’s call for ‘Green New Deal’ and ‘Green Economy Initiative’ – World Economic Forum in Davos – ‘Green New Deal for a Post-Crisis World’ – HSBC – responsible investment (sustainable finance) – Wal-Mart – ‘Sustainability Summit’ in Beijing 2008 • Consolidating and resonating among transnational socio-economic forces

Stage 2 in the Development of ‘Responsible Competitiveness’ Discourses and Practices 2007 -9 Major Actors and Institutions Saudi Arabia Investment Authority General (SAGIA) King Khalid Foundation Corporate Social Responsibility Initiative at Harvard Kennedy School (CSRI) Account. Ability World Bank Institute The Prince of Wales International Business Leaders Forum Tamkeen Characteristics Discourses/Knowledging Apparatuses Co-hosting a series of leadership dialogues consisting of leading Saudi Arabian and multinational companies, educators, policy Responsible Competitiveness makers, chambers of commerce, the Leadership Dialogues media, and global thought-leaders in the area of corporate social responsibility and responsible competitiveness Global Competitiveness Forum 2009 – ‘responsible competitiveness’ as its Forum reports and blogs central theme

Over 100 world leaders including former Malaysian Prime Minister Mahathir Mohamed, Shinzo Abe, former prime minister of Japan; Carlos Ghosn, president and CEO of Nissan Motor Company; and Mary Robinson, seventh president of Ireland, will speak at this international gathering. Other prominent speakers: Abdullah Zainal Alireza, minister of commerce & industry, Global Paolo Coehlo, renowned author; Timothy Competitiveness Shriver, chairman, Special Olympics; Thomas Forum 2009 Enders, president and CEO of Airbus; Nandan Nilekani, executive co-chairman of Infosys; Mohammed Al-Mady, vice chairman and CEO of SABIC (Saudi Basic Industries Corp. ); Thomas Russo, vice chair, Lehman Bros; and Paolo Scaroni, CEO of Eni Sp. A. Amr Al-Dabbagh, governor of Saudi Arabian General Investment Authority (SAGIA), the main organizer, said the forum would be based on theme entitled “Responsible Competitiveness, ” which is essential for the world to confront future economic challenges Selecting ‘Responsible Competitiveness’ as its central theme Forum programme, reports + blogs Recommendations in an open letter to G 20

IV ‘Responsible Competitiveness’ as an Emerging Knowledge Brand • Ruggie-Zadek + UN-Harvard Kennedy School. Account. Ability + research institutes, corporate organizations, NGOs, etc. • Gaining greater resonance since the crisis and recontextualizing at different sites and scales • Emerging as a new knowledge brand

How does it function as a knowledge brand? • Claims problem-solving competencies – ‘beyond auditing’, ‘financial crisis’ • Quality guarantee from Harvard Kennedy School • Many technologies (theories, principles, methodologies, reports, indexes, best practices) marketed by network of UN agencies, national research institutes, think tanks, NGOs, etc. • Popularized by journals, business press, reports, forums, blogs, etc. • Circulated by idea entrepreneurs from think tanks, trade bodies, financial institutes, etc. • Appeals to fear/anxieties of crisis and restructuring

Knowledge brands can be defined as sets of hegemonic meaning-making devices that are promoted by “world-class” guru-academicconsultants who claim unique understanding of the economic world and who translate this into pragmatic policy recipes and methodologies that address crisis, social contradictions and also appeal to pride and anxieties of subjects in the process of socioeconomic changes

V Recontextualization • Building on work of World Bank and UNDP • Harvard Kennedy School of Government and UNIDO – Report on Building Linkages for Competitiveness and Responsible Entrepreneurship (2007) • Re-contextualize ‘corporate responsibility’ for Developing Countries • Linking ‘corporate responsibility’ with ‘poverty reduction’ (one of the Millennium Development Goals) – Narrates growth in terms of job creation, income generation and provision of livelihood for the poor – Requires ‘new types of public-private partnership and business linkages between large corporations and small enterprises offer great potential to improve economic opportunities, productivity and growth’ (2007)

• Builds new kind of clusters – ‘Corporate responsibility clusters’ to promote enterprise development, poverty reduction and spread more competitive and responsible business practices – Targets ‘governments of developing countries’, ‘smalland-medium-enterprises’ and ‘the poor’ as sites of intervention • Such reinvention of ‘cluster’ metaphor echoes what neo-Foucauldians call a ‘technology of agency’ – a mix of participation, capacity-building and control • Creates agency in terms of ‘partners’ but also controls sites for exercising agency and types of agency

Technology of Agency: Sites and Types of Agency Sites of Organising Agency Government Types of Agency • Development partners • Creating necessary enabling environment • Part of multi-sector partnership to promote business impact • Attract FDI • Create jobs and develop human resources Multinational and domestic corporations Small and medium enterprises NGOs The poor • Upgrading the value chains • Adopt CSR strategies and social investment • Public policy advocacy for small enterprises • Involved as key producers, employers, distributors, innovat ors, and wealth creators • Important part of a vibrant private sector • Implement responsible business practices • Multi-sector partnership • Strengthen development impact of business • Competitive, entrepreneurial, self-help, self-improved, and self-managed individuals

• This technology partners government, NGOs and people with markets in new ways • It imbues their relationship with new meanings of responsibilities – To participate in clusters, production, the markets and global trade – To become builders of ‘social capital’ and ‘catalyzers’ of entrepreneurship – To become self-help, self-improved, and self-managed individuals

VI Concluding Remarks • Examine the scaling up of CSR in face of private governance failure • The making of a new global governance standard/norm – through suturing different knowledging techniques and apparatuses (e. g. , reports, indexes, journals, best practices) a project related broadly to ‘responsible competitiveness’ – two overlapping stages • mediated by knowledge brand that resonate among transnational socio-economic forces • Recontextualize in different sites and scales

• Examine recontextualization of corporate responsibility to developing countries • For example, ‘corporate responsibility clusters’ – ‘Making markets work better for the poor’ or ‘making the poor works for markets’? – ‘Marketization of the social’ or ‘socialization of the market’? – Moving to post-Washington Consensus or a case of enhanced neoliberalism/neoliberalism expansionism? • Cultural Political Economy Approach to ‘changing cultures of competitiveness’ in neo-liberalism – Beyond how question and materiality of the technical – Who is involved? What is involved? And why?

The End Thank you!

1. Build on Existing Research • CPE of competitiveness, Wal-Mart and corporate social responsibility • Wal-Mart – largest service company in the world • Its brand – ‘Always Low Prices’/ ‘Save Money, Live Better’ – The bargain model of retailing - price-value competitiveness – Low-cost accumulation strategy – Entering into ‘ultimate joint partnership’ with China

• Two ways these two systems meeting points – The role of dormitory labour regime in industrial clusters • Lengthening of the workday • Easy access to labour • Daily labour reproduction (food, accommodation, etc) • Compression of work/life

– Disciplining of suppliers’ costs and margins through scorecards • A body of knowledge enables W-M managers to have key -hole views into suppliers’ costs and margins • A mechanism of control – evaluate its costs and require them to match its lowest price, comparing their costs with the average, etc. • Informational super-vision – allow Wal-Mart managers to demand lower prices, benchmark average and demand refunds • Power asymmetry between retailer and suppliermanufacturers – pass their costs onto workers

Table 1: Knowledge Produced in Wal-Mart Supplier Scorecards Measurement Criteria Sales Measurements Markdown Measurements Margin Measurements Measurement Components Overall % increase Comps Avg. Sales/Store Sales at Full Prices vs. Markdown • Mark-ups and Markdowns (dollars, units and %) Prior and current retail price § Initial margin Average retail price Average cost Gross profit at item level Gross profit/item/store Margin mix • Replenishable store inventor Inventory Measurements Return Measurements Non-replenishable store delivery Warehouse inventory Lost sales from OOS Excess inventory DC outs Total owned inventory Customer defective returns Store Claims (Source: American Logistics Association, Exchange Roundtable, March 8, 2005, Dallas TX, http: //www. hoytnet. com/HTMLobj 315/ALA 2005 R 3 -FINAL_with_Pics_March_8_2005. ppt, accessed on 12 May 2008)

Wal-Mart’s Ethical Standards Programmes 1992 Wal-Mart’s Factory Certification programme Include Standards for Suppliers according to local employment and labor laws Focus on Bangladesh and China First Factory Certificate programme manual 1993 -96 Pacific Resources Exports Ltd. auditing factories directly producing for Wal-Mart Price. Waterhouse. Coopers was involved auditing at a later stage 1997 -2001 Factories in Egypt, Pakistan, India and Nicaragua were added 2002 Assuming its own global procurement and directly managing its Factory Certificate programme 2003 Wal-Mart Ethical Standards associates train buyers, suppliers and factory managers on Wal-Mart Supplier Standard – a product quality assurance programme (including reviews and internal audit) 2006 Now includes environmental elements in the audit process (e. g. , packaging scorecard) 2008 ‘Sustainability Summit’ in Beijing (Source: http: //www. bworld. com. ph/Downloads/2006/Outsourcing 4. ppt, accessed on 4 th September 2007 and other sources)

Wal-Mart Watching • Anti-Wal-Mart groups Øalternative voices, campaigns, exposure of abuses, name and shame strategies etc.

Table 1: Examples of Anti-Wal Mart Groups Involved in Corporate Watching Name of Union/NGO/ Community Group Nature of the Group AFL-CIO Largest union in the USA Runs the ‘Paying the Price at Wal-Mart’ website News and specialized topics on Wal-Mart (e. g. , job exports, environment) Corp. Watch A research group based in Oakland, California, USA Campaigns against sweatshops (e. g. , Wal-Mart and Nike) and private military contractors Wal-Mart Watch A US-wide public education campaign Sponsored by the Service Employees International Union (SEIU) A watchdog on Wal-Mart business practices Wake Up Wal-Mart Sponsored by the Union of Food and Commercial Workers (US) Critic of Wal-Mart and its business practices (e. g. , sub-standard wages) Sprawl-Busters Consultancy group to design and implement campaigns against megastores Pro-local business and community Frontline: Is Wal*Mart good for America? A foundation-funded group Specialized interviews with Wal-Mart insiders Anti-Wal Mart news from America and China Wal-Mart Class Website Female workers in Wal-Mart and their class lawsuit Student Against Corporate Misbehaviour (SACOM) A Hong Kong-based NGO Partly sponsored by the Service Employees International Union Campaigner for workers’ rights and monitor of workers’ conditions in China (e. g. , Wal-Mart subcontractors)

2008 Presidential Debate • • • We need Wall Street responsibility BEFORE financial crises Q: Are you going to vote for the Senate bailout plan? Mc. CAIN: Sure. But there’s also the issue of responsibility. I’ve been heavily criticized because I called for the resignation of the chairman of the SEC. We’ve got to start also holding people accountable, and we’ve got to reward people who succeed. OBAMA: Mc. Cain’s absolutely right that we need more responsibility, but we need it not just when there is a crisis. We’ve had years in which the reigning economic ideology has been what’s good for Wall Street but not what’s good for Main Street. There are folks out there who have been struggling before this crisis took place. And that’s why it’s so important we look at some of the underlying issues that have led to wages and incomes for ordinary Americans to go down, a health care system that is broken, energy policies that are not working. Unless we are holding ourselves accountable day-in, day-out, not just when there’s a crisis for folks who have power and influence and can hire lobbyists. Source: 2008 first presidential debate, Obama vs. Mc. Cain Sep 26, 2008

2009 Global Competitiveness Forum is Launched Tue, 06/01/2009 - 5: 32 pm Under the Patronage of His Majesty King Abdullah bin Abdulaziz, for the third year, the Global Competitiveness Forum in Riyadh is a global platform for constructive dialogue on core competitiveness issues. Since the last forum, the world has faced unprecedented social, environmental, and economic crises that challenge nations, companies, and individuals to react in ways that place competition on a responsible footing. More than ever, the world needs its leaders to discuss, debate, and take action on issues such as: - How can we avoid similar economic crises in the future? - What does responsible competitiveness mean for a company and for a nation? - What are the barriers to creating a responsible business, and how can they be overcome? - What does the financial crisis teach us about responsible business? How can firms compete responsibly amid crisis? - Is collaboration implied in competition? - Are efficiency and responsibility mutually exclusive? - Are we maximizing the value of our national resources? - What leadership role should businesses play on environmental challenges? Achieving responsible competitiveness amid economic upheaval requires a vital rethinking of the role of the public and private sectors in fostering sustainable prosperity. The Global Competitiveness Forum strives to be the premier gathering for provoking comprehensive thought and leadership on this pressing challenge.

HSBC website The UN Principles for Responsible Investment (UNPRI) Environmental, social and governance (ESG) concerns such as climate change, water shortages, the use of arable land for competing needs or the link between health and nutrition are generating new risks and opportunities for companies. HSBC believes that the ability of companies to manage these risks and opportunities impacts the value of our investments. The business case for responsible investment is clear. We believe it is in the interest of our clients and society at large to encourage the companies we invest in to manage environmental, social and governance issues appropriately, as well as to understand the materiality of these issues and to incorporate them into our investment decisions. These beliefs underpin our commitment to the United Nations Principles for Responsible Investment. Launched in April 2006 by former UN Secretary General Kofi Annan, this initiative consists of a set of voluntary principles for asset owners and investment professionals. The six principles are not prescriptive, but instead provide a framework to incorporate environmental, social and governance issues into mainstream investment decision-making and ownership practices. Approximately 300 financial institutions have signed the UNPRI, representing a total of over US$12 trillion in assets under management as of January 2008.

• Account. Ability has joined with the United Nations Global Compact and a network of research institutes, business schools and civil society organisations to explore how responsible business practices can most effectively become an embedded feature of global markets.

• relies on technologies of agency to • shape the conduct of targeted populations. These include techniques of • self-help, self-improvement and empowerment to instil habits of selfmanagement. • Technologies of agency operate in schemes as diverse as • human rights education, economic development and poverty reduction.

• Technologies of capacitation – capacity building – targeting the poor as agents of ‘decision and choice’ (Isin 2005) – an assemblage of people and institutions to form entrepreneurial communities – it partners people with markets in new ways and imbue their relationship with new meanings of rights and responsibilities – to participate in clusters, production, the markets and global trade - best practices, training, builders of ‘social capital’ and ‘catalyzers’ of entrepreneurship