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Development through corporate social responsibility

Corporate social responsibility (CSR) is particularly important for developing countries, argues a new study, The role of multilateral development institutions in fostering corporate social responsibility, by IDB deputy manager Antonio Vives. According to the study, voluntary practices can overcome the shortcomings of existing rules and regulations, lags in the adoption of internationally accepted norms by some countries, the lack of incentives, and pressures by stakeholders.

But what is corporate social responsibility? The study defines it as “the practices of the corporation that explicitly seek to avoid damage and promote the well-being of stakeholders by complying with current rules and regulations as well as voluntarily going beyond those requirements.” According to the study, it should be a priority among multilateral development institutions because it aims at enhancing the quality of life of the population, a key objective of development.

By its very nature, corporate social responsibility is development spurred by the private sector, which adds to the development efforts of governments and multilateral institutions. When corporations think about the well being of workers, the community, the environment, consumers and other stakeholders, they add to their contribution to economic and social development through employment creation and payment of taxes. “Their mandate to promote economic development, which should also be the goal of corporate social responsibility practices, makes multilateral development institutions particularly suited to promote the adoption of good practices, and to work with governments in creating a conductive environment for these practices to flourish and be effective,” says the study.

Multilateral development institutions can foster corporate social responsibility through promotion and advocacy, development of a favorable policy environment, financial support, demands for compliance through their own operations, and CRS reporting and accountability practices. While the most direct effects may be on their clients, through loan conditionality, the largest effects may be achieved through helping to create a policy environment in which the voices of all stakeholders (including consumers, suppliers, civil society, providers of funds, governments and the media) are heard.

In developing countries, where stakeholders are not as active as in developed countries, or do not have the proper environment to exercise their choices, it is the duty of multilateral institutions to correct “market failure” by supporting the adoption of CSR practices by corporations, and strengthening  and supporting stakeholders’ demands for good behavior. While enlightened corporations recognize the value and duty of CSR practices and voluntarily carry them out, there are still many firms that need to be reminded of them.

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