September 5, 2005

Rethinking Business Regulation: from Self-Regulation to Social Control, Peter Utting, United Nations Research Institute for Social Development, September 2005, 29 pp.

In this brief but dense publication, Utting takes a critical look at the potential and limitations of voluntary approaches to business regulation. Rather than dismissing all forms of voluntary regulation as "simply part of a broader trend of ‘deregulation' promoted by neoliberalism," Utting views them as "part of a more complex process of ‘re-regulation'...."

The author points to the development of multi-stakeholder initiatives (MSIs) as an example of a "ratcheting-up of standards and a slight hardening of the soft volunteerism that characterized the early experiences of CSR, which centred on corporate self-regulation."

He notes that some non-governmental regulatory schemes "are conducive to democratic governance by engaging a broader range of actors or stakeholders in consultative and decision-making processes...[and] have also contributed to harmonizing standards and implementation procedures, and to imposing some order on what was becoming a confusing array of codes of conduct."

At the same time, MSIs have a "very mixed scorecard," says Utting. Since they only involve "a small fraction of the world's 61,000 TNCs, nearly one million affiliates and several million suppliers," their procedures to encourage compliance remain weak, and some tend to be "fairly exclusionary, top-down and technocratic." He also notes that some CSR schemes "have not seriously addressed the question of what impact CSR is having on developing countries and the possible tensions and contradictions between CSR and development."

Utting also points to the structural constraints that restrict the scope and effectiveness of CSR, noting, "The pressures on companies to priorize ‘business-as-usual' practices and shareholder interests are intense, and they are institutionalized in legal and incentive structures, as well as in corporate or management culture."

As Utting notes, "the major substantive weakness of the CSR agenda seems to reside in the fact that it is swimming against a strong current of neoliberal reform that promotes forms of deregulation and flexibilization - or disembedding - that often have the effect of lowering standards." According to Utting, "the key challenge confronting the CSR agenda appears to be its relationship with neoliberalism."

However, according to Utting, the "ratcheting up" and "gradual hardening" of voluntary initiatives has recently entered a new phase encapsulated in the term "corporate accountability," which emphasizes "not only more effective codes of conduct monitoring, reporting and certification systems, but also recourse to public policy and law."

Utting argues that we need to "look beyond the voluntary versus binding, soft versus hard dichotomy" that frames much of the current debate on corporate social responsibility and accountability. It would be more fruitful, he suggests, to focus more on the "complementarity between different non-governmental regulatory systems; the interface between confrontational and collaborationist forms of civil society activism; and the linkages between voluntary and legalistic approaches or public policy."

The author concludes, "[O]ne of [the CSR movement's] main challenges is political, namely how to mobilize the social and political forces, and build the broad-based coalitions and networks required to promote progressive institutional change."

According to Utting, this will require "confronting the difficult question of alliances and compromises involving business interests, and exploring more systematically the potential for the types of complementary, synergistic and pluralistic approaches to regulation outlined above."

Rethinking Business Regulation is available in English at: http://www.unrisd.org/

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