Adopting Corporate Responsibility Standards (CSR) can help reduce a company’s political risk in emerging economies: lawyer

More than just a “philanthropic” exercise, international Corporate Social Responsibility (CSR) standards can help a company gain valuable “intelligence” that may in fact reduce the risk of a business failure in emerging economies.

Avril Cole, associate at Norton Rose Canada LLP in Toronto, made the observation at a seminar in Toronto called International CSR Standards: Benchmarks for Due Diligence & Risk Minimization on Apr. 12.

While CSR is not “law,” the international guidelines are increasingly a central feature of performing due diligence on a company’s global supply chain risk.

Simply put, CSR standards help businesses establish a commitment to international human rights, and assess the environmental sustainability and impact of business activities on local communities. They also promote good corporate governance and transparency between companies and their local communities.

Cole suggested CSR’s promotion of concern for local communities might actually confer a competitive advantage to companies that adopt CSR. International mining companies, in particular, seem to be active in adopting CSR, although any type of company can adopt them.

“Stakeholder engagement provides intelligence, valuable information about the political risk context of a particular company,” Cole said. “A successful analysis of that intelligence can be an effective counter-measure to the risks faced by the project.”

For example, by engaging stakeholders in the local community, a company may be able to reinforce the socio-economic benefits it offers to the host community. It will also help deal with stakeholders’ concerns before they become a political issue.

“Building goodwill will ensure those stakeholders support the investment and help the mining company resist…resource nationalism,” Cole said.