Methods of CSR regulation

Just before specific consideration of individual CSR implementation initiatives both at intergovernmental and domestic levels, it appears useful to highlight the different policy framework and regulatory methods adopted across different jurisdictions towards embedding corporate social and environmental responsibility and accountability in the business community.2" Regulation is an intentional activity of attempting to control, order or influence the behaviour of others. Regulation can include law, but it is not limited to law as the concept of regulation is broader than law itself. Law can be an instrument of regulation, which is the ultimate target of this book: to use the instrumentality of law, amongst others, to design and proffer a suitable regulatory and enforcement system for corporate social responsibility for business communities in Africa. Regulation is not governance, per se. While regulation concerns how and why behaviour relating to the conduct of affairs of an entity is directed, steered and otherwise guided, governance concerns how and why an entity or system structures and conducts its affairs.21 The goal of enforcement is compliance with regulations and the achievement of the underlying goals of regulations;22 hence, enforcement is a means to an end and not an end in itself.23 As a result of the different theoretical approaches to corporate actions and the different CSR regulatory consequences about the theoretical models highlighted in Chapter 2, implementation of CSR or embedding of corporate social andenvironmental responsibility and accountability have taken varying methods.24 The following features and methods of regulations have been identified and are discussed seriatim:2’’

  • 1 Formal versus informal regulations:
  • 2 Soft law versus hard law regulations;
  • 3 Private versus public regulations;
  • 4 International versus domestic regulations;
  • 5 Principle-based versus rule-based regulations;
  • 6 Voluntary versus mandatory regulations;
  • 7 Internal versus external regulations.

Formal versus informal regulations

Formal regulations refer to regulations deliberately instituted to order a particular behaviour and are backed by established and mostly binding enforcement mechanisms. Informal regulations, on the other hand, occur through other informal means such as policies and guidelines. They may not be enforced in any formal way, but relevant actors may nevertheless feel compelled to comply with them in the interests, say, of remaining in good standing with different stakeholders.26 Instances of the formal regulation will include duly enacted statutory laws guiding particular corporate behaviour in different jurisdictions. This will include the 2008 South African Companies Act No. 71; the 1990 Nigerian Companies and Allied Matters Act, as amended (CAMA) and the 2006 UK 2006 Companies Act; the 2002 US Sarbanes-Oxley Act among others. On the other hand, the informal regulations will include the UN Global Compact, Guiding Principles on Business and Human Kights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework and the OECD Guidelines for MNEs, amongst others.

Soft law versus hard law regulations

Soft law regulations can be described as non-legally binding regulations usually containing the aspirational goals, lofty ideals and other best practices expected to govern or regulate certain behaviours. The importance of soft law non-legally binding regulations is underscored at international law given its state-centeredness.2' In other words, since international law is usually seen in terms of a law of nations, with its rules and regulations only applicable to state actors (as distinct from private individuals and companies), regulations to order corporate behaviour at an international level usually take the shape of soft laws. These soft law instruments do not have the status of international treaties that are ratified by states; they include guidelines, declarations, recommendations and resolutions. Although soft law regulations are non-binding, they are particularly useful in the following ways:

  • (i) Soft laws provide official credibility and impetus for the development of complementary multi-stakeholder CSR initiatives at industry, regional or wider levels;28
  • (ii) They help to galvanize support for a particular programme or policy and can help to focus thinking about certain issues to clarify positions and to develop understanding between states;29
  • (iii) Sometimes, soft laws may harden into positive law, where they are seen as evidence of emergent new standards of international law;30
  • (iv) Soft laws also provide a quick and flexible response to contemporary challenges and allow non-state actors to participate in international law where they cannot in traditional international law making processes.31

On the other hand, hard law regulations are positive and legally binding regulations, with a clear and predictable enforcement mechanism, usually in domestic legislation. This regulatory method has not enjoyed wide adoption across jurisdictions in the discourse of embedding corporate social responsibility. The provisions of Section 72(4) of the South African Companies Act No. 71 of 2008 about a social and ethics committee looks promising in this regard, but its exact usefulness towards proper CSR regulation and implementation appears doubtful. Another example of hard law CSR regulation can also be made of Section 135 of the Indian Companies Act 2013 (Indian Companies Act), which requires, inter alia, the constitution of a CSR committee at the level of the board of directors of qualified Indian companies. The UK in 2002 attempted to harden CSR regulation32 by the introduction of a Private Member sponsored bill on the subject of CSR, but it never saw the light of day. Nigeria also attempted in March 2007 to harden CSR enforcement through a bill,33 which also never saw the light of day. The reasons for this will be addressed in Chapter 4. There is yet another pending proposed legislation before the Nigerian National Assembly that also seeks hard law regulation of CSR in Nigeria. The bill is known as the Petroleum Host and Impacted Communities Development Trust Bill, introduced in 2018 following the unbundling of the notorious Petroleum Industry Bill by the 8th National Assembly of the Federal Republic of Nigeria.

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