The Problematic Entanglements Between Civil Society and Corporations

26 July 2018
Research Innovation

Duncan Jepson  | Founder and Managing Director, Liberty Global | Liberty Asia

Pablo Eisenberg, an outspoken activist and academic, spent much of his career cautioning people about the fine lines between the form and the substance of corporations, their philanthropy and the work of civil society. As he wrote in The Chronicle of Philanthropy in 1992, “Corporations have long characterized their philanthropy as a form of ‘enlightened self-interest,’ the notion that charitable contributions benefit the company as much as the community.”

Though corporations exist as distinct individual legal entities who can own assets, take on liabilities and even have a manner about them, their voice and actions are the cumulative expressions of their desire to earn a profit. Philanthropy for a corporation is therefore inherently about its business and its response to the attitudes of its clientele. Corporate philanthropy projects rarely challenge core business activities or profitability.

A key strength of civil society is its not-for-profit nature, but many forces such as receipt of donations, sharing information, providing advice, internships and work placements, among others, create entanglements with corporations that are complicated for civil society to navigate. More than 25 years after Eisenberg’s article was published, members of the anti-trafficking civil society community are finding themselves in relationships with the very same businesses that were the focus of their ire only years before. Some non-profits believe that through increased engagement they can change for-profits and make them work towards the same social goals. But others, like Eisenberg, want us to remember that the profit motive is inherent in a corporation’s structure, organisation and daily routines. A corporation’s level of interest and commitment to social causes are based on a mix of prevailing investor, management and client attitudes and desires.

Spools of yarn. Unsplash/Julian Mora

Non-profits’ fiscal entanglements with for-profits often become problematic. In abstract, a corporate donation that helps an NGO to pursue its own programme and a contract to supply services for the direct or indirect advantage of a client seem obviously different, but many of these differences vanish in implementation. Prior to the growth of the “sustainability movement”, donations often functioned primarily as payments that benefit the donor’s reputation and reduce its business risk, and any benefit to society was merely a welcome extra. Ethically such donations should be considered a commercial arrangement, one based around exchange, rather than charitable giving focused on the underlying beneficiaries. The sustainability movement has transformed the attitude of many corporations towards their relationships with society and the health of the planet as most recently witnessed in this year’s Annual Letter to CEOs by Blackrock’s Larry Fink, but real progress demands transparently separating actions of commercial exchange and those focused on the underlying beneficiaries.

Increasingly, non-profits may find themselves forced to sign non-disclosure agreements. It is harder for charities to be the voice of the vulnerable when non-disclosure agreements are involved, since they force non-profits to be silent about the corporate and institutional weaknesses and failings of their for-profit partners. Transparency of non-profits’ conflicts of interest between serving society and supporting the business of a corporation are becoming increasingly important as social forces push civil society, industry and governments together over issues such as trafficking.

Even though non-profits are increasingly entangled with for-profits, civil society sometimes still underappreciates the difference between ethical accountability and legal liability, especially from the perspective of for-profits. In the early 1990s, I started a small business sourcing, manufacturing and importing products from China. We manufactured or facilitated the manufacturing of a range of products such as pipe brackets, lightning conductors, transistors, baseball caps, scarfs, car parts and cosmetic accessories. We saw hundreds of factories from Lanzhou in the west to Nantong in the east and witnessed some very rough conditions. I was under no legal obligation to report what I found questionable, nor was there anywhere to report it, even though that was the ethical thing to do. In the 2000s, I left sourcing and became a corporate lawyer, where I was trained that benefiting from exploitation or any other crime was a crime. My colleagues and I worked under legal and regulatory obligations that at the very least shaped our decisions, but there was no way to leave matters on a purely ethical plane of argument. Our employment was justified by ensuring we operated within legal bounds or face criminal and economic liability that would threaten the existence of our employer and its activities.

If there was suspicion that a transaction was ultimately connected to issues such as human trafficking and its associated crimes, our legal obligation was to report it to law enforcement. If we took the risk and continued the transactions, making money, and failed to disclose the crime, the company itself would have been committing a criminal offence. But buying a product produced with forced labour—a pair of sneakers, fish or apparel, for instance—is an ethical problem, not a criminal one. To many, both situations pose the same ethical quandaries, but money laundering poses substantial criminal and legal liability—trading goods made from forced labour currently does not.

…real progress demands transparently separating actions of commercial exchange and those focused on the underlying beneficiaries.

Of course, there appears to be a disconnect here. Some people that handle proceeds of crime—such as manufacturers using forced labour—have only ethical obligations, no legal reporting requirements and currently little criminal or civil liability. Others—such as banks—have wide legal liability exposure and reporting obligations. This may have to do with the governance choices that societies have adopted given the special social function that financial institutions play, but it also suggests a kind of double standard. Society has avoided this issue for a long time, but attitudes are changing, and there is a growing resolve to routinely treat exploitation as a criminal issue.

To do so, society needs to be able to identify who benefits from these transitions and if resources are being used for industry risk mitigation or for reducing the potential harm of vulnerable populations, whom charities are mandated to serve. If civil society organizations have information about a company’s use of or benefit from exploitation—acquired from their partnerships with for-profits or from conducting their own research and due diligence—and don’t seek to share it with public institutions, they will likely be denying access to justice to vulnerable populations who have suffered criminal and civil injuries. The more methods of sharing information and data can only help protect the vulnerable increasing transparency and therefore increasing corporate accountability.

Pablo Eisenberg finishes his article with a simple and wise reminder, “Both corporations and non-profit groups must be vigilant in protecting the equilibrium between community and corporate interests.”

Duncan Jepson is the founder and managing director of Liberty Global | Liberty Asia.

This article has been prepared by Duncan Jepson as a contribution to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the author and do not necessarily reflect those of UNU or its partners.

The Delta 8.7 Forum

Can New US Law Help Increase Financial Recovery and Reintegration of Survivors of Human Trafficking?

Professor Barry Koch, Dr Leona Vaughn, Sarah Byrne
Continue Reading

Gendered Understandings of Forced Sexual Exploitation

Ellie Newman-Granger
Continue Reading

Forced Labour Import Bans: What Does the Evidence Tell Us?

Owain Johnstone
Continue Reading

Gendered Understandings of Forced Sexual Exploitation

Ellie Newman-Granger
Continue Reading

Domestic Slave Labour in Brazil

Maurício Krepsky Fagundes
Continue Reading

Indigenous Peoples and the Anti-Trafficking Sector’s Blind Spot

Miriam Karmali, Krysta Bisnauth
Continue Reading