The recent decision by Shell Petroleum to settle out of Court in a landmark case brought by representatives of the Ogoni people of Nigeria is noteworthy.
It was its’ ties with the late dictator Sani Abacha that led to the claim being brought against it. Shell extracted oil in the Niger Delta for years, and the results of its activities there was a humanitarian and environmental catastrophe.
A group of Ogoni people brought a case against Shell using an obscure American law, and Shell decided to settle out of Court.
Shell has been careful to stress that the 15 million dollars they are offering is not an admission of guilt on their part, but it is probably fair to say few people believe them.
In the public relations arena, Shell lost this battle a long time ago.
The Shell case is an interesting example of a new wave of corporate social responsibility that is taking hold driven by a diverse range of activists.
The credit crunch era and the demonization of neoliberal capitalism have given this movement added impetus. We are slowly moving into a world in which multi-national corporations are being pressured to conform to the moral expectations of society.
The classic position taken by companies was argued by the famous economist Milton Friedman who argued that Corporations only owed a duty to their shareholders and that duty was to make a profit.
The way large Corporations have been allowed to do pretty much what they want for decades is a story admirably recounted in Naomi Klein’s book No Logo.
Obviously Companies are not going to become socially responsible because their executives woke up one the morning and had a sudden attack of conscience. Consumer and activist pressure is reshaping their attitudes to labour, the environment and human rights.
Ethical consumerism is a big market these days, and Companies know this.
These days, consumers are a lot more likely to buy products that tick the right ethical boxes, and Companies are falling over themselves to meet this demand. Ten years ago, few Companies would have bothered to release annual reports setting out how they are achieving socially responsible objectives.
Today, it is pretty much de rigeur and goes hand-in-hand with a broader range of activities-everything from labels setting out environmental credentials to re-evaluating relationships with suppliers in the third world.
The environment is the biggest ethical factor here, and no Company that wants to be taken seriously can afford to be environmentally responsible. Unfortunately, human rights issues are still secondary but as the Shell case showed, even this aspect has become more prominent.
It would appear that Friedman’s outlook that Corporations should only concern themselves with profit has been driven out by a more ethical approach.
One reason for this is the way the credit crunch has affected ‘business as usual’ capitalism.
In the eighties, Margaret Thatcher and Ronald Reagan pushed for the ‘scorched earth’ form of Capitalism that allowed Companies to completely put aside any notion of social responsibility The public may have accepted that situation in the eighties and most of the nineties, but nothing forces a re-evaluation of policy like an economic crisis.
Of course it is entirely possible that the drive for ethical business might not be sustained in the long-run and Companies will return to their old ways.
Certainly Companies will not be socially responsible if they are only being pressured by NGO’s and human rights organizations, as consumers’ insistence that companies should be socially responsible is the main factor behind companies changing their ways.
It is not a new phenomenon, but it has been significantly accelerated by the credit crunch. Granted, some of the ‘Capitalism is evil’ rhetoric has been too simplistic, but in this context, it is clearly reaping results.
As perverse as this sounds, the credit crunch is going to create a more rational and moral world in many ways.