Managing Your Corporate Social Responsibilities | Practical Law

Managing Your Corporate Social Responsibilities | Practical Law

Companies can face extensive liability or reputational damage if parties in their supply chain commit illegal or unethical acts. To minimize these risks, companies should adopt corporate social responsibility (CSR) programs that require supply chain participants to meet legal and ethical standards. This Legal Update outlines practical tips to assist companies in developing CSR supply chain policies, procedures, and employee training programs.

Managing Your Corporate Social Responsibilities

Practical Law Legal Update w-001-1397 (Approx. 6 pages)

Managing Your Corporate Social Responsibilities

by Practical Law Commercial Transactions
Law stated as of 12 Jan 2016 • USA (National/Federal)
Companies can face extensive liability or reputational damage if parties in their supply chain commit illegal or unethical acts. To minimize these risks, companies should adopt corporate social responsibility (CSR) programs that require supply chain participants to meet legal and ethical standards. This Legal Update outlines practical tips to assist companies in developing CSR supply chain policies, procedures, and employee training programs.
In our global market, companies are increasingly held responsible when parties in their supply chain commit illegal or unethical acts. For example, a company can face negative repercussions based on its supplier's:
  • Human rights violations.
  • Unethical employment practices.
  • Corruption.
Failing to discourage and prevent unethical and illegal behavior in the company's supply chain can result in a company facing:
  • Civil and criminal liability.
  • Harm to its reputation and business.
To minimize these risks, companies should adopt corporate social responsibility (CSR) supply chain policies and procedures (CSR programs) that require supply chain participants to meet established legal and ethical standards.
This Legal Update provides practical tips to help companies:
For more information about specific CSR laws and regulations, see Practice Notes, Developing an ESG Supply Chain Compliance Program: Designing an ESG Program and ESG and the Supply Chain: Relevant Legislation Impacting the Supply Chain, and Article, Expert Q&A on the UK Modern Slavery Act 2015.

Establishing a CSR Program

A comprehensive CSR program should have written rules that require officers, employees, suppliers, agents, and business and development partners to meet or exceed relevant legal, regulatory, and industry standards. Having a solid CSR program in place helps to create a corporate culture that emphasizes responsibility and integrity. It also helps decrease CSR-related risks by avoiding or mitigating legal violations and injury to the company's brand.
When designing a CSR program, a company should:
  • Assemble a CSR program design and compliance team comprised of representatives from legal, audit and compliance, procurement, sales, and human resources.
  • Designate the primary business owner to develop, implement, and enforce the CSR program.
  • Identify and assess actual and potential supply chain liabilities.
  • Assess the company's culture, CSR priorities, and goals.
  • Outline a work plan, timeline, and budget.
For more specific details on these steps and planning a CSR program, see Practice Note, Developing an ESG Supply Chain Compliance Program: Designing an ESG Program and Practice Note, ESG and the Supply Chain: Creating an ESG Supply Chain Policy.
For general information on creating a robust legal compliance program, see Practice Notes, Developing a Legal Compliance Program and Advantages of Implementing a Legal Compliance Program.
As part of its CSR program, a company should also consider requiring its suppliers to represent and warrant that they and their subcontractors comply with all CSR laws, rules, and regulations (see, for example, Standard Clauses, General Contract Clauses: Corporate Social Responsibility Representations and Warranties).

Training Employees on Your CSR Program

Simply having a CSR program is not always enough. A company should also ensure that its executives and employees are actually trained in and understand the program.
The training should:
  • Educate employees on the CSR program by explaining what CSR is and why it is important to the company.
  • Describe how the company's CSR program relates to:
    • bribery and corruption;
    • violence and exploitation connected to mining conflict minerals;
    • human rights violations; and
    • unethical employment practices.
  • Explain the potential personal and corporate liabilities for violating the CSR program and applicable laws.
  • Provide the attendees with copies of or access to clear and comprehensive CSR program documents.
  • Be required on a recurring basis.
The most useful training is generally customized for the specific company, its industry, and the risks associated with its supply chain.
For sample CSR training materials for executives and employees, see Standard Document, US Supply Chain ESG Training for Employees: Presentation Materials and Environmental, Social, and Governance (ESG) Issues in US Supply Chains: Business Briefing.

Policies and Training For Preventing Bribery and Corruption

Bribery and corruption can be serious problems for companies that do business abroad, especially in developing and transitioning countries. A company can face extensive reputational harm or civil and criminal liability if it or a business that it owns in the supply chain violates anti-bribery and corruption laws, such as the Foreign Corrupt Practices Act (FCPA).
In addition to establishing general CSR policies and training, a company should also protect itself from FCPA liability by:
  • Adopting specific policies to prevent bribery and corruption.
  • Ensuring that employees and agents acting on the company's behalf receive training on the company's anti-bribery policies and on relevant laws, such as the FCPA.
The anti-corruption policy should be tailored to the company's specific business and risks and clearly specify the ethical standards all employees and agents must follow. For sample anti-corruption policies, see Standard Documents, Foreign Corrupt Practices Act Anti-Corruption Policy and Policy for the Use of Third-party Agents Outside of the United States.
The anti-bribery training should alert employees and executives to their obligations under company policy and the FCPA and the penalties for violating either (see, for example, Standard Documents, Foreign Corrupt Practices Act (FCPA) Training for Employees: Presentation Materials and Foreign Corrupt Practices Act (FCPA) Training Hypotheticals for Employees: Presentation Materials).
For more information about anti-bribery and corruption laws, see Practice Note, The Foreign Corrupt Practices Act: Overview.