Num 8 Cap one

Must be 2-3 pages and you must use the company Capital One

8-2: Sustainability Assessment, answer the following questions regarding the company you have chosen to investigate:

Does your company do business with sustainability and the global village in mind?

How does your company meet the standards put forth in the readings and articles?

What has been your experience?

How do the countries to which companies expand respond?

Cite at least two sources.

Global governance and the interface with
business: new institutions, processes and
partnerships

Partnered governance: aligning corporate
responsibility and public policy in the global
economy

Atle Midttun

Abstract

Purpose – The purpose of this paper is to note the remarkable expansion of corporate social
responsibility (CSR) throughout the late 1990s and early 2000s. Taking this as point of departure, it aims

to discuss the potential for aligning CSR-oriented industrial self-regulation with public governance to fill

some of the governance gap in the

global economy.

Design/methodology/approach – The paper provides a conceptual discussion, empirically

underpinned by three case studies.

Findings – The paper finds that it is plausible, and empirically supported by the case studies, to
conceive of a considerable role for CSR based self-regulation in the global economy. A central

precondition is the ability of civil society organizations to establish ‘‘moral rights’’ as credible voices for

‘‘just causes’’ in a media-driven communicative society, and thereby put pressure on brand sensitive

industry. The paper finds that corporate self-regulation may fill a larger part of the governance gap if
public policy is oriented to engage with industry in a partnered mode.

Research limitations/implications – The paper establishes a conceptual base for exploring the

governance implications of CSR, casuistically underpinned by three case studies. Further studies are

needed, however, to explore the scale and scope of partnered governance in the global economy.

Practical implications – The paper provides insights into an approach to increase governability of the

global economy.

Originality/value – The originality of the paper lies in exploring the implications of CSR for governance,

and for highlighting how the governance potential may be enhanced by reorientation of public policy.

Keywords Governance, Corporate social responsibility, Globalization, Regulation

Paper type Conceptual paper

Introduction

The late twentieth and the early twenty-first centuries have seen increasing economic

globalization in the form of both globally extended capital markets and extended

outsourcing of production in global supply systems across the world. After three decades of

predominant liberalist orientation, the international economy remains strongly

pro-commercially biased.

International governance of social and environmental concerns has been relatively much

weaker, reflecting the lack of resourceful engagement by committed powerful actors and

PAGE 406 j CORPORATE GOVERNANCE j VOL. 8 NO. 4 2008, pp. 406-418, Q Emerald Group Publishing Limited, ISSN 1472-0701 DOI 10.1108/14720700810899158

Atle Midttun is based at the

Norwegian School of

Management, Oslo,

Norway.

The author is grateful to the
Research Council of Norway for
support to this article under the
projects ‘‘C(S)R in Global Value
Chains’’ and ‘‘Sustainability for
the 21st Century: Overcoming
Limitations to Creative
Adaptation in Addressing the
Climate Challenge’’. The author
also wishes to thank Nina
Witoszek at the Centre for
Development and the
Environment at the University of
Oslo, for valuable comments.

pressure from self-interested nation states. We are, in other words, faced with a highly

imbalanced globalization, where, judging by the standards of advanced democratic

industrial economies, the global space remains politically under-governed – particularly in

the environmental and social fields.

Yet while the global markets remain politically under-governed in a political sense (Vig and

Axelrod, 1999), CSR and business self-regulation have rapidly expanded. With 45 million

hits on Google (Google, 15 April 2007), corporate social responsibility (CSR) has grown to

become a megatrend that is expanding on most continents (Figure 1). From the US,

Australia and New Zealand and later on in Europe, CSR has spread to Africa and Asia, as

illustrated by the number of press articles on the topic.

Following this remarkable expansion, substantive literature has developed to explore the

business case for CSR, arguing how CSR might enhance conflict management, facilitate

reputation building, stimulate the development of industrial clusters, support risk

management etc. (see for instance Elkington, 2001; Fombrun, 1996; Hart, 1997; Porter

and Kramer, 2002, 2006; Midtun and Gautesen, 2005; Midttun et al., 2006). However, given

that CSR contributes to social and environmental responsibility, there should also be a public

policy case for CSR, especially for advanced welfare nations. They largely fail to impose

what they see as acceptable social and environmental standards on the global economy

through conventional regulation. Systematic analysis of the public policy case for CSR,

however, is largely lacking. This article attempts to fill the gap by highlighting the potential for

and characteristics of CSR-oriented public governance based on a partnered mode.

Legitimate ‘‘moral rights’’ in a communicative society

A major factor behind the booming CSR is the strong engagement by civil society

organizations (CSOs). CSR that is driven by CSOs is strongly coupled to stakeholdership, an

important mantra in business strategy since the mid-1980s, inducing the modern

stakeholder-oriented firm to engage in dialogue with interested parties that are affected

by the firm or that may affect it (Freeman, 1984).

In modern media-driven societies, idealistic stakeholders acquire bargaining power

vis-à-vis industry through public legitimacy bestowed upon them by media in open public

debate. When seen as credible voices for ‘‘just causes’’, they come to represent what

Rousseau (1988) called the ‘‘volonté general’’ or general will with the moral right to stand up

against formal authority – be it the firm or the state. It is suggested in this paper that such

‘‘moral rights’’ bestowed upon CSOs through media ‘‘canonization’’ may carry extensive

weight in a brand-oriented commercial context where negative media exposure could inflict

serious brand damage. Stakeholders with communicatively consolidated legitimate ‘‘moral

rights’’ may, therefore, sometimes negotiate almost on par with holders of property rights.

Figure 1 Corporate social responsibility in international press

VOL. 8 NO. 4 2008 jCORPORATE GOVERNANCEj PAGE 407

The stakeholder model based on legitimate ‘‘moral rights’’ could thus represent an efficient

internalization of social and environmental externalities such as pollution and workers’ rights.

Because it is backed by strong agency, morality-driven and media-supported CSOs most

often have greater effects than direct customer-driven CSR. CSOs have strong incentives to

pursue their just cause actively. This is what their business model is set up for, and what their

existence ultimately depends on.

‘‘Moral rights’’-based stakeholder bargaining has many similarities with Nobel prize winner

Ronald Coase’s concept of self-regulation through bilateral negotiation (Coase, 1960). The

so-called Coase theorem assumes that individual property holders can also be endowed

with rights to natural resources, and may subsequently negotiate adequate restrictions on

negative spillovers from industry without public regulation beyond a privately enforceable

legal framework. However, the collective action problems with respect to establishing

‘‘Coasian’’ property rights over natural resources and the problem of dealing with the

tremendous transaction costs associated with asserting them on an individual basis remain

overwhelming.

In this respect, the ‘‘moral rights’’-based stakeholder model remains much more operative,

at least in democratic countries, with respect to both establishing rights and enforcing social

and environmental concerns into business operations. When they engage in the global

arena, even non-democratic countries are vulnerable to this type of pressure.

Business-led CSR along two trajectories

The moral challenge by CSOs and other stakeholders has resulted in two trajectories in

business-led CSR (Figure 2). One trajectory involves making CSR part of a corporate

differentiation strategy where leading firms have taken CSR successively into their strategic

core, while in another trajectory CSR has been successively internalized into industrial

standards in the attempt to lift the social and environmental performance of whole sectors of

the economy. In both cases this contributes to internalizing environmental and social

concerns into industrial

practice.

The differentiation strategy, as described in CSR literature, has evolved in several stages

(Figure 2). Particularly in the US there has been a strong tradition for philanthropy, which was

Figure 2 Trajectories in business-led CSR

PAGE 408jCORPORATE GOVERNANCEj VOL. 8 NO. 4 2008

often fairly unrelated to core business. Porter and Kramer (2002, 2006) have argued for

relating philanthropy closer to core business to achieve synergies between CSR and

business engagement. A further step towards CSR-differentiated business strategy has

been to engage in CSR as part of a supportive strategy. Car manufacturers developing

green niche vehicles alongside their dominant combustion-driven mainstream cars are good

examples. The final step is to merge CSR into the core business strategy in order to build a

unique business model for the firm. An illustration of this is energy companies that engage

exclusively or dominantly in renewable technologies and link their business strategy to

sustainable development and climate change.

The introduction of CSR into industrial standards has also evolved in stages (Figure 2). It has

typically started with ad hoc reactions to CSO challenges, often followed by CSO-led

engagements in sector-specific environmental and/or social accounting. Taken further, this

process leads to the consolidation of industrial guidelines and in some cases of standards.

Even when backed by third party verification, such standards may take on serious

performance implications. Finally, standards may eventually gain political endorsement and

thereby take on a quasi-legal character or a de facto rule system (Burns and Flam, 1987).

From industry-led CSR to partnered governance

Seen from a public governance point-of-view, there has long been a growing concern about

the increasing economic and technological interdependence and the remaining

fragmentation of international political decision-making. Public policy analysis has varied,

however, from the neo-realist school, that sees the world system as an inherently anarchic

set of relations among sovereign nation states (Baylis and Smith, 2005) to economic

globalists that see markets as self-regulating entities (Martinelli, 2007).

The arguments advanced on a wave of neo-liberalism for shifting ever larger parts of the

economy into a competitive market-based mode of operation (Kahn, 1988; Ogus, 2001)

were also often phrased in a rhetoric that milsleadingly implied that strong political

governance could easily be transferred from the context of domestic regulation in advanced

industrial nations onto the global arena. These optimistic liberal-institutionalist confidence in

international organizations and regimes (Baylis and Smith, 2005) has at best only

contributed moderately to global governance, and primarily in the commercial rather than in

the environmental and social fields.

Seen in a governance perspective, CSR represents a form of self-regulation that may

supplement, or even to some extent substitute, public policy-led governance. However, we

argue that CSR-based self-regulation could be much more effective if it is was more

systematically integrated with political steering in joint partnered governance.

Partnered governance – a conceptual framing

Conceptually, partnered governance and its interfaces with political/regulatory governance

and industrial self-regulation may be graphically displayed in a two-dimensional matrix.

Policy-driven governance, with the traditional de-regulation debate of planned versus

market economy, is displayed in the upper part of Figure 3 (quadrants I and II) representing

along the horizontal axis both planned economic and regulated market-based governance

forms (Midttun, 1998).

The lower part of Figure 3 (quadrants III and IV) represents the space where the strong

governance assumptions do not hold. This domain is largely left to CSR-based industrial

self-regulation. As already mentioned, this self-regulation also comes in an individually

differentiated and a collectively industrially standardized form.

Partnered governance constitutes a middle ground where the two spheres potentially

interface. This paper suggests that by forming this interface adequately, through both

complementary policy strategies and complementary policy tools, it is possible to enhance

governance of the global economy.

In order to engage efficiently in partnered governance, governments need to engage

beyond traditional roles. As argued by Fox et al. (2002), they need to move out of traditional

VOL. 8 NO. 4 2008 jCORPORATE GOVERNANCEj PAGE 409

mandating strategies based on command and control legislation to facilitating, partnering

and endorsing strategies (Table I).

In the facilitating role, public authorities may stimulate industrial action by, for instance,

developing or supporting appropriate CSR management tools and mechanisms, including

voluntary product labeling schemes, benchmarks and guidelines for company management

systems and reporting, thereby supporting self-regulatory initiatives. A government may

also facilitate CSR-orientation by creating fiscal incentives through its own procurement and

investment practice.

In the partnering role, governments may bring in complementary competencies and

resources to tackle social and environmental issues outside their unilateral authoritative

control. By acting as participants, conveners or facilitators, governments may stimulate

complementary self-regulatory engagement and thereby achieve effects that go far beyond

what they might have achieved through unilateral action when operating under conditions of

limited authoritative control.

Finally, governments may engage in endorsement through the effects of public procurement

or public sector management practices or through direct recognition of the efforts of

individual enterprises by award schemes.

Creative government strategies in a partnered governance mode would increase the payoff

for societal concerns into business strategy and elicit complementary industrial

engagement with a potential to shape a more ‘‘civil’’ global capitalism, somewhat

Table I Government roles

Mandating ‘‘Command and control’’ legislation Regulators and inspectorates Legal and fiscal penalties and rewards
Facilitating Enabling legislation Creating incentives Capacity building

Funding support Raising awareness Stimulating markets
Partnering Combining resources Stakeholder engagement Dialogue
Endorsing Political support Publicity and praise

Source: Fox et al. (2002)

Figure 3 Partnered governance

PAGE 410jCORPORATE GOVERNANCEj VOL. 8 NO. 4 2008

analogous to the negotiated political economy in advanced welfare states (Schmitter and

Streeck, 1985).

Case illustrations

The following examples show partnered governance in three different configurations

illustrating some of the variety in this field: regulatory competition between NGOs and

industrial regulation in forestry; new modes of industry-policy collaboration in the extractive

industries’ transparency initiative; and the crossover between public policy and industrial

implementation in the ethical trading initiative. In all the cases, CSR initiatives have come in

response to challenges voiced in the public arena, but also in some cases supplemented by

direct pressure from industrial contractors, resulting in various forms of what Ayres and

Braithwaite (1995) have termed responsive regulation. The interface between industrial CSR

and public governance differs, however, from case to case.

Partnered governance under regulatory competition in the forest and paper and pulp
industry

Partnered governance intervention in the forestry and paper and pulp industry has arisen in

response to challenges to traditional business practices in the media and to public debate

on issues ranging from environmental topics such as biodiversity and certification of timber

to human rights and corruption.

A characteristic feature of the new regulatory initiatives within the forest and paper and pulp

industry is the competition between NGOs and industrial interests. Faced with ambitious

NGO initiatives, the industry association has sought to develop an alternative standard for

self-regulation, while individual firms have bowed to overwhelming societal pressure and

chosen the pragmatic option of adapting to both standards selectively.

This case thus highlights how buyer pressure and NGO-driven regulatory initiatives may

trigger government-partnered industrial self-regulation to enhance improved environmental

and social performance.

Evolution of the regulatory initiative

The NGO initiative to establish the Forest Stewardship Council (FSC) and its offer of

certification of sustainable and ecologically-sound forestry was partially driven by the failure

of an intergovernmental process to agree on a global forest compact. Established in 1993

(FSC, 2006) to drive forward an agenda for sustainable forestry, the FSC developed a set of

principles and criteria for forest management that address legal issues, indigenous rights,

labor rights, multiple benefits and environmental impacts relating to forest management

(FSC, 2006).

The scheme met with critical opposition from leading forest industry groups, often in alliance

with host/home governments. Although they shared some basic ecological concerns with

the FSC, in their view the FSC was making unrealistic demands that would impede efficient

forestry practices. In close collaboration with home-base governments, the forest industry

responded with a set of CSR-based regulatory initiatives to establish more ‘‘realistic’’

standards for sustainable forestry.

In North America, the Sustainable Forest Initiative (SFI) program was adopted by the trade

association for wood, paper and wood products (AF&PA).

The European Program for the Endorsement of Forest Certification schemes (PEFC) was

established in 1999 as an umbrella organization for certification, in close cooperation with

national legal systems.

The differing origins and objectives of each scheme have led to differences not only in the

contents of the standards but also in the administration of the rule systems. As noted by

Olivier (2006), the SFI program relies on certifiers whose independence and professional

competence is assessed through the existing US national accreditation system, whereas the

FSC has an internal accreditation process designed to operate under the jurisdiction of the

FSC Board of Directors. In line with the emphasis by the FSC on rewarding exemplary

VOL. 8 NO. 4 2008 jCORPORATE GOVERNANCEj PAGE 411

forestry in the market place, it has more explicit restrictions on intensive management,

plantations and genetically modified crops (GMCs).

Leading firms in the forest and wood processing industry have generally taken a pragmatic

position on extra-legal regulation. They relate to both NGO and government-partnered

industry standards and seek to bridge the span between ideals and reality by flagging

adherence in principle but adopting pragmatic adjustment and gradual implementation in

practice.

Discussion

As previously mentioned, a characteristic feature of the new regulatory initiatives within the

forest and paper and pulp industry is the competition between NGOs and industrial

interests. As noted by Olivier (2006), competing regulatory initiatives ultimately arise from

the political differences that separate environmental groups from forest owners and

industrial organizations. The green movement tends to regard certification as a mechanism

to reward (through continued market access) only the very best forest management and to

promote an ideal of forest management that mimics natural processes and preserves

so-called old growth. They promote a vision of a single, internationally harmonized system of

forest certification requiring forest owners to comply with very high standards of forestry

performance. This is essentially the approach adopted by the FSC.

In contrast, Olivier (2006) notes that industry and forest owner groups in partnership with

host governments tend to regard certification as a mechanism to promote progressive,

step-wise improvement in forest management. They also believe certification should provide

an effective marketing tool to promote the environmental benefits of wood. The PFEC, for

instance, represents government and industry positions and a gradualist approach,

including national industrial initiatives that seek to codify extra-legal rule-making adapted to

local conditions.

The regulatory competition has, therefore, most likely produced higher level regulation or

higher levels of environmental and social quality in the forest industry than under

conventional authoritative regulation in the current global economy, one of the reasons being

that producer countries have been disciplined by commercial buyers abroad and NGOs.

Partnered governance in upstream petroleum industry: the extractive industries’
transparency initiative

New partnered governance initiatives have been launched in the extractive industries to

meet the challenges to traditional regulation and business practices – particularly at the

interface between multinational petroleum companies and resource-rich developing states.

To quote the Financial Times (2005):

Extractive industries have long been criticised for perpetuating the ‘resource curse’ – distorting

the economy and propping up corrupt and autocratic governments that exploit their control of the

revenues to keep themselves in power.

This was the immediate background for the Extractive Industries’ Transparency Initiative

(EITI), launched in 2002 in Johannesburg at the World Summit on Sustainable Development.

The initiative aimed to promote greater transparency around the large-scale money transfers

taking place in the petroleum and mining sectors (EITI, 2006).

Core focus

This case highlights how the EITI weaves several modes of governance into a powerful web

of partnered governance:

B Large western multinational companies are jointly supporting the demand to publish

money streams from their own extractive activity for the treasury in host countries as a

result of strong pressure from interest organizations and public opinion.

B Host countries are taking on obligations to publish the money streams in the public sector,

many as a result of considerable pressure from international organizations such as the

PAGE 412jCORPORATE GOVERNANCEj VOL. 8 NO. 4 2008

World Bank, donor countries and others, but also motivated by the need for inner

administrative reform.

B Civil society organizations have been actively promoting the EITI both with the

government of their home countries and with authorities and foreign countries – the latter

often with considerable difficulty.

Financial investors, including many of the large fund managers, have generally taken a more

active attitude to free flow of information, transparent governance and corporate social

responsibility.

Breakthroughs on the issues listed above imply a breakthrough for open information and

responsible economic governance as set out in a number of international conventions.

Evolution of the regulatory initiative

The EITI, initially pioneered by Transparency International and Global Witness, was later

actively promoted by the UK government. It is based on a voluntary agreement aiming to

increase transparency in transactions between governments and companies within the

extractive industries. The UK EITI government initiative followed an unsuccessful

self-regulatory initiative by BP in 2001 to publish unilaterally what they pay in taxes, fees

and signature bonuses in Angola. BP’s initiative was unsuccessful because Sonargol, the

state oil company of Angola, threatened to exclude BP from Angola, and BP subsequently

only published the signature bonus mandatory under UK law.

The EITI received mixed reactions from other western countries and their multinational oil

companies. The US government and US home-based petroleum multinationals such as

Exxon and Texaco would not support the initiative unless they received credible

commitments from oil-rich nations and systematic implementation of the principles by all

companies involved. Other nations, such as Norway, joined the EITI and supported the

initiative both at the government and company level. The two Norwegian petroleum

companies, Statoil and Norsk Hydro, which are in the process of internationalizing their

petroleum engagements beyond the Norwegian Continental shelf, were both developing

advanced CSR programs and were eager to support the initiative.

A significant step towards implementing the Extractive Industries Transparency Initiative

(EITI) in the Republic of Azerbaijan was taken on 24 November 2004. The governmental

Committee on EITI, foreign and local extractive industry companies (oil and gas) and the

NGOs’ Coalition for Increasing Transparency in Extractive Industries signed a Memorandum

of Understanding (MOU) for the implementation of EITI in the Republic of Azerbaijan. A total

of 20 foreign and local extractive (oil and gas) industry companies, including the State Oil

Company of the Republic of Azerbaijan, BP, Exxon, Statoil, Total, Lukoil, Unocal, Shell and

Devon Energy have since signed the MOU (State Oil Fund, 2004).

More recently the EITI has attracted support from a number of other resource-rich

developing countries – namely the Republic of Congo, Ghana, the Kyrgyz Republic,

Nigeria, São Tomé e Principe, Timor Leste and Trinidad and Tobago. These countries have

begun to interpret and implement the principles, thus playing a pivotal role in shaping the

EITI. The engagement of resource-rich developing countries has also brought the US

multinationals and the US government onboard. In parallel, however, some NGOs – such as

Global Witness – are calling for stronger mandatory engagement.

The reception of the EITI in the business community has been rather mixed, ranging from

positive embracement by petroleum companies with headquarters in North Western Europe

to more reluctant conditional acceptance by those with headquarters in the USA.

The EITI has also gained broader industrial support outside the petroleum industry. In June

2003, the ‘‘Investors’ Statement on Transparency in the Extractives Sector’’ in support of the

EITI was signed by 38 investors. The process was led by ISIS Asset Management, a

UK-based investor with e90 billion under management. The Investors’ Statement is intended

to demonstrate to extractive companies and host governments that the capital markets

unambiguously support the EITI principles.

VOL. 8 NO. 4 2008 jCORPORATE GOVERNANCEj PAGE 413

Discussion

This case exhibits an interesting set of mechanisms in partnered governance: rule-making

through mobilization of NGOs and public pressure in host countries which then extends into

national politics. The EITI involved a not uncontroversial intrusion into the national politics of

developing countries by activist European governments (led by the UK and also including

Norway) where the stimulation of democratizing processes in developing countries put host

governments under dual pressure.

Ingeniously, persuasion was used in combination with economic sanctions by the World

Bank and other international organizations. The NGO partnership was also critical to

success by establishing the agenda and ensuring world attention. The ‘‘Publish what you

pay’’ movement was instrumental in triggering self-regulation and recruiting inside agency

within the host countries for support and local rule-making. The EITI was also ingenious in

staging implementation through stakeholder conferences. Here rules were disseminated

with increasing precision: from EITI principles to EITI criteria. However, a hard set of

sanctioning mechanisms is not yet in place and there are still varying interpretations on how

to proceed. Thus the EITI would seem to be caught between the desire to expand the

number of signatories and the potential hardship entailed for such signatories in terms of

hard implementation.

Partnered governance in the retailing industry, the ethical trading initiative:
implementing public policy through industrial value chains

The retailing industry, including such branches as food supply and clothing, is increasingly

being challenged to assume responsibility for working conditions, human rights and safety

in their value chain, which often stretches back to developing countries. Targeting the end

consumer, these companies are highly dependent on branding, and with reputation being

such a critical issue, negative press releases on practices in their supply chains can have

quite a detrimental effect.

A case in point is Nike, the footwear retailer and manufacturer, which has received intense

media criticism for bad working conditions in their factories in Asia. A similar criticism has

been leveled at the food chain ICA Norge, which has been forced to carry out internal

investigations after the press accused ICA of using child labor.

The Ethical Trading Initiative, ETI, aims to deal with these challenges in the retailing industry.

The critical areas targeted are monitoring and verification in order to create transparency

and disclosure of labor management. With its central focus on international labor law and

standards, including the ILO conventions, the ETI is also linked to public policy and can be

seen as partnered governance with respect to implementing public policy in an international

arena (EITI, 2006).

Evolution of the regulatory initiative

The ETI, launched in the UK in 1998, included NGOs and trade union and corporate

members working together to identify what constitutes ‘‘good practice’’ in code

implementation, and then promoting and sharing this good practice. The ETI identifies

good practice mainly through its members’ experimental projects and research, and shares

this through publications, seminars and conferences and the ETI website

(www.ethicaltrade.org). The ETI requires all corporate members to submit annual

progress reports on their code implementation activities, and has also developed

procedures for disengaging poor performers.

The Ethical Trading Initiative operates in close interface with more formal governmental

rule-making including the United Nations Universal Declaration of Human Rights; the

International Labour Organisation’s Tripartite Declaration of Principles concerning

Multinational Enterprises and Social Policy; Guidelines for Multinational Enterprises

developed by the Organisation for Economic Co-operation and Development (OECD);

and the United Nations’ Convention on the Rights of the Child. The ETI Base Code and the

accompanying Principles of Implementation, although both negotiated and agreed by the

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founding trade union, NGO and corporate members of ETI, therefore also reflect the most

relevant international standards with respect to labor practices and ILO conventions. Large

firms involved in retailing often flag extensive CSR policies and the strong engagement of

their value chains in ethical management.

Discussion

To sum up, the ethical trading initiative within the retailing industry highlights the challenge of

complex value chain issues in an industry that is highly dependent on branding. The

governance challenge is to create common labor practices in a system that often extends

over several continents and across a large variety of governance and industrial styles.

Implementation takes place largely through the sanctioning power of retailing industry with

access to tapping the buying power of dominant OECD markets. The combination of

reputation effects and brand building gives the global industrial system incentives to deliver.

Through the larger retailer’s direct multinational managerial systems and contractual

relations they already have the essential infrastructure in place to deliver credible results

beyond the reach of territorially-bound national legislatures. The Ethical Trading Initiative

serves to focus and strengthen these managerial and contractual practices so as to

implement international conventions on labor standards and human rights more efficiently.

In a partnered governance mode, the ETI may therefore also be seen as a supplementary

implementation tool for public policy in a typical ‘‘soft law’’ domain. The reference to

intergovernmentally endorsed standards serves to legitimize the ETI at the same time as the

deployment of industrial managerial and contractual resources and competencies obviously

strengthens the implementation of public policy. The large government contribution towards

funding the ETI is also an indication of the partnering mode of this initiative.

Partnered governance, concluding reflection

Both the conceptual analysis and the case examples indicate that there may be a strong

public policy argument for partnered governance when facing the challenge of integrating

social and environmental responsibilities into the globalizing economy. Elements of

partnered interplay between industry, government and civil society initiatives can be seen in

all our case examples.

The Extractive Industries Transparency Initiative exhibits an interesting set of mechanisms in

partnered governance: rule-making through mobilization of NGOs and public pressure in

host-countries, extending into national politics. Persuasion was used in combination with

economic sanctioning by the World Bank and other international organizations. The EITI also

made intelligent use of staged implementation through stakeholder conferences where rules

were disseminated with increasing precision: from EITI principles to EITI criteria.

In the Ethical Trading Initiative we have seen how implementation takes place largely through

the sanctioning power of the retailing industry with access to tapping the buying power of

dominant OECD markets. The direct multinational managerial systems and contractual

relations of larger retailers provide the essential infrastructure to deliver credible results

beyond the reach of traditional territorially-bound legislatures. In a partnered governance

mode, the ETI may therefore also be seen as a supplementary implementation tool for public

policy in a typical ‘‘soft law’’ domain. The reference to inter-governmentally endorsed

standards simultaneously served to legitimize the ETI and to strengthen the implementation

of public policy through the deployment of industrial, managerial and contractual resources

and competencies.

In the forest and paper and pulp industry, regulatory competition seems to have produced

higher-level regulation or higher levels of environmental and social quality in the industry

than under conventional authoritative regulation in the current global economy. Although the

government partnered industrial certification is less ambitious than the NGO-led FSC, the

engagement of industrial actors and government agencies has provided forest certification

on a far greater scale than would otherwise be possible.

VOL. 8 NO. 4 2008 jCORPORATE GOVERNANCEj PAGE 415

We have argued for and found that media-driven ‘‘moral rights’’ bestowed on civil society

organizations establishes a basis for CSR-driven collective action beyond the formal

authority of nation states. Our findings here resonate with recent political science literature

highlighting that civil society organizations have managed to implant elements of public

accountability into the private transactional spaces of transnational firms (Ruggie, 2004) and

that this process has evolved relatively decoupled from the sphere of states. Ruggie points

to Wapner’s (1995) notion of World civic politics and Cutler’s (2002) concept of private

governance as building blocks of what he calls the new global public domain.

Our argument for partnered governance is based on the notion that public authorities at

different levels may achieve improved outreach by interfacing constructively with civic

politics. Civil politics engagements based on moral rather than formal rights may,

nevertheless, trigger processes that eventually result in formal governance arrangements.

Yet in many cases, formal governance may not even be desirable. In line with Luhmann

(1990), the complexity of global society may dictate more loosely coupled partnered

governance over formal government. Given the cultural diversity of the emerging global

society it is highly unlikely that politically mandated hierarchic governance can reach all the

way. Partnered governance, on the other hand, may allow advanced states and pioneering

companies to work together to raise the social and environmental bar above the global

lowest common denominator.

As long as the veto-players in global policy-making do not control global media, their

capacity to block policy processes to maintain minimalist social and environmental

standards may be overruled by moral persuasion in the public media. The direct or indirect

vulnerability, of industrial brand image to moral attacks may imply economic costs to

industrial actors and regimes that follow unacceptable practices.

In this way, ‘‘moral rights’’ based challenges by civil society organizations in the media

provides a healthy challenge both to autocratic planning and solely profit-centered

commercialization. Partnered governance strengthens this challenge and allows socially

and environmentally advanced states and regions to engage with civic society and

challenges to laggards on new arenas.

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