Mon, Apr 04, 2016 page8

• Codifying corporate responsibility

  • By Yang Chung-han 楊宗翰
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  A Taiwanese cargo vessel, the TS Taipei, owned by TS Lines Ltd, broke apart on March 10 en route from Hong Kong to Keelung Port, leaking a large amount of oil into the sea.

  The Environmental Protection Administration launched a salvage operation to minimize the environmental impact and to closely monitor other dangerous chemicals still contained on the ship.

  As this accident is close to the Jinshan Nuclear Power Plant in New Taipei City’s Shimen District (石門) and a fishing port, environmental experts have said that the potential damage to the ecosystem could last for two to three years.

  Aside from a focus on salvage and risk management plans, this event invites reflection on the nature of corporate social responsibility and the law.

  While an increasing number of companies have adopted corporate responsibility initiatives, describing it as a voluntary agreement is misleading. Internationally, we are witnessing a codifying transition from voluntary corporate responsibility measures to legally mandated corporate responsibility.

  The US Securities and Exchange Commission’s “conflict minerals” rules and California’s Transparency in Supply Chains Act are federal and state-level regulations that require certain companies to report non-financial sustainability matters in their global supply chains and manufacturing processes. The Alien Tort Claims Act also makes any tort in international law actionable in US courts.

  The EU recently adopted a new directive requiring about 7,000 companies to disclose information on their policies and the main risks related to environmental, human rights, anticorruption and other matters.

  The UK has proven itself as a leader in the field of corporate responsibility policy, sharing responsibility for sustainability between business and the government. The UK government published a national framework for action in 2014 that sets out the vision, ambitions and goals of corporate social responsibility and the actions needed to achieve them.

  The UK Companies Act 2006 requires directors to have regard for the impact of their company’s operations on the community and the environment when considering their duty to promote the success of their company.

  Moreover, the Corporate Governance Code 2014 says: “The board should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met.”

  In the UK, a company’s duties are expected to extend beyond its shareholders as corporate responsibility is legalized.

  The UN International Maritime Organization has adopted the International Convention for the Prevention of Pollution from Ships and its Protocol of 1978 requiring each state to reduce discharge and prevent accidents by cooperation. Governments also have a role in endorsing, facilitating and mandating corporate social responsibility in transboundary oil pollution.

  Article 1 of the Company Act (公司法) still sees profit making (maximizing shareholders’ values) as the only purpose for business.

  Without a clear policy framework and specific governmental institution for corporate social responsibility implementation, the regulatory system is fragmented.

  Taiwan has not established any international mechanisms relating to corporate responsibility, such as a National Contact Point as set out in the The Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises. The National Contact Point receives complaints from civil societies against multinational companies and is intended as a non-judicial grievance mechanism for mediation.

  In the future, Taiwan might consider codifying corporate responsibility with comprehensive legislation, or at least an independent corporate social responsibility chapter in its Company Act. This normative development might base its policy on international standards, such as the OECD Guidelines for Multinational Enterprises and the UN Global Compact, and force Taiwanese corporations to exercise corporate social responsibility, whether businesses are state-owned or private and whether their operations are in Taiwan or abroad.

  Yang Chung-han is a doctoral candidate at the University of Cambridge and a member of the Taipei Bar Association.

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