Peace through Commerce: Responsible Corporate Citizenship and the Ideals of the United Nations Global Compact

Impact Assessment, Transparency, and Accountability

C H A P T E R 8 Impact Assessment, Transparency, and Accountability Three Keys to Building Sustainable Partnerships between Business and Its Stakeholders Donal A. O’Neill INTRODUCTION Wealth matters. It pays for clean water, for vaccinations, for education , for the onslaught on infant and maternal mortality. It pays for the transportation and communication infrastructure that opens opportunities and for the energy that liberates humanity from millennia of soul-destroying, back-breaking toil. It kick-starts economic growth and generates employment, and in a self-reinforcing virtuous spiral it creates more employment and more growth, neutralizing in the process the discontents and frustrated ambitions that otherwise undermine personal and communal security. Wealth ensures human dignity. Good intentions alone will not ensure social and economic progress. Of the UN’s Millennium Goals, six are “cash sinks” in the short to intermediate term, aspirations that though noble in themselves will demand vast wealth for their realization. Only two of these goals—“Promote Gender Equality and Empower Women” and “Develop a Global Partnership for Development”—can be regarded as short-term enablers for wealth creation. Without wealth the Millennium Goals are impossible . Margaret Thatcher summarized the challenge when she remarked “No one would remember the Good Samaritan if he’d only had good intentions—he had money, too.”1 157 158 Donal A. O’Neill Wealth—in the form of money—must come from somewhere: from exploitation of natural resources, from the application of human ingenuity, from recognition of opportunities hitherto overlooked. And history has shown us—in societies as diverse as ancient Phoenicia, the Venetian Republic , the great European mercantilist empires, Meiji Japan and its inheritors , the United States since its creation, and more recently Taiwan, Malaysia, and South Korea—that private business is the most effective mechanism known to humanity for sustained wealth creation. Business creates wealth through a combination of enterprise, ingenuity, creativity, skillful design, and use of capital markets and flexible organizational structures, not to mention an appeal to the basic human craving for a better life for one’s family and descendents. Business—which ultimately consists of millions of ordinary people who are investors through pension trusts and mutual funds—gains from the process. But so, too—and often more so—does government, not only through direct taxation on business (and, in the case of the extractive industries, through royalties) but through government’s relentless pursuit of personal and value-added taxation of direct and indirect employees . This taxation pays for education, welfare, health care, and infrastructure—and for realization of the UN’s Millennium Goals. There is an implicit deal involved. Government takes its share, but business expects in return physical security, property rights, and rule of law to protect and regulate the arena in which it operates. But rule of law is a two-edged sword, imposing obligations on business as well as rights. The most significant obligations, and those least understood and least well-managed by both business and government, relate to the long-term socioeconomic impact of business on its host societies. It is with such socioeconomic impact that this chapter is concerned. IMPACTS Business changes the environment it operates in, not just in the immediate term but sometimes over decades. This statement applies as much to the convenience store on the street corner as to the huge manufacturing plant, but in no case is the impact as dramatic as in the extractive industries—mining, oil, and gas. It is on these industries that this chapter concentrates. Extractives probably have received more attention than Impact Assessment, Transparency, and Accountability 159 other industries with regard to impact management, but the principles involved and the lessons learned—both about successes and failures— are applicable across a wide range of other business activities, in particular diffuse ones such as alcohol sales, gambling, and tourism, which governments are often keen to support without evaluating long-term consequences. Extractive industry undertakings represent enormous investments— with budgets of billions of dollars—and over many decades generate vast revenues for host governments and large profits, as well as risks, for the investors. Challenges such as development of mines in difficult terrain, of oil or gas fields below thousands of feet of water, or of liquefaction of gas and its transport in refrigerated ships between continents demand sophisticated technical solutions, deployment of massive construction workforces , and availability of many specialist contractors to support operation and maintenance...