Testimony 

Before the Congressional Human Rights 

Caucus

United States Government Accountability Office

GAO 

For Release on Delivery 

Expected at 3:00 p.m. EDT 

Wednesday, September 28, 2005 GLOBALIZATION 

Observations on Federal 

Activities Related to Global 

Corporate Social 

Responsibility and Human 

Rights 

Statement of Loren Yager, Director 

International Affairs and Trade 

GAO-05-1049T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-1049T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or yagerl@gao.gov. 

Highlights of GAO-05-1049T, a testimony 

before the Congressional Human Rights 

Caucus 

September 28, 2005

GLOBALIZATION

Observations on Federal Activities 

Related to Global Corporate Social 

Responsibility and Human Rights 

Although the United States has no broad federal CSR mandate, we identified 

12 U.S. agencies with over 50 programs, policies, and activities that generally 

fall into four key government roles: endorsing, facilitating, partnering, and 

mandating. However, many of these programs have small budgets and staff 

and aim to accomplish broader agency mission goals, rather than being 

specifically designed to facilitate or promote companies’ global CSR 

activities. The U.S. government endorses CSR by providing awards to 

companies, such as the Department of State’s Award for Corporate 

Excellence. Federal programs facilitate CSR primarily by providing 

information, funding, and incentives to key players to engage in CSR. For 

example, the Department of Commerce facilitates CSR by training its 

commercial service officers specifically on corporate stewardship. The 

Department of State’s efforts to convene nongovernmental organizations 

(NGO) and oil and mining companies to ensure respect for human rights in 

their overseas security procedures through the Voluntary Principles on 

Security and Human Rights provide a partnering example. Finally, some 

agencies, such as the Overseas Private Investment Corporation (OPIC), 

mandate CSR by requiring companies to meet criteria consistent with CSR to 

obtain agency services. 

Perspectives on the government’s role are tied to perspectives on CSR and 

its connection to profit. Those with a free-market economic perspective 

state that corporations should be primarily concerned with earning profits 

and that government should not promote CSR because it reduces profit. 

Those with a “business case” perspective contend that CSR efforts can 

increase businesses’ long-term profits and value, and welcome government 

assistance with voluntary business efforts. Finally, those with a social issues 

perspective believe that business should contribute to broader social goals 

but have mixed opinions of whether this should be accomplished through 

voluntary CSR actions or more extensive regulation. Most representatives 

we spoke with at U.S. companies and other groups who were actively 

engaged in CSR supported a government role in global CSR, yet views on the 

appropriate role varied. Most supported U.S. federal agency efforts to 

endorse and facilitate CSR and partner with companies voluntarily pursuing 

CSR actions. 

Examples of Federal CSR-Related Programs Addressing Human Rights and Labor Standards 

Agency Program/activity Objective 

Commerce Training on human rights, rule 

of law and corporate 

stewardship 

To train commercial service officers and foreign 

service nationals on rule of law, human rights and 

corporate stewardship 

Labor Protecting the Basic Rights of 

Workers program 

To improve the capacity of developing-country 

governments to achieve compliance with national 

labor laws and internationally recognized workers 

rights 

State Partnership to Eliminate 

Sweatshops Program 

To address unacceptable working conditions in 

manufacturing facilities overseas that produce 

goods for the U.S. market 

Source: GAO analysis of agency information. 

The trend toward globalization has 

intensified the debate about the 

proper role of business and 

government in global “corporate 

social responsibility” (CSR), which 

involves business efforts to address 

the social and environmental 

concerns associated with business 

operations. The growth in global 

trade and the dramatic increase in 

foreign direct investment in 

developing countries raise 

questions regarding CSR-related 

issues such as labor, environment, 

and human rights. U.S. firms with 

operations in many countries 

employ millions of foreign workers 

and conduct a range of CSR 

activities to address these issues. 

However, there is controversy as to 

the proper government role. GAO 

describes (1) federal agency 

policies and programs relating to 

global CSR and (2) different 

perspectives regarding the 

appropriate U.S. government role 

in corporate global CSR efforts. 
Page 1 GAO-05-1049T 

Mr. Chairman and Members of the Caucus: 

Thank you for the opportunity to discuss our work on the federal 

involvement in global corporate social responsibility and our recent report 

on this topic.1

 We appreciate the continued interest of Congress and this 

caucus in these issues, and also recognize the leadership of the Kenan 

Institute.2

 The trend toward globalization—as evidenced by the growth in 

global trade and the dramatic increase in foreign direct investment in 

developing countries, from $22 billion in 1990 to $154 billion in 2002—has 

intensified the debate about the role of business and the U.S. government 

in addressing “corporate social responsibility” (CSR) related issues. The 

term “CSR” is often used to refer to business efforts to address the impact 

of business operations on such concerns as human rights, labor, and the 

environment. “Global CSR” is sometimes used to refer to business efforts 

to address the social impacts of business in the global economy. 

Discussions of global CSR in the context of developing countries focus on 

the need for business to address the gaps from inadequate or poorly 

enforced laws related to the protection of labor, human rights, the 

environment, and other social resources. 

Given the role of U.S. corporations in the growth of trade and investment 

in developing nations and your interest in issues related to globalization, 

this testimony describes (1) global corporate social responsibility, (2) 

federal agency policies and programs related to global CSR, and (3) 

different perspectives on the appropriate U.S. government role in global 

CSR. While our original report covers the full range of issues under the 

CSR umbrella, in this testimony we primarily focus our examples on 

human rights and labor. 

To determine what policies and programs federal agencies have adopted 

that relate to global CSR, we surveyed federal legislation and spoke with 

agency officials and experts in CSR. To identify different perspectives 

regarding the role of the U.S. government related to corporate global CSR 

efforts, we reviewed CSR-related trade and business literature and 

interviewed representatives from U.S. multinational corporations, 

business interest groups, investor groups, nongovernmental organizations 

 1

GAO, Globalization: Numerous Federal Activities Complement U.S. Business’s Global 

Corporate Social Responsibility Efforts, GAO-05-744 (Washington, D.C.: Aug. 8, 2005). 

2

The Frank Hawkins Kenan Institute of Private Enterprise—Washington Center, 

www.kenaninstitute.unc.edu. 
Page 2 GAO-05-1049T 

(NGO), and academic institutions that are leaders in the CSR field. We 

conducted our work from May 2004 through May 2005 in accordance with 

generally accepted government auditing standards. 

Global CSR is an umbrella concept that can best be described through the 

definitions used for the term, the actions companies take to practice CSR, 

and the roles of key players. CSR can be broadly defined as addressing the 

interests of all company stakeholders, which include not only 

shareholders but also customers, employees, suppliers, and the 

surrounding community, on issues such as environmental protection, 

worker safety, and ethical conduct. Global CSR addresses these issues 

within international markets, particularly in developing countries. U.S. 

businesses take a variety of actions related to CSR that range from 

voluntary, such as philanthropic donations, to government mandated, such 

as disclosure of significant environmental conditions. Civil society, 

investor groups, multilateral organizations, and governments play key 

roles in identifying issues of concern and in encouraging businesses to 

adopt CSR efforts to address these issues. 

Although the United States has no broad federal CSR mandate, we 

identified 12 U.S. agencies with over 50 programs, policies, and activities 

that generally fall into four public sector roles: endorsing, facilitating, 

partnering, and mandating. However, many of these programs have small 

budgets and staff and aim to accomplish broader agency mission goals, 

rather than being specifically designed to facilitate or promote companies’ 

global CSR activities. The U.S. government endorses CSR by providing 

awards to companies, such as the Department of State’s Award for 

Corporate Excellence and discussing CSR publicly. Federal programs 

facilitate CSR primarily by providing information or providing funding and 

incentives to key players to engage in CSR. For example, the Department 

of Commerce facilitates CSR by training its commercial service officers 

specifically on corporate stewardship. To illustrate partnering, the 

Department of State works with the United Kingdom to convene NGOs 

and oil and mining companies to implement the Voluntary Principles on 

Security and Human Rights to ensure respect for human rights in their 

security procedures. Finally, in terms of mandating, some agencies, such 

as the Overseas Private Investment Corporation (OPIC), mandate CSR by 

requiring companies to meet criteria consistent with CSR to obtain agency 

services. 

Perspectives of the government’s proper role are tied to perspectives on 

CSR and its connection to profit. Those with a free-market economic 

Summary 
Page 3 GAO-05-1049T 

perspective state that corporations should be primarily concerned with 

earning profits and that government should not promote CSR because it 

reduces profit. Those with a “business case” perspective contend that CSR 

efforts can increase long-term profits and value and welcome government 

assistance with voluntary CSR efforts. Finally, those with a social issues 

perspective believe that business should contribute to broader social 

goals, but have mixed opinions on whether this should be accomplished 

through voluntary CSR actions or more extensive regulation. Most 

representatives we spoke with at U.S. companies and other groups who 

were actively engaged in CSR supported a government role in global CSR, 

yet views varied regarding the appropriate federal role. In general, most 

were supportive of U.S. federal agency efforts to endorse and facilitate 

CSR and partner with companies voluntarily pursuing CSR actions. 

The expansion of world trade and investment has led to the increasing 

integration of the world economy in recent decades—a process often 

referred to as “globalization.” Total trade in developing countries, exports 

and imports, rose from less than $1.5 trillion in 1990 to $3.8 trillion in 2002, 

while foreign direct investment in developing counties grew even faster 

during this period, from $22 billion to $154 billion. Some view globalization 

as fostering economic growth, increasing employment, and improving 

living standards in both developed and developing nations. Others claim 

globalization has negative social impacts and raise concerns about the 

expanding activities of multinational corporations, particularly in 

developing countries. U.S. multinational corporations are now faced with 

difficult issues, such as the treatment and conditions of foreign workers in 

corporate supply chains, human rights issues associated with authoritarian 

governments in host countries, as well as environmental and health issues 

associated with production in diverse local communities. In addition, 

some negative incidents involving U.S.-based companies have been widely 

publicized, hurting their own and the United States’ image, such as the use 

of sweatshops in the manufacture of clothing and other products. 

U.S. corporations are increasingly building operations or buying products 

from sources in developing countries. However, the legal, regulatory and 

ethical environments in which U.S. businesses and their suppliers operate 

vary across countries. Given the limited capacity of some developing 

countries, CSR advocates argue that corporations themselves must 

establish and maintain codes of conduct regarding operating standards in 

these environments. Companies face increasing pressure from 

nongovernmental organizations, the media, “socially responsible” investor 

groups, and other stakeholders to adhere to high standards globally in 

Background 
Page 4 GAO-05-1049T 

their own operations and throughout their supply chains. For example, 

recently U.S. electronics companies signed a joint code of conduct to 

protect working conditions, workers’ rights, and the environment in the 

electronics industry supply chain. Despite these efforts, some CSR 

advocates call for more government action to promote CSR, with some 

noting that several national governments in Europe have put in place 

mechanisms to encourage or require the adoption of CSR practices. In 

addition, some Members of Congress have shown support for CSR-related 

policies, similar to those advocated by working groups convened by the 

Kenan Institute. 

Global CSR is an umbrella concept that can best be understood by 

describing the different definitions used for the term, the actions 

businesses take to practice CSR, and the roles of key players involved in 

CSR. Although groups use different definitions and terms, CSR generally 

involves business efforts to address a broad range of issues, including 

labor and human rights. However, most definitions suggest that, in 

addition to addressing the interests of its shareholders, business should 

address the interests of its other stakeholders, including customers, 

employees, suppliers, and the local community. 

Business actions addressing CSR concerns related to human rights can be 

broadly grouped into those addressing human rights, the workplace, and 

community development:3

• Human rights: Business actions addressing human rights assure basic 

standards of treatment to all people, regardless of nationality, gender, 

race, economic status, or religion. Human rights policies generally guard 

against such concerns as child labor in manufacturing, government action 

depriving citizens of basic civil liberties, and forced or prison labor. 

• Workplace: Business actions related to the workplace involve human 

resource policies directly impacting employees, such as compensation and 

benefits, career development, and health and wellness issues. Examples of 

workplace CSR actions include adoption of global workplace standards, 

involvement of employees in business decisions, and establishment of 

employee grievance policies and procedures. 

 3

Adapted from Business for Social Responsibility Education Fund, Corporate Social 

Responsibility: A Guide to Better Business Practices (2000). 

Global Corporate 

Social Responsibility 

Embraces a Range of 

Human Rights 

Concerns 
Page 5 GAO-05-1049T 

• Community development: Business actions focused on community 

development intend to benefit the business and the community 

economically, particularly for low-income and underserved communities. 

Community development activities include employing and training 

disadvantaged workers, partnering with minority- and women-owned 

businesses, and locating facilities in underserved communities. 

The extent and type of business actions are influenced by key players in 

CSR that include not only businesses, but also civil society, investor 

groups, multilateral organizations, and governments. For example, the 

Kennedy School of Government notes that the growth in civil society is 

one of the drivers making CSR more mainstream. Civil society activities 

exposing sweatshops or other questionable corporate activities can 

provide an incentive for firms to act in ways that would avoid or mitigate 

damage to their reputation. Investor groups such as mutual funds and 

pension plans are responsible for a growing proportion of U.S. 

investments and, therefore, are a potentially increasing influence over 

businesses’ CSR actions. Finally, multilateral organizations have played an 

active role in developing standards relating to CSR and in promoting the 

concept of CSR. 

To obtain information on specific agency programs and policies related to 

CSR, we used a two-step process. First, we provided a general description 

of global CSR to agency officials and asked them to identify relevant 

programs, policies, and efforts within their agency. We then sent a 

questionnaire to officials responsible for each identified program and 

interviewed officials to obtain further information. We found that, while 

there is no comprehensive legislation mandating a federal role in global 

CSR, and few agencies actually define CSR, over 50 programs at 12 

agencies are related to global CSR. Many agencies work with the private 

sector on issues that are generally covered by the concept “corporate 

social responsibility,” such as labor, human rights, the environment, and 

corporate governance, but do not label their activities CSR.4

 4

For the full list of the federal CSR-related programs we identified by agency, see appendix 

II of our report. 

Although No Broad 

Federal CSR Mandate 

Exists, Federal 

Agencies Conduct 

Activities Related to 

Global CSR 
Page 6 GAO-05-1049T 

Agency perspectives on global corporate social responsibility vary from 

active endorsement to reluctance to label their programs CSR. For 

example, several bureaus in the Department of State directly support 

corporate CSR practices as a means to enhance their own efforts aimed at 

public diplomacy, protecting human rights, and other areas. Similarly, the 

Department of Commerce has officially endorsed corporate social 

responsibility, stating that American companies must follow the highest 

standards of conduct and contribute to the communities where they do 

business. 

However, other agencies do not want their programs to be labeled CSR 

because they do not see it as part of their mission or believe they lack 

authority to engage in CSR activities. For example, while officials from the 

Office of the U.S. Trade Representative acknowledged that the agency 

undertakes some activities that might complement CSR, they stated that 

the agency’s mission is to negotiate trade agreements, not to engage in 

CSR efforts. Similarly, a senior official at the Department of Labor said 

that, while the department has many activities that could conceivably be 

seen as supporting global CSR, the department is not doing them for that 

reason. He believes the department lacks specific authority to work on 

CSR. 

Some agencies without a formal position on CSR actively take advantage 

of the overlap between their missions and company CSR practices to 

achieve their broader mission goals. For example, the U.S. Agency for 

International Development (USAID) and the Inter-American Foundation 

(IAF) leverage resources from corporations for development missions. 

Specifically, USAID’s Global Development Alliance aims to achieve the 

agency’s development goals by leveraging resources from the private 

sector and other partners. USAID’s alliances address a range of issues, 

such as encouraging economic growth, developing businesses and 

workforces, addressing health and environmental problems, and 

expanding access to education and technology. 

Other agencies, such as OPIC, the Export-Import Bank of the United 

States (Ex-Im Bank), and the U.S. Securities and Exchange Commission 

(SEC), engage in activities related to CSR, generally in response to 

statutory or congressional requirements rather than based on a formal 

agency decision on CSR. 

While Agency Perspectives 

on CSR Vary, Many Federal 

Programs in Pursuit of 

Broader Mission Goals Are 

Related to Global CSR 
Page 7 GAO-05-1049T 

Many of the programs we identified started in the last 5 years. For 

example, the Department of State’s Partnership to Eliminate Sweatshops 

Program started in 2000 to provide grants to address unacceptable 

working conditions in manufacturing facilities overseas that produce 

goods for the U.S. market. In fiscal year 2003, the program funded the 

development of a confidential database of factory-monitoring reports that 

would be accessible by companies seeking compliance information on 

factories in their supply chains. The effort was in response to U.S. 

companies that have cited lack of information about factory compliance as 

an obstacle to improving their own compliance efforts and responsible 

behavior. Since 2001, several presidential initiatives aimed at foreign 

assistance have partnered with companies to achieve the initiative goals, 

which also complement corporate CSR practices. 

While some federal agency CSR-related activities address labor and human 

rights issues directly, others cover a broader portfolio of issues that 

sometimes include labor and human rights. The Department of 

Commerce’s training for commercial service officers on human rights, rule 

of law, and corporate stewardship offers an example of a federal program 

with a specific human rights focus. Commerce developed the training in 

response to congressional concern that increased trade between the 

United States and its trading partners might come at the expense of human 

rights. Table 1 provides additional examples of federal CSR-related 

programs specifically focused on human rights and labor standards. 

Table 1: Examples of Federal CSR-Related Programs Specifically Focused on Human Rights and Labor Standards 

Agency Program/activity Objective 

Commerce Training on human rights, rule of law and 

corporate stewardship 

To train commercial service officers and foreign service nationals 

on rule of law, human rights and corporate stewardship 

 Implementation of the Labor Standards 

Provision of the Bilateral Textile Agreement 

with Cambodiaa

To provide incentives to the government of Cambodia to improve 

working conditions in the Cambodian textile and apparel industry 

through effective enforcement of local labor laws and 

internationally recognized core labor standards 

Labor Protecting the Basic Rights of Workers 

programb

To improve the capacity of developing-country governments to 

achieve compliance with national labor laws and internationally 

recognized workers rights 

 International Child Labor Program—activities 

working with industry associations 

To support efforts to eradicate exploitive child labor worldwide 

State Partnership to Eliminate Sweatshops Program To address unacceptable working conditions in manufacturing 

facilities overseas that produce goods for the U.S. market 

 

Many Federal CSR-Related 

Programs Are Recent and 

Have Small Budgets and 

Staffs 
Page 8 GAO-05-1049T 

Agency Program/activity Objective 

 Voluntary Principles on Security and Human 

Rights 

To provide guidance to extractive companies on how to ensure 

respect for human rights in the creation and implementation of 

security procedures 

Source: GAO analysis of agency information. 

a

The agreement with Cambodia expired on December 31, 2004. 

b

An official from the Protecting the Basic Rights of Workers program, which reported a $20 million 

budget in fiscal year 2003, said the program received no funding from the fiscal year 2005 

appropriations. 

An example of a broad CSR-related program that may encompass human 

rights and labor issues is USAID’s Global Development Alliance—which 

supports numerous public-private partnerships, of which some focus on 

these issues. To illustrate, USAID partnered with one U.S. corporation 

operating in postwar Angola to build up the country’s business sector and 

equip Angola’s workforce with necessary business skills. The company 

and USAID each agreed in 2002 to provide $10 million over 5 years for a 

series of projects to strengthen small and medium-sized businesses, 

including helping refugees and former soldiers to return to agriculture, 

developing an enterprise development bank, and supporting the creation 

of an agricultural training center. (Table 2 provides additional examples of 

broad federal CSR-related programs that may encompass human rights 

and labor standards). 

Table 2: Examples of Broadly Focused Federal CSR-Related Programs That May Encompass Human Rights 

Agency Program Objective 

State Secretary of State’s Award for Corporate 

Excellence 

To promote best business practices, good corporate governance, and 

democratic values overseas 

 Organization for Economic Cooperation and 

Development (OECD) National Contact 

Point 

To raise awareness among U.S. companies of the OECD Guidelines 

for Multinational Enterprises and to facilitate resolution when parties 

raise issues concerning U.S. companies' treatment of the guidelines. 

USAID Global Development Alliance To encourage public-private partnerships for development projects 

Source: GAO analysis of agency information. 

Federal agency activities related to CSR focus on a range of countries and 

sectors. For example, the International Child Labor Program at the 

Department of Labor funds projects in Bangladesh, Pakistan, Central 

America, and West Africa that work with various industry associations to 

address the use of child labor. The Department of State funds a number of 

projects in China and other countries in various sectors, including the 

apparel industry and the extractives sector. 
Page 9 GAO-05-1049T 

Many programs do not specifically track budget and staffing information 

for their CSR-related activities. Of the programs reporting budget and 

staffing information, most are relatively small. Similarly, many federal CSR 

efforts are staffed by agency officials with multiple responsibilities who 

work part time on the effort. 

Most U.S. government programs, policies, and activities related to global 

CSR can be loosely categorized into the World Bank’s four public sector 

roles: endorsing, facilitating, partnering, and mandating. These roles range 

from the least government involvement (endorsing companies’ voluntary 

efforts) to the most government involvement (mandating behavior 

consistent with CSR). Although some federal efforts related to CSR can be 

classified as serving more than one role, roughly two-thirds of the U.S. 

government programs, policies, and activities that we identified fell in the 

middle of the spectrum by facilitating and/or partnering with companies 

on their voluntary CSR efforts. The remainder either fell into the 

mandating and endorsing roles or outside the World Bank’s roles. Figure 1 

illustrates the range of U.S. government activities in the World Bank 

framework. 

Figure 1: Illustrative U.S. Government Activities Related to CSR Range from 

Endorsing CSR to Mandating CSR 

Federal Agencies Conduct 

a Range of Activities That 

Endorse, Facilitate, 

Partner, and Mandate CSR 

Activities, Some Related to 

Human Rights 

Endorsing Partnering Mandating Facilitating

Source: GAO illustration based on World Bank report.

Provide awards for 

CSR activities

Discuss CSR in 

public speeches

Provide CSR 

information

Provide grants to 

address CSR issues

Facilitate publicprivate partnerships

Convene 

stakeholders

Mandate CSR for 

participating 

companies

Regulate CSRrelated issues
Page 10 GAO-05-1049T 

• Endorsing: The U.S. government has a number of awards programs that 

endorse CSR by recognizing companies for socially responsible activities. 

For example, the Department of State’s annual Award for Corporate 

Excellence emphasizes the role U.S. businesses play to advance good 

corporate governance, best practices, and democratic values overseas. 

Since 1999, 12 businesses have received the Award for Corporate 

Excellence, following nominations submitted by chiefs of missions at U.S. 

embassies and consulates abroad. 

• Facilitating: The U.S. government facilitates CSR by providing 

information, funding, or incentives to companies and other players to 

engage in CSR-related issues. For example, the Department of Commerce 

trains commercial service employees on rule of law, human rights, and 

corporate stewardship. The training helps these officers provide 

information on corporate stewardship issues to companies involved in the 

export promotion process. 

• Partnering: Several U.S. government programs partner with corporations 

or convene partnerships with key stakeholders, which can help companies 

accomplish their CSR initiatives. For example, the Department of State has 

been a key player in convening stakeholders to develop the Voluntary 

Principles on Security and Human Rights, which provides guidance to oil 

and mining companies on how to ensure respect for human rights in their 

security procedures. According to a State Department official, nearly every 

major oil and mining company is now a participant in the Voluntary 

Principles process. 

• Mandating: While there is debate over whether complying with laws and 

regulations constitutes CSR, a number of federal requirements and 

regulatory mechanisms that mandate social and environmental issues 

could fall under the CSR umbrella. For example, the Overseas Private 

Investment Corporation (OPIC), which provides long-term financing and 

political risk insurance to U.S. companies investing in over 150 emerging 

markets and developing countries, requires that all beneficiary companies 

comply with certain CSR criteria. These requirements cover issues that 

include host country development impact, environmental protection, 

international labor rights, and human rights. The requirements are written 

into contracts, and OPIC specifies that they must be carried down to the 

subcontract level. 
Page 11 GAO-05-1049T 

In addition to the four roles discussed above, a number of U.S. programs 

foster a business environment conducive to CSR by working with other 

national governments to strengthen compliance and enforcement of social 

and environmental regulations in countries where U.S. companies operate. 

These efforts serve to protect U.S. businesses from competing with 

companies that are not complying with weakly enforced laws and 

regulations. For example, the Department of Labor’s program Protecting 

the Basic Rights of Workers works with host country ministries of labor to 

improve adherence to international core labor standards and acceptable 

conditions of work in developing countries. In accordance with a 

congressional appropriation, in fiscal year 2003 the office allocated $20 

million for these efforts worldwide, including in a number of countries in 

Africa, the America, and Asia, and in Ukraine. However, according to an 

agency official, this program’s budget decreased to $2.5 million in fiscal 

year 2004 and no funding was provided in fiscal year 2005. 

Based on our review of CSR literature, perspectives on the appropriate 

role of government in CSR vary, but generally correlate with three major 

perspectives on the connection of CSR to business profits: (1) free-market 

economic, (2) “business case,” and (3) social issues. 

• Free-market economic perspective 

Those with a free-market economic perspective generally view CSR as a 

potentially profit-depleting activity that will ultimately diminish the 

effectiveness of business and a free-market economy. According to this 

perspective, business managers have a primary duty to maximize value for 

shareholders, and in doing this, businesses serve the general welfare by 

directing resources to produce goods and services society wants. In this 

view, engaging in CSR actions that are not based on profitability can affect 

not only business performance but also potentially reduce the general 

welfare of society. While this free-market economic perspective 

recognizes that government has a role in structuring the legal framework 

of a market economy, those with this view do not support government 

involvement in the general adoption of the concept of CSR. 

• Business-case perspective 

Many CSR proponents cite a “business-case” perspective, in which 

business CSR efforts are supported based on their contribution to 

business profit and value. Those with the business-case perspective reason 

that businesses can undertake CSR actions that will increase businesses’ 

Strengthening 

Enforcement and 

Compliance with CSRRelated Regulations in 

Other Countries 

Perspectives on the 

Appropriate 

Government Role in 

CSR Vary, but Many 

Support Federal 

Assistance for 

Voluntary Efforts 
Page 12 GAO-05-1049T 

value or return on investment in terms of increased revenue, increased 

asset value, or reduced cost. 

Engaging in CSR practices may also help multinational businesses manage 

certain political and reputation risks in their operations, particularly with 

regard to host countries in the developing world.5 Negative publicity can 

seriously undermine the reputation of multinational businesses 

internationally, and it can create a political climate that may lead a host 

government to take actions, such as regulations or other restrictions, that 

can undermine firms’ efficiency and profitability. In addition, some 

developing countries may not have adequate laws to address concerns 

about workers rights or the local environment, and even where they do, 

these countries may not have the resources, technical expertise, or the 

willingness to adequately enforce their laws and regulations. By 

demonstrating a commitment to good business practices, such as through 

CSR, multinational businesses may send a signal that they are committed 

to helping mitigate problems or issues that may arise regarding their 

operations, thus creating a more positive climate in which to pursue 

business opportunities. 

Those with a business-case perspective view a major role of government 

as supporting businesses’ voluntary CSR-related efforts. Supporters of this 

perspective look for business to work with civil society and government to 

develop CSR approaches that address relevant social issues. 

• Social issues perspective 

Those with a social issues perspective focus on the extent to which 

business addresses social issues, but opinions within this group are mixed 

on whether to rely on voluntary or mandatory CSR approaches. A 1999 

survey of 25,000 consumers worldwide found that two-thirds of the 

population in countries surveyed indicated that “they want companies to 

go beyond their historical role of making a profit, paying taxes, employing 

people and obeying all laws; they want companies to contribute to broader 

societal goals as well.”6

 Some supporters of the social issues perspective 

 5

Virginia Haufler, A Public Role for the Private Sector: Industry Self-Regulation in a 

Global Economy (Washington, D.C.: Carnegie Endowment for International Peace, 2001). 

6

The Millennium Poll on Corporate Social Responsibility, conducted by Environics 

International Ltd. in cooperation with the Prince of Wales Business Leaders Forum and the 

Conference Board. Consumers in 23 countries were surveyed. 
Page 13 GAO-05-1049T 

cite successes of some business voluntary CSR efforts in contributing to 

social issues. Some also call on business to voluntarily adopt CSR 

practices to address social issues beyond what might be justified by 

business profit. Such organizations see a role for government in fostering 

voluntary corporate CSR actions. 

Others with a social issues perspective believe that business is primarily 

concerned with profit and thus should not be trusted to develop solutions 

for important social issues on their own. According to those with this 

view, business involvement in CSR efforts can become merely a branch of 

public relations instead of addressing social problems.7

 As a result, they 

feel that governments should move to mandate CSR. Several groups have 

argued for increased government engagement in CSR initiatives aimed at 

ensuring that business adhere to international norms. For example, one 

consumer group’s position paper on CSR calls on governments and 

international agencies to introduce legislation to set standards that 

transnational corporations must observe and also a framework for 

monitoring corporate behavior.8

In addition to reviewing the available literature, we also interviewed 32 

individuals actively engaged in CSR representing companies; business 

groups; NGOs focused on environmental, human rights, and labor issues; 

investor groups; and academic institutions to obtain their views on the 

appropriate role for the federal government and the impact of current 

federal activities on their CSR efforts.9

A majority of respondents supported a government role in global CSR, yet 

views varied regarding the appropriate federal role and the impact of 

current activities. Some respondents based their discussion of the 

government role on their knowledge of current U.S. government activities 

related to global CSR, yet we found that several were unaware of these 

efforts. While some said they were aware of U.S. government efforts, they 

primarily cited domestic CSR efforts or initiatives that are not led by the 

U.S. government. 

 7

Christian Aid, Behind the Mask: The Real Face of Corporate Social Responsibility, 2. 

8

Consumers International and Corporate Social Responsibility, Consumers International. 

9

Our selection was not intended to be representative in any statistical sense. For more 

information, see appendix I of our report. 

Views of Groups Actively 

Engaged in CSR Vary on 

the Appropriate Role of 

the U.S. Government in 

Global CSR 
Page 14 GAO-05-1049T 

A number of respondents were aware of U.S. government award programs 

that endorse CSR, but had mixed reactions regarding their effectiveness. 

Whereas a majority of companies we interviewed who commented on 

awards said they have a positive impact, for example, by motivating 

employees and validating the company’s efforts, some companies were not 

motivated by awards. Most of the business groups reacted positively to 

federal government awards, stating that awards call attention to success 

stories and provide a signal of the type of behavior the government likes, 

help to motivate companies, and provide a positive counterbalance to 

regulations and compliance by rewarding voluntary efforts. Most of the 

NGOs that were aware of federal government awards for global CSR 

activities were skeptical of the impact of the awards, questioning the 

nominations and selection processes and whether the awards are a good 

indicator of companies’ CSR performance. 

Many respondents from the various groups expressed support for federal 

government efforts to facilitate CSR, especially through providing 

information. Representatives from companies and other groups suggested 

that the government could play a more active role in providing information 

on how to set benchmarks in areas such as the environment and human 

rights, providing information on best practices and how to start CSR 

activities in other countries, or establishing a clearinghouse with CSRrelated information. 

Many respondents viewed government partnerships with companies and 

efforts to convene stakeholders to accomplish CSR goals favorably and 

thought it was an appropriate role for the U.S. government. Many 

organizations supported a federal role in partnering by convening 

stakeholders to address specific CSR issues or to share information. For 

example, the Department of State’s involvement in developing the 

Voluntary Principles on Security and Human Rights was cited as an 

example of a positive effort by the U.S. government to convene 

stakeholders to address a CSR-related issue. 

Companies and business groups generally held mixed views regarding the 

impact of laws and regulations on company global CSR efforts, whereas 

NGOs and investor groups largely believed that laws have a positive 

impact on CSR. In general, these latter groups desired a government role 

in mandating CSR, especially to increase disclosure and transparency of 

company CSR activities. A few respondents cited the lack of U.S. 

legislation or involvement in CSR as an impediment to companies’ CSR 

efforts. 

Mixed Reactions Regarding the 

Impact of U.S. Government 

Efforts to Endorse CSR 

through Awards 

Respondents Supported 

Government Efforts to 

Facilitate CSR and Partner 

Mixed Views on Government 

Mandating CSR through Laws 

and Regulations 
Page 15 GAO-05-1049T 

While some companies were concerned about burdensome mandates, 

several said that certain existing regulations and government efforts create 

minimum standards and level the playing field internationally, which is 

helpful to companies with active CSR programs. According to one 

company, laws such as the Foreign Corrupt Practices Act has had a 

positive impact on the company’s CSR activities by enhancing the visibility 

of CSR and helping to raise standards of transparency and governance. 

Similarly, customs legislation that set minimum criteria allows the 

company to discuss CSR standards with its suppliers and ensures that it is 

not the only company focusing on these issues, which could create a 

competitive disadvantage. 

Many respondents agreed that government should play a role in promoting 

transparency and disclosure of companies’ CSR efforts. Some companies 

strongly supported a federal role in promoting transparency, yet others 

warned against regulation and adverse consequences, for example, if U.S. 

companies face regulatory burdens and are forced to disclose more than 

their foreign competitors. However, some NGOs and investor groups 

supported government mandating that companies disclose information on 

CSR-related issues. 

A majority of respondents from the various groups supported a 

government role in encouraging other governments to enforce their own 

laws and standards related to common CSR issues. A few suggested that 

trade agreements offer an opportunity to encourage other governments to 

enforce CSR standards. 

Some respondents expressed a desire for more coordination among U.S. 

activities related to global CSR and pointed out that other countries are 

more involved in CSR than the U.S. government. Some noted that federal 

efforts are not well coordinated, which can make it difficult for companies 

to participate in U.S. government activities, and called for increased 

coordination among U.S. government agencies for CSR activities. Several 

respondents also expressed a desire for a greater U.S. government role in 

CSR, stating that the United States is absent from world leadership, 

especially compared with the European Union, on this issue. One 

company wanted the U.S. government to participate in the global debate 

on CSR and to continue its efforts to represent U.S. interests in the face of 

the European Union’s more regulatory approach to CSR. 

Some Respondents Want More 

Coordination among U.S. CSR 

Activities and Greater U.S. Role 

in CSR Global Leadership 
Page 16 GAO-05-1049T 

In my opening remarks, I cited a few of the reasons why firms’ efforts in 

the areas of global corporate social responsibility and human rights have a 

potentially significant impact in other countries around the world. 

Globalization has taken many forms, but certainly the operation of U.S. 

firms in other nations is an important element of this trend and, for that 

reason, has a potentially significant role in issues such as human rights. 

We appreciate the opportunity to provide additional transparency to the 

policy debate about the U.S. government role by detailing the efforts 

across many departments that may affect the private sector’s CSR efforts 

related to human rights and labor issues. 

This hearing is also timely in that the two recent hurricanes in the Gulf of 

Mexico have demonstrated that, even in the United States, the private 

sector can play a crucial role in responding to disasters. Globally, U.S. 

companies have provided nearly $562 million to relief efforts in the wake 

of the tsunami that hit Asia and Africa in December 2004.10 While 

philanthropic activities, such as responding to disasters, is only one 

element of CSR, these disasters lead to increased attention and insight into 

the important roles of the government and the private sector in addressing 

both the immediate and longer term needs of persons around the world. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 

to respond to any questions that you or other Members of the Caucus may 

have. 

For questions about this testimony, please contact me at (202) 512-4347 or 

yagerl@gao.gov. Other major contributors to this testimony were Kate

Blumenreich, Ken Bombara, Tim Fairbanks, Kim Frankena, and Jamie 

McDonald. 

 10As of June 8, 2005, according to the U.S. Chamber of Commerce Web site, 

www.uschamber.com.

Concluding 

Observations 

GAO Contact and 

Staff 

Acknowledgments 

(320391) 
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