Burgess COMMENTARY

Peter Burgess

Corporate social responsibility in Latin America: reality or fantasy? Extractive companies are responding to pressure to do the right thing, but relations with local communities and media remain fraught

Gabriel Garcia Marquez ... Social responsibility managers find themselves squeezed between what Gabriel García Márquez called 'the lines of demarcation that separate what seems real from what seems fantastic'. Photograph: Ivan Garcia/AFP/Getty Images

Perhaps it's poetic justice that in the birthplace of Gabriel García Márquez corporate social responsibility was equated with magic realism, a genre that has been defined as 'what happens when a highly detailed, realistic setting is invaded by something too strange to believe'.

Last week, the 2nd Latin American Social Responsibility Forum for the Extractive Sectors was held in Bogotá, Colombia, and participants acknowledged that the blurriness between reality and fantasy that pervades the work of Colombia's most famous writer is very familiar. Social responsibility has entered the business sector but its value isn't always clear, and CSR managers from Latin America's oil, gas and mining corporations are in a quandary.

On the one hand, social responsibility is seen as a realistic way for corporations in Latin America's extractive sector to secure and maintain social licence to operate by better addressing the needs of indigenous and local communities. On the other, CSR managers in the region acknowledge that even with the best intentions working with local stakeholders is unpredictable at best.

Some communities in Latin American see commercial ventures as a threat to traditional ways of life and do their best to undermine the actions of extractives. When this happens, corporations are regarded as evil and often pilloried in the media as victimising indigenous people. Others understand the economic opportunities that come with oil, gas and mining operations, and are eager to capitalise on employment, royalties and supplier contracts. But often in these cases, even though the extractives are contributing to positive socio-economic change, the media doesn't regard it as newsworthy, and positive actions remain under the radar.

'In the end, it is impossible not to become what others believe you are,' wrote García Márquez. This is especially true for extractives in Latin America and elsewhere whose reputation is defined not by their own actions but by the perceptions of their stakeholders. This is not to say that all corporations in the resource sector are acting in a socially responsible manner. Participants at the forum were clear that, even though significant progress has been made, much more needs to be done – especially in the way corporations communicate with local communities, shareholders, the media, and even their own executives.

High rates of crime and corruption, and a lack of consistent government regulation, have driven businesses in this region to define social responsibility in very sophisticated and detailed ways. According to participants, their corporations pay particular attention to documenting how they will approach respecting human rights, assessing the needs of communities, paying off social liabilities, and increasing their understanding of the social and environmental context in the areas they operate in.

However, even with the growing pressure for corporations in the region to do the right things in the right ways, the relationship between policies and procedure and results is murky – both in terms of business value and social change. And social responsibility managers find themselves squeezed between what García Márquez described as 'the lines of demarcation that separate what seems real from what seems fantastic'. Reality is when executives demand that their projects be developed quickly and operated efficiently. Understanding and addressing the shifting needs of local communities is more in the realm of the fantastical.

Corporations in this sector want to know what they should be doing differently. However, for extractives that have already worked hard to implement social responsibility, there aren't that many options left.

Participants at the forum recognised that the next (and possibly the last) frontier for this industry will involve a fundamental shift from planning, communicating and measuring social responsibility from the inside out to the outside in. This will push corporations to adopt new practices that are now seen to be risky but may be much more valuable. For example, ensuring that representatives from local communities are included in corporate governance (on the board of directors and at an executive level). Structuring co-ownership of extraction projects to provide local communities with a real stake in business performance and social outcomes. And helping community stakeholders to define and assess social performance.

Fundamentally, better social responsibility will depend on real partnerships between corporations and local communities that are based on shared goals and that take each other's needs seriously. As García Márquez wrote in Love in the Time of Cholera: 'Very well, I will marry you if you promise not to make me eat eggplant.'

Paul Klein is the president and founder of Impakt. He was included in the Toronto Globe and Mail's 2011 Leading Thinkers Series and serves on the advisory council of the centre of excellence in responsible business at the Schulich School of Business.

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