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The Role of the Private Sector in Zones of Conflict 

21-22 March 2001 United Nations Headquarters  

Opening Remarks

This first Policy Dialogue of the UN Global Compact (GC) on the role of the private sector in zones of conflict addresses a theme requested by the GC members themselves. Conflict is fundamentally a problem of failed governance. Both the private sector and the UN prefer not to interfere in domestic political affairs, but current civil conflicts pose new challenges. GC members need to identify specific measures they can take in a multi-stakeholder partnership that will create pockets of global civil society to underpin the global economy and promote peace.

Both business and civil society groups can have a role in mitigating conflict.. With this in mind, the GC Dialogue could discuss models such as the US-UK Security Agreement and the Chad-Cameroon pipeline project; and it could explore issues of transparency and accountability, the use of conflict impact assessments, and the link between environment and security. All of these require collective action and partnership to resolve problems effectively.

Summary of Participant Discussion

Comments by Business Representatives

The private sector has come a long way from the days when words about social responsibility were just a public relations tool. There is no place, particularly not in Africa, where conflict can be ignored. Business leaders are willing to work with other partners, especially in the development of incentives for individuals to avoid unethical behavior. Many business representatives believe that they need to act in collaboration with others, especially when they are uncertain about the appropriate response to a difficult situation. The GC is a model for this type of partnership, though it must demonstrate its value through concrete projects among GC members. Many GC business members can provide examples of their partnership projects around the world and in a variety of industry sectors. Lack of trust between business and NGOs can be a barrier to such partnerships. Some businesses stress that the core operations of an enterprise cannot be run as a philanthropy.

Risk management no longer can be confined to geological, technical, or financial risks, but now must include social, environmental, and security problems. Businesses cannot operate effectively in countries where the behavior of governments and other actors is unpredictable. The risk management process requires strong measures such as a statement of values (a corporate code), followed by initiatives that demonstrate commitment, and backed by monitoring and reporting. Measurement, evaluation, benchmarking and certification systems in areas such as human rights are still in their infancy and need to be better developed. Particular attention needs to be paid to the evaluation of the root causes of conflict including poverty, environmental degradation, and the uneven distribution of wealth, all of which must be included in risk management analysis.

Important as corporate social responsibility is in these areas, it must be sensitive to the danger of under-mining government responsibility, leading governments to become "decapacitated" in some ways.

The private sector needs to take concrete action in zones of conflict. Existing projects provide models for working closely with a community to overcome poverty, inequality, and mistrust thereby assisting in the task of prevention. The private sector can play a role in peace-building through implementing GC Principles. After a war, the private sector can cross the lines of conflict in an effort to rebuild, and can provide incentives for peace. Post-conflict investment involves identifying the relevant local business actors, demobilizing soldiers, providing compensation for destruction, and other tasks—and all of these require the participation of a number of groups.

Comments by NGO Representatives

NGOs are willing to work with business, and encourage them to adopt UN Global Compact Principles. They point out the danger of the "law of unintended consequences," i.e., that attempts by the private sector to pursue policies of social engagement, aid, and community development in zones of conflict can have unintended and unwelcome consequences. Businesses face special problems—adhering to local laws and to international conventions, in countries where corruption often is widespread.

Companies can act most effectively through partnership with NGOs, and through consortia of likeminded businesses. One business often can provide incentives for other businesses to act responsibly, for instance, through financial relationships. The key is to create a level playing field within the private sector, so that companies that fight corruption are not displaced by less ethical competitors. All partners should promote respect for the rule of law. The US-UK Security agreement is a good first step and model for partnership, as is the establishment of an international advisory group for the Chad-Cameroon project. NGOs often must proceed cautiously, however, since they can become targets in a conflict if they become identified too closely with a particular company.

Neither NGOs nor businesses have yet developed effective conflict impact assessment and management tools. Such tools and standards have to be implemented throughout the corporate organization, which can be difficult.

Transparency is a particularly important tool for the international community to use, especially for making corruption more difficult. In some countries, government officials cannot be held accountable and there is no press freedom. The IMF now focuses on the flow of revenue from investors to government officials, but this monitoring needs to be reinforced by external pressure, including pressure from the private sector. BP is to be commended for promising to publish information on their operations in Angola, but transparency should be adopted by groups of companies—even an entire industry—together.

Conflict often occurs over access to natural resources, which need to be governed better. Nevertheless, there exist important differences in the cultural, legal and regulatory frameworks of various countries. The GC Policy Dialogue could contribute to the Rio +10 meeting on this topic.

Comments by Union Representatives

Unions by their nature bring together workers from opposing sides of a conflict, and they can actively try to resolve divisive issues. They are open to working with business as partners. The US-UK Security Agreement, the Global Compact itself, and the recent agreement between ICEM and Statoil are all positive developments.

Both the possibility of unintended consequences of corporate action and the potential for undermining government capacity, pose real dilemmas for corporate social responsibility. However, this should not stop the private sector from engaging, and moving from dialogue to operationalization.

Comments by United Nations Representatives

Environmental degradation can create conflict, governance problems, even corruption. There has been a "greening of warfare" in recent years as the international community has become aware of the environmental causes and consequences of armed conflict. We need to develop a good conflict impact assessment system, particularly in the post-conflict phase, since otherwise it is difficult to evaluate conflicting complaints and resolve them.

Working Groups

Participants were divided into five groups based on themes from the discussion, and asked to answer four questions, keeping mind the different stages of conflict:

How might this issue contribute to conflict prevention or resolution?
What are the arguments pro and con taking action on this issue?
What types of action could be considered?
What might be an agenda for a working group?
Transparency:

Transparency is directly linked to accountability, and thus runs through all the stages of conflict. It is a practice that should be adopted by all actors—governments, multilateral institutions, corporations, civil society organizations—in order to reduce the potential for conflict and corruption.

We need to understand the incentives for different actors to be transparent. Different actors may be able to provide different kinds of information. For instance, companies should publish data on their payments to governments, as they do in the developed countries. The UN itself must become more transparent about its activities. Donor governments should provide public information about their aid programs and encourage their partners to be more transparent. NGOs should determine what level of transparency on their part might contribute to conflict mitigation. Nevertheless GC participants acknowledged that some information can and should be made public, while other information cannot be publicized.

This group proposed identifying key actors in zones of conflict and the types of information they could provide that might reduce or prevent conflict. The group also suggested developing a framework paper on the role of the financial sector in transparency initiatives.

Collective Action

Collective action is a value shared by both corporations and NGOs, although their motivations for it may be different. If we take the example of the health and pharmaceuticals sectors, one can see the importance of having more than one actor involved—banks, the World Bank, corporations, and NGOs. Collective action requires risk assessment, which often can become a sensitive issue for the government involved.

This group proposed developing a multi-stakeholder pilot project that would provide insight into how to assess and manage risk in collective efforts. Other organizations, including the World Bank, are developing conflict assessment tools, early warning systems, and risk analysis. These tools are only as good as the people that use them, and warnings in the past have often been ignored by corporations, multilateral institutions, and governments. The group also proposed establishing a website for providers of emergency services, for coordinating collective efforts among GC members, and to provide more information on models to follow. The group also suggested developing a joint venture in infrastructure reconstruction in post-conflict areas.

Peace and Conflict Assessment and Risk Analysis

Peace and conflict assessment and risk analysis can be used in all phases of conflict to ensure that investments do not make existing problems worse. A company should use comparable methodologies in every country in which they operate. The first step is to define risk itself—violent conflict, human rights violations, environmental risk, etc. The second step is to understand conflict and its various gradations. We need to look both at what might worsen conflict—and what might bring peace. These tools need to be used at the very beginning of an investment, in partnership with others and based on good community relations and widespread information-sharing among all participants. NGOs and corporate executives tend to speak a different language, and the process of developing and implementing these tools may provide a common framework of understanding.

Information from these assessments can be mis-used by different sides in a conflict, or it can simply persuade a company not to invest. But business can be a catalyst for change by using these tools and engaging others in the process. Actors who use such tools can increase business opportunities, help stabilize the political environment, and increase the sustainability of business itself. Peace and conflict impact assessments can promote participation by governments, corporations, and others by establishing incentives for all those involved.

This group proposed a number of projects. These include preparing material on the link between environment, security, and business for the Rio +10 meeting, and perhaps creating an exhibit there. The group suggested contributing to the Secretary-General's reports on conflict prevention. It also suggested that the GC members help develop business school curricula, with NetImpact—a virtual network of students at business schools—as a possible resource.

The group also suggested that GC members examine and compare different peace and conflict assessment tools and methodologies, and develop demonstration projects on how they work. The "Do No Harm" Principles developed for NGOs may be a model for the private sector to follow. The UN, through its global offices, could act as a broker and provider of information and lessons learned. The working group could share information, lessons learned, and already-existing mechanisms, and create a "toolbox" for others.

Capacity Building

Capacity building activities at the local level can prevent conflict by crossing conflict lines, broadening the basis for action among stakeholders, and strengthening legitimate voices in society. But in order to do capacity building you have to make sure the right people are at the table. Such initiatives can mis-fire, for instance, by weakening local government capacity. Different capacity-building programs might be best for one stage of conflict and not another. It can be difficult to ensure that resources get distributed to the right people. Corporations can face conflicting claims of legitimacy by NGOs, and need to identify the appropriate ones for partnership. Some GC NGO members could provide assistance in identifying appropriate partners. If done well, capacity-building programs can increase the security and credibility of the partners, and can prevent conflict if done at early stages of an emerging conflict.

Capacity-building can include programs to promote the equitable distribution of income, addressing poverty, supporting stakeholder dialogues, and pursuing joint peace and conflict analysis activities. Specific business projects, including micro-finance programs, can be structured to promote cooperation between different factions. The IFC has guides on community capacity-building that may be useful models. The World Bank will establish an Expert Panel to field test the IFC documents, particularly in the mining sector. The ILO has done extensive capacity building work and can offer its expertise.

Corporations also need to do internal capacity-building among their employees. Capacity-building programs should also aim to improve the ability of corporate managers to understand NGOs, and vice versa.

This group proposed developing principles for capacity-building, distilling experience from a variety of sources, and conducting pilot projects for GC members to demonstrate successful capacity-building models. They recommended analyzing a multi-stakeholder process, such as Chad-Cameroon, to evaluate its applicability elsewhere. The group also suggested developing learning circles within the business community in different regions, to develop internal capacity.

Standards, Guidelines, Benchmarks and Measurement

The differences among these must be clearly understood by all partners, as they have different meanings in different contexts. It is difficult to quantify many aspects of human rights, therefore hard to measure and benchmark. The Global Mining Initiative and the US-UK Security Agreement are positive models for GC members.

This group proposed researching and surveying different types and definitions of standards, guidelines, benchmarks and measurements. This should include a better understanding of their relationship to current law and regulation. The group also suggested looking at research on how corporations have internalized changes in law and regulation in the past, since this may provide insight into how they might internalize corporate social responsibility standards, guidelines, benchmarks and measurements.

Closing Remarks and Follow Up Actions

The objectives of business and NGOs are often far apart, and the GC can be a forum to bring them together. Collective action requires mutual understanding among participants, and that understanding still needs to be deepened. Engagement is a process, and we need to identify the case for participating in that process.

There was general agreement in the Policy Dialogue on the need to identify pilot projects with relevance to more than one working group. The participants suggested a number of specific research projects and favored developing a "toolbox" of peace and conflict assessment and risk management methodologies. The GC office will identify champions for these projects and provide assistance in setting up core working groups, but the process has to be led by the GC Policy Dialogue members themselves. Each core-working group will have representatives from business, labor and NGOs and they will be responsible for developing proposals to present to the larger group. The GC office will be consulting with participants and will be sending out a proposal on how to move forward.

We have a window of opportunity in which we can come to common themes, develop projects on the ground, and operationalize and test what we have developed here.
We need to make substantive contributions to the important issues raised by the role of the private sector in zones of conflict. We also need to make a process contribution by demonstrating that a multi-stakeholder process can make a difference on the ground.