Kurt Vonnegut’s vision of the Chronosynchlastic Infidibulum has come true, except instead of our bodies being dispersed across interstellar space, it is our everyday products that are dispersed over space and time across the globe. Networks of suppliers are mirrored by social networks with information flowing (relatively) freely to anyone with a wifi connection… and informed consumers are now scrutinizing their purchases to a greater degree than ever before. The rise of the Corporate Social Responsibility (CSR) movement fueled an expectation of transparency amongst the multi-nationals that operate from a nominal home base but only truly coalesce as a product in your living room, or in this case a consulting report for building a dam.
Poyry, with over 5000 employees, is one of the largest international consulting design firms in the world and a major economic player in its home base of Helsinki, Finland. Yet Poyry’s work reaches far from Finalnd, and its role in the Xayaburi dam project represents a case of how the evolving legal concepts around CSR are starting to provide a mechanism through which stakeholders can influence company policies. As The Diplomat reports:
The Xayaburi dam project has been the subject of an international consultation process under the auspices of the Mekong River Commission (MRC), which comprises four member states: Cambodia, Laos, Thailand and Vietnam
But the MRC has split between Laos and Thailand, which support the dam (Thailand is providing all the funding and will purchase 95% of the power generated), and Cambodia and Vietnam, which view dams on the Mekong as a cumulative threat to agriculture, fisheries and livelihoods.
Scientists warn that a cascade of dams threaten food security along the Mekong for around 65 million people. The prime minsters of both Cambodia and Vietnam have demanded further scientific studies on downriver impacts to be carried out prior to any construction, but supported by Pöyry’s recommendations, Laos has ignored its Indochina neighbors.
It was the deadlock inside the MRC that prompted the government of Laos to hire Zurich-based Pöyry Energy, allegedly with a view to circumventing the consultation procedures laid down by the 1995 Mekong Treaty
In response, fourteen Finnish NGOs filed a landmark case against Pöyry, alleging that it had violated OECD rules. Finland was obliged to set up a Corporate Social Responsibility Committee in 2012, to hear the complaint against parent firm Pöyry PLC, the parent company in Helsinki.
As the largest donor to the MRC, Finland has a special interest in the Xayaburi controversy. All development partners of the MRC have expressed deep concerns about the environmental impacts of Xayaburi, the first dam to be built on the Lower Mekong.
The Finnish NGOs have accused the international consultant Pöyry of promoting a reckless and irresponsible mode of development, and undermining international cooperation among the riparian countries through the Mekong River Commission.
Pöyry has since announced that it has won a new eight-year contract to supervise construction of the Xayaburi dam.
Poyry’s work on the Xayaburi was not the first time the company was involved with the Mekong. In the 1990’s, Vietnam hired Swiss consultant Electrowatt (now part of Poyry) to build a controversial set of dams on a tributary to the Mekong in Vietnam, despite the protests of Cambodia. Like the situation in Xayaburi, Electrowatt’s analysis did not include any downstream impacts from the dam construction. The case of the Yali Dam set a precedent for ignoring regional neighbors, and it appears Laos took note of a compliant consultant to hire.
OECD guidelines stipulate that “Enterprises should contribute to economic, environmental and social progress with a view to achieving sustainable development”. Poyry’s role in shepherding along approval of the dam in Laos and its subsequent multi-million dollar contract to oversee construction, present an affront to the OECD guidelines, not to mention a conflict of interest.
This was clear to the group of over a dozen Finnish NGO’s who sued Poyry, claiming the company was in violation of international law and undermining the Mekong River Commission as detailed on the Business and Human Rights Resource Center. The case ultimately went to the Finnish Ministry of Employment and Economy for a ruling from its committee on Corporate Social Responsibility. Through a series of secretly submitted documents, Poyry was ultimately able to escape any sanctions for its behavior in the case, as OECD Watch reports:
The final statement confirms that consulting and business service companies such as Pöyry are covered by the Guidelines and have a responsibility to conduct due diligence to avoid being linked to adverse social and environmental impacts caused by their clients. However, the NCP determined that Pöyry had not acted in breach of the Guidelines in this case. Finnwatch, an NGO advising the NCP, issued a statement disputing this finding.
The case, which was the first ever handled by the Finnish NCP, raises serious concerns about the NCPs equitability. The NCP gave in to Pöyrys demands for an excessive degree of confidentiality and did not allow the complainants to see or rebut to the companys response to the allegations. The NCP based part of its final statement on Pöyrys confidential response, which was never shared with the complainants a practice that has been deemed unacceptable by other NCPs. Recall that a similar lack of equitability led the UK NCPs Steering Board to overturn its own flawed final statement in the BP BTC case in 2011.
Regardless of the ultimate result, the case presents an example of the maturing of the CSR field from a series of well-(or not)-intentioned yet unverified reports of corporate progress to a verifiable and accountable set of policies and actions taken by corporations with true legal and economic consequences. Though it was the first case heard by the Finnish government regarding OECD CSR guidelines, it will certainly not be the last, and that type of precedent is one other stakeholders can utilize to address social and environmental concerns.
When it comes to intractable trans-boundary natural resource problems, which the Mekong is a prime example of, the more stakeholders with a voice at the table the better the outcomes can be. Consultants and coprorations operating in the developing world would do well to consider the full sustainability impacts of their operations lest they find themselves in greater legal risk from newly emerging models of regulation in regards to CSR.
What do you think? Are new legal mechanisms for CSR compliance (e.g. OECD Guidelines) an effective means to enforce good corporate governance? Or do they need more teeth to make an impact? Feel free to share thought and any similar examples.