Two Keys to Consider: CSR and Human Trafficking as They Relate to Financial Institutions
Gopal Kumar
Abstract:In the practice of CSR, the prevalence of human trafficking makes avoidance of this activity difficult. The issue of human trafficking is commonly associated with the sex trade but also incorporates forced labor and a variety of other modes. All human trafficking is inextricably tied with money and is thereby tied with financial institutions. United Nations University published a workshop report about the direction financial institutions could take to extricate themselves from ties to human trafficking. This paper examines two of their proposals and the implications of these proposals for CSR, financial institutions, and human trafficking.
In July 2017, United Nations University released its workshop report called 25 Keys to Unlock the Financial Chains of Human Trafficking and Modern Slavery. The report provides corporations with guidance on combatting human trafficking in its supply chains and/or detecting human trafficking through financial services. Countries should consider human trafficking a money laundering crime in addition to a human rights violation, according to the Ninth Key. The Fourth Key proposes financial institutions take the lead in removing human trafficking from their supply chains. These two Keys have ethical implications for Corporate Social Responsibility (CSR), obligating firms to include into their social responsibility the implementation of the Fourth and Ninth Keys.
Corporate Social Responsibility (CSR)
CSR is a balance between a corporation’s stakeholder responsibilities and its motives for growing. A typical argument favoring the involvement of a corporation in social issues is as follows:
(1) There exist social problems that need to be solved;
(2) An agent who can ameliorate the issues without great cost to itself and/or its people has a moral obligation to do so;
(3) Firms have the ability to ameliorate issues as described in (2);
(4) Therefore, firms have a moral obligation to ameliorate social issues (Moriarty).
The argument connects firms to the power to improve on issues, pinning on them the moral obligation to do so. In step (2), however, the obligation is guaranteed only if a firm can ameliorate social issues without great cost to itself. This great cost may be financial burdens, slow growth, reduced product/service quality, and – most importantly – reduced stakeholder wealth. Given the many different tasks a corporation must complete to stay afloat, it may seem that CSR is a side project of a firm. Because it is not the main focus, a side project is likely to receive varying amounts of attention depending on available resources. Therefore, (2a) should be added to the argument: CSR exists as a perennial, yet quotidian, side project of corporations, which needs to be balanced with the main focus of corporations.
Nevertheless, George and Smith’s discussion of the Carlson hospitality company demonstrates a side project can complement the main focus. George and Smith discuss a case study of the global hotel company Carlson Hospitality Worldwide, Inc. The study examines the effects of the company publicizing its actions against human trafficking. Carlson CEOs in the early 2000s signed various human rights compacts and used “a very hands-on approach,” including a “Responsible Business training program,” to mitigate human trafficking in its supply chain. In 2009, a Carlson hotel manager in Belize reported suspicious activity. Consequently, this manager helped to catch a child trafficker. As a result, Carlson received good publicity (George and Smith, 63). The hands-on approach and training program are significant expenditures of money and effort, and implementing human rights agreements is a significant constraint on the firm’s ability to grow. Yet the payoff was good publicity. Increased public awareness that Carlson acted against the problem of human trafficking earned them recognition and support of its stakeholders (George and Smith, 64). A firm’s main focus and its side project need not be mutually exclusive, as demonstrated by Carlson. Furthermore, the Carlson case shows the cost mentioned in (2) is a factor that takes into account the costs and benefits of the socially responsible action.
The Ninth Key of the UN University report recommends adding yet another dimension to CSR by combining it with money laundering and ties together two seemingly disparate ethical principles. The key is presented here:
“Encourage countries to consider human trafficking and modern slavery as money-laundering and terrorist financing risks in their national risk assessments (FATF Special Recommendation 1), and pay attention to these issues in FATF, FATF-Style Regional Body and Egmont Group analysis and discussions.” (University, 23)
The Key does not suggest countries change the way their governments consider human trafficking, but rather expand the category of money laundering to include human trafficking. This category change makes human trafficking an economics issue and not just a human rights issue. With a human rights issue, one can directly appeal to social science and/or the Universal Declaration of Human Rights. With money laundering, one appeals to numbers and data and bases ethical reasoning on empirical analysis as well. Yet, these two approaches can be tied together.
