Costs if you do, costs if you don't: Promoting responsible business and reporting - challenges for policy makers

The growing interest from developing country governments, donors and businesses in linking business and development raises questions about how host and home country governments can encourage and/or ensure responsible business practices of international firms.

While the business case for responsible voluntary CSR reporting is growing and voluntary mechanisms can have legal effect through soft law, these often lack effective enforcement mechanisms for lagging firms whose incentives for responsible business is weaker.

Incentivising responsible firm behaviour and reporting therefore relies on finding a balance between the scope of activities for reporting, an appropriate regulatory mix, effective enforcement mechanisms and the related costs.

The potential costs and benefits of mandatory reporting vary widely across firms depending on size, value-chain complexity, sector characteristics and proximity to consumers. Any mandatory reporting must be adapted to these while converging with existing voluntary schemes to avoid overload.

Read Discussion Paper 176:

You can also listen to an interview with one of the authors in this ECDPM podcast.

Image courtesy of John Hogg/World Bank - Flickr (CC)