Government Regulation of International Corporate Social Responsibility in the US and the UK: How Domestic Institutions Shape Mandatory and Supportive Initiatives

Date01 March 2018
Publication Date01 March 2018
AuthorJette Steen Knudsen
British Journal of Industrial Relations doi: 10.1111/bjir.12253
56:1 March 2018 0007–1080 pp. 164–188
Government Regulation of International
Corporate Social Responsibility
in the US and the UK: How Domestic
Institutions Shape Mandatory
and Supportive Initiatives
Jette Steen Knudsen
While most scholarship on corporate social responsibility (CSR) focuses
on company-level CSR initiatives, it increasingly also examines government
programs for CSR. However, research on how governments contribute to CSR
has mainly focused on domestic and not international CSR challenges. This
literature also does not specify whether governments shape CSR through
mandatory regulation or supportive initiatives. This article adopts a process-
tracing approach to determine how governments regulate international CSR. It
demonstrates that the legal and political systems in the liberalmarket economies
of the UK and the US lead to dierent forms of publicCSR regulation — notably
in the areas of labour standards in apparel and tax transparency in extractives.
The UK government has been more likely to support bottom-up collaborative
multi-stakeholder initiatives,whereas the US government has favouredtop-down
mandatory regulation.
1. Introduction
Business responsibility has traditionally been defined as voluntary (private)
social and environmental activities by corporations (Vogel 2008). Companies
voluntarily engaged in philanthropic programs, such as donating money
to the local school or hospital, and the government was not involved.
Furthermore, philanthropic initiatives were primarily aimed at solving social
problems in the local community where companies were based. In recent
years, the role of business responsibility has changed in two key ways. First,
Jette Steen Knudsen is atthe Fletcher School of Law and Diplomacy, Tufts University
2017 John Wiley & Sons Ltd.
Government Regulation of International Corporate Social Responsibility 165
the focus of corporate social responsibility (CSR) has shifted from a local
community orientation to the international level. A major reason is that
as corporations from the global north (advanced industrialized countries)
increasingly source from or operate in the global south (emerging or less
developed countries) they face a wide range of CSR demands. Stakeholders
such as civil society organizations, unions, institutional investors and the
media demand that corporationsundertake initiatives to protect human rights
and labour rights, adopt initiatives to prevent corruption, etc. (Gjølberg
2009; Locke 2013; O’Rourke 2006; Vogel 2008). Second, governments have
become more and more involved in CSR programs either through traditional
mandatory regulation of business or through soft law that encourages
companies to pursue CSR initiatives (Knudsen et al. 2015). Since the legal
context diers from one country to another, the same action may be voluntary
in one context but not in another. Notably the European Commission has
changed its definition of CSR from ‘social and environmental activities that
companies adopt on a voluntary basis’ to (the less precise) ‘the responsibility
of enterprises for their impacts on society’ (European Commission 2011),
which logically admits behaviour regulated by the government (Knudsen and
Moon 2017).
Most of the literature on CSR focuses on the development of company-
level CSR initiatives(Brammer and Pavelin 2005; Brammer et al. 2012; Brown
and Knudsen 2015; Kinderman 2012; Koos 2012). However, increasingly
a literature has also emerged that explores the development of government
involvement in shaping CSR initiatives as the dependent variable (Albareda
et al. 2007; Knudsen et al. 2015; Midttun et al. 2006, 2012). This article
focuses on the development of government regulation of CSR and asks how
the domestic political context — and in particular the legal and political
systems — in the liberal market economies (LMEs) of the US and the
UK contributes to shaping public regulation of CSR intended to influence
companies’ international CSR activities.
This article proceeds as follows: Section 2 presents the theoretical
framing, while Section 3 describes the research approach. Section 4 analyses
how domestic institutions contribute to shaping government regulation of
international CSR in the extractive and apparel sectors in the UK and the
US. Section 5 provides a discussion of key findings and oers a conclusion.
2. Theoretical discussion
Hall and Soskice (2001) have proposed that the advanced industrialized
countries fall into two main types: LMEs such as the US and the UK and co-
ordinated market economies (CMEs) such as Germanyand Denmark. LMEs
rely more on market mechanisms while CMEs tend to co-ordinate business
transactions though non-market relationships. These dierences exist across
several key institutional domains of the economy. The distinction between
LMEs and CMEs is based on the nature of institutions, such as industrial
2017 John Wiley& Sons Ltd.

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