Leiden Law Blog

Teaching CSR: stakeholder scenario in palm oil industry reveals its value

Posted on by Caspar van Woensel in Private Law , 1
Teaching CSR: stakeholder scenario in palm oil industry reveals its value

Real-life scenarios prove it: it’s really hard to take a good decision. In mock stakeholder meetings on a dilemma in the field of corporate social responsibility (CSR) students arrive at the table brimming with the immediacy of their assigned interests. When they leave the table something has happened: there is an earnest understanding of the decision of the board. The parties have just realised how tough good decision-making is. This blog shares some of the experiences in CSR teaching.

Exercise background

CSR is on the rise in international business. Better working conditions in the garment industry (Clean Clothes Campaign), the quest for sustainable and traceable palm oil (Unilever), Soco International’s decision to write off on its investments with regard to oil reserves in the “Gorillas in the Mist” Virunga National Park (Congo): no corporation can do without a vision of social and environmental responsibility that is tailored to its particular business. How can future international business lawyers be prepared for the dynamics of this field?

One of the methods is role play: in real-life scenarios, multinational corporations are faced with dilemmas in countries where they buy raw materials or consumer products, and students are asked to play a part. Harvesting bananas in unsafe countries, picking tomatoes without breaks in Florida, drilling for gas in the Arctic, financing a mining corporation with ties to rebels – for corporations, there are responsibilities everywhere and they are not limited to abiding to the law. In our CSR class, we teach this to students, but they have yet to grasp what it means. Hence the exercise.

The goal of the exercise is to shed light on the process of determining the corporate course action while taking into account the interests that are likely to be affected. A good way to observe this process is to have the board of the corporation host a stakeholder meeting. To raise the stakes, the board announces beforehand that it must reach a decision at the end of the meeting.

The palm oil sector

At a recent event, a scenario was played out in the palm oil sector. The scenario was played out using different groups with roles assigned. Students all played a part as a stakeholder, while their teacher acted as the host and was thereby able to lead, clarify and steer matters for the purpose of the exercise, and round off in time. In this mock case, Unilever invited its stakeholders to a meeting in Kuala Lumpur, Malaysia, to help it decide on the continuation or discontinuation of the wholesale purchase of palm oil in Indonesia, where the sector is facing severe problems.

Unilever is one of the world’s largest buyers of palm oil and a pioneer in buying traceable palm oil from sustainable sources. Its goals are not being met in Indonesia, with concerns about formal and traditional land ownership, the treatment of local communities, cases of bribery. And wildfires are consuming rain forests, as a fallout of efforts to clear more land for plantations.    

Who came to the stakeholder table? A European consumer organisation demanding 100% fair palm oil; labour unions from Indonesia worrying about employment; plantation owners and a wholesale seller of palm oil, all from Indonesia; the national government of Indonesia raising the importance of multinational corporations for the economy; an international nature-watch organisation protesting against the exchange of rain forests for palm plantations; international banks financing the activities of Unilever abroad; and a few of Unilever’s larger shareholders. The Unilever board acted as chair.

Role play in action

It emerged that the sellers would easily turn to less demanding buyers from India and China. The constructive arguments of the labour unions and the board nudged the palm oil sellers back into the arms of Unilever: they opened up to the idea of learning about using sustainable methods and in the process maintaining trade relations with Unilever. In fact, they were quite fond of the corporation because of the care it was taking in its business dealings, and they felt secure. However, maintaining their income was an overriding priority for them and they would sell to the highest bidder.

The government was an ambiguous but unmistakable partner for improving the issues in Indonesian society. The most critical stakeholders proved to be the banks and the shareholders. Banks voiced concerns over whether Unilever as a client was going to meet the banks’ own standards (Equator Principles) now that it was experiencing problems in Indonesia. The shareholders pressed the board to run a proper business course, not deploy social and educational programmes. Investment portfolios are easily adjusted, they warned. The board referred them to its established sustainability goals, sound profitability, and its ongoing dialogue with the shareholders on its strategy.

In the end, the board decided that the corporation could take a hit financially and that, as a large player in the palm oil sector and a self-declared sustainability pioneer, it would not at this difficult point in time for the Indonesian palm oil sector, abandon that sector altogether and in the process allow others with quite possibly lesser standards to take its place. This decision came with a special nod to the shareholders as a vocal stakeholder close to the board. No party jumped up and strode out of the room; the meeting ended quietly. Upon repetition, the scenario took similar form.

The teaching benefits

Each time the scenario was played out, the students (as individuals, rather than stakeholders) immediately and convincingly assumed their assigned roles and stuck to their guns, until a point was reached where they could see common ground or a bigger point. They then remained devoted to their perspective but were prepared to see it from the other side or confirm their willingness to move in a certain direction. Their behaviour after the decision spoke volumes: it was received in a not entirely unfriendly, almost solemn way – a dawning of the reality that no decision satisfies all interests.

The students provided feedback after the activity’s completion. They had really enjoyed the role play and were surprised to see themselves so immersed in it. This is important because when learning is fun, more is learned. They also expressed that the result allowed them to pause and reflect on the hardship of good decision-making. When designing the scenario, this is what we hoped for, though we weren’t sure this goal would be achieved.

The stakeholder scenario, in this instance with Unilever as the object and the palm oil industry as the debated sector, thus proved its value as a teaching tool. Instead of taking a corporation’s social responsibility for granted, the students – future international business lawyers – now have reason to question what this responsibility might entail. Or next, how it could be shaped by their hands as well.

The experiences described in this blog have been gathered at the Mordenate conference on Law & sustainable development, on 27 November 2015 in Leiden, and were conducted in similar fashion in our CSR and Legal profession & ethics classes. 

Photo: Source: http://www.withcompassion.com.au/what-is-palm-oil

1 Comment

Santy Kouwagam
Posted on January 8, 2016 at 07:20 by Santy Kouwagam

Very interesting topic and way of teaching. I would have loved to be in that class.

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