Corporate Social Responsibility (CSR) and Human Rights From Voluntary Standards to Binding Obligations

695 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) Corporate Social Responsibility (CSR) and Human Rights From Voluntary Standards to Binding Obligations https://currentsign journal.com/index. php/JCS/index Muhammad Akhter Aleem Dr. Sajid Sultan Muhammad Ahsan Iqbal Hashmi* Vol. 3 No. 4 (2025) 696 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) Corporate Social Responsibility (CSR) and Human Rights From Voluntary Standards to Binding Obligations This paper examines the evolving relationship between Corporate Social Responsibility (CSR) and human rights, focusing on the shift from voluntary standards to binding legal obligations. While CSR initially emerged as a philanthropic and voluntary initiative, its limitations in addressing systemic labor, environmental and social injustices have become increasingly evident, particularly in developing countries. The analysis begins with the conceptual and historical foundations of CSR, followed by a discussion of its gradual incorporation into international and regional legal frameworks. A comparative perspective highlights the experiences of Pakistan, Africa, Latin America and Southeast Asia, illustrating how weak state capacity, complex supply chains and corporate resistance hinder effective implementation. The paper further identifies structural challenges in moving toward binding obligations and proposes future directions, including international treaties, mandatory due diligence laws, regional cooperation and integration with the Sustainable Development Goals. The study concludes that voluntary standards are insufficient for ensuring accountability and that a transition toward binding obligations is both a legal necessity and a moral imperative for aligning corporate conduct with human rights protection. Keywords: Corporate Social Responsibility (CSR); Human Rights; Business and Human Rights; Voluntary Standards; Binding Obligations; Global South; Pakistan; International Law; Development; Sustainability. Introduction The relationship between Corporate Social Responsibility (CSR) and human rights has evolved from a philanthropic exercise to a critical component of global governance. Traditionally CSR was considered a voluntary commitment by corporations to operate ethically and contribute to societal well-being beyond legal requirements. However, increasing globalization multinational corporate influence and growing awareness of human rights abuses linked to business operations have shifted the debate towards recognizing CSR not merely as a voluntary choice but as a potential legal obligation (Ruggie, 2013). Muhammad Akhter Aleem LL.M Commercial and Corporate Law, Advocate High Court Queen Mary University of London, United Kingdom Email: akhteralee[email protected] Dr. Sajid Sultan Lecturer, Department of Law Bahauddin Zakariya University Multan (Vehari Campus) Pakistan Email: [email protected] Muhammad Ahsan Iqbal Hashmi* Assistant Professor of Law Bahauddin Zakariya University Multan (Vehari Campus) Pakistan Email: [email protected] Abstract 697 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) The voluntary approach has been shaped by initiatives such as the UN Global Compact the OECD Guidelines for Multinational Enterprises and ISO 26000. These frameworks encouraged corporations to adopt responsible practices but without legally enforceable sanctions they relied heavily on corporate goodwill (Deva & Bilchitz, 2013). While voluntary CSR improved awareness and transparency in certain sectors its limitations became visible in cases involving labor exploitation environmental degradation and community displacement where corporations failed to uphold human rights standards (McCorquodale & Nolan, 2021a). This debate has led to a gradual movement from voluntary standards towards binding obligations. Governments international organizations and civil society have increasingly demanded accountability for corporate human rights violations. The emergence of national laws such as France‘s Duty of Vigilance Law and Germany‘s Supply Chain Act alongside the European Union‘s efforts to mandate corporate due diligence highlight a global shift (Krajewski et al., 2021). These legal frameworks aim to ensure that corporations integrate human rights protection into their core business strategies rather than treating them as optional add-ons. Against this backdrop the central question emerges: can CSR effectively protect human rights when limited to voluntary commitments or is a transition to binding obligations necessary for meaningful accountability? This paper argues that while voluntary standards played a crucial role in initiating corporate engagement with human rights only binding legal obligations can close accountability gaps. The discussion proceeds by examining the theoretical foundations of CSR its voluntary frameworks the evolution towards binding obligations and the future of corporate accountability in international law (Nahornyi et al., 2022). Theoretical Framework of CSR and Human Rights Corporate Social Responsibility (CSR) has historically been conceptualized through two dominant theoretical approaches: the classical shareholder-oriented model and the modern stakeholder-oriented model. The classical perspective advanced by Milton Friedman views the primary responsibility of corporations as profit maximization within the boundaries of law. According to this view any additional responsibility towards society or human rights falls outside the corporate mandate and rests with governments (Camilleri, 2022). In contrast the stakeholder theory developed in the late twentieth century emphasizes that corporations owe duties not only to shareholders but also to employees consumers communities and other stakeholders whose interests are affected by corporate operations (Mahajan et al., 2023). This paradigm shift has laid the foundation for integrating human rights into CSR discourse. From an international law perspective the role of corporations in protecting human rights has been a contested subject. Traditional international law places primary responsibility for human rights protection on states while corporations are seen as private entities without direct international legal obligations (Macchi, 2021). However as multinational corporations gained power comparable to states their actions have increasingly influenced human rights outcomes particularly in developing economies. This has led to normative debates about whether corporations should bear independent responsibilities for human rights protection. The human rights framework offers a normative foundation for CSR. Under the ―Protect, Respect and Remedy‖ framework introduced by the UN Guiding Principles on Business and Human Rights (UNGPs) states retain the duty to protect human rights but corporations are 698 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) required to respect them through due diligence and remediation processes (Macchi, 2021). This framework reflects a middle ground by not equating corporations with states in terms of obligations yet recognizing that business operations have a direct impact on the realization of human rights. CSR theory has also been influenced by transnational legal processes where norms emerge through interactions among states corporations civil society and international organizations. Scholars argue that CSR has evolved from soft norms of social legitimacy to elements of transnational law that increasingly blur the boundaries between voluntary commitments and binding obligations (van Asselt, 2021). The theoretical framework thus establishes the foundation for analyzing the shift from voluntary CSR standards to mandatory legal requirements in human rights protection. CSR as Voluntary Standards Corporate Social Responsibility (CSR) initially emerged as a voluntary practice, rather than a matter of legal obligation. The underlying assumption was that corporations, particularly those operating across borders, should adopt ethical standards exceeding national legal requirements, especially in countries with weak governance structures. In the 1990s and early 2000s, a number of international initiatives institutionalized CSR through voluntary guidelines and frameworks, encouraging corporations to incorporate human rights and sustainability considerations into their business practices. One of the earliest and most influential initiatives was the United Nations Global Compact (2000), which established ten principles relating to human rights, labor, the environment and anti-corruption (Williams, 2004). While widely adopted by multinational corporations, the Compact lacked enforcement mechanisms, relying primarily on corporate goodwill and reputational incentives. Critics argue that many companies used the Compact as a public relations tool rather than as a genuine commitment to human rights (Deva, 2012). The OECD Guidelines for Multinational Enterprises, first adopted in 1976 and subsequently revised, similarly provided recommendations on responsible business conduct, including respect for human rights. Although these guidelines introduced the mechanism of National Contact Points (NCPs) to address complaints, their implementation remained voluntary and lacked binding authority (Reinert et al., 2022). Likewise, the ISO 26000 Guidance on Social Responsibility (2010) emphasized integrating CSR principles into corporate governance but explicitly refrained from creating enforceable duties (Hemphill, 2013). The reliance on voluntary frameworks was justified on the grounds of flexibility and inclusivity, enabling corporations to tailor approaches according to sector-specific challenges. Empirical studies, however, reveal the limitations of voluntarism: while voluntary initiatives promoted transparency and disclosure, they often failed to prevent serious human rights abuses. Incidents of forced labor in supply chains, unsafe working conditions and large-scale environmental damage persisted, particularly in industries such as textiles, mining and agriculture (Wettstein, 2012). These shortcomings have led scholars and policymakers to criticize voluntary CSR as insufficient for ensuring meaningful accountability. Instead of preventing abuses, voluntary standards often created a ―race to the top‖ among already responsible corporations, leaving less 699 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) scrupulous actors largely unaffected (Waddock, 2024). This gap has fueled demands for a transition from voluntary CSR to binding legal obligations, designed to level the playing field and enforce corporate accountability across the board. CSR and Soft Law Mechanisms While voluntary CSR frameworks laid the foundation for corporate engagement with human rights, the emergence of soft law mechanisms marked an important transitional phase between voluntary standards and binding obligations. Soft law refers to instruments such as guidelines, declarations and principles that, while not legally binding, exert normative influence on corporate conduct through reputational incentives, stakeholder expectations and evolving international standards (Slominski & Trauner, 2021). The most significant development in this context was the adoption of the United Nations Guiding Principles on Business and Human Rights (UNGPs) in 2011, drafted under the leadership of John Ruggie. The UNGPs are structured around three interrelated pillars: the state duty to protect human rights, the corporate responsibility to respect human rights and the right of victims to access effective remedies (McCorquodale & Nolan, 2021b). Although non-binding, the UNGPs have become the most authoritative global framework in the field of business and human rights. Their widespread acceptance by states, corporations and civil society has given them quasinormative force, often serving as the benchmark for corporate due diligence practices (Rasche & Waddock, 2021a). Beyond the UNGPs, several other soft law initiatives have shaped corporate behavior. The OECD Due Diligence Guidance for Responsible Business Conduct, the International Labour Organization (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy and the International Finance Corporation (IFC) Performance Standards are prominent examples. These frameworks emphasize corporate due diligence, requiring businesses to identify, prevent and mitigate adverse human rights impacts in their operations and supply chains (Canton, 2021). Courts, arbitral tribunals and regulatory bodies have increasingly referenced these standards, further enhancing their normative weight in global governance. Despite their growing influence, soft law mechanisms face several criticisms. First, they rely heavily on corporate self-reporting, raising concerns about selective disclosure, ―bluewashing,‖ and superficial compliance (Rasche & Waddock, 2021b). Second, they assume that corporations are sensitive to reputational pressures, an assumption that may not hold true in industries with opaque supply chains or limited consumer scrutiny. Third, victims of corporate abuses often lack meaningful access to remedies because soft law does not create enforceable rights or liabilities. Nevertheless, soft law has proven important as a stepping stone toward binding obligations. Recent legislative developments, such as France‘s Duty of Vigilance Law (2017), Germany‘s Supply Chain Act (2021) and the proposed EU Corporate Sustainability Due Diligence Directive, explicitly draw upon the UNGPs and OECD Guidance as their normative foundation (Tenreira, 2024). This illustrates how soft law can gradually ―harden‖ into legally binding frameworks, bridging the gap between voluntary CSR and enforceable corporate obligations. In sum, soft law mechanisms occupy a critical space in the global governance of CSR and human rights. Although they cannot guarantee accountability on their own, their normative influence, 700 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) adaptability and role in shaping national and regional legislation make them indispensable in the transition from voluntary CSR standards to binding legal frameworks. From Voluntary to Binding Obligations: Emerging Trends The global governance of Corporate Social Responsibility (CSR) is shifting from reliance on voluntary standards toward the adoption of binding legal obligations. While voluntary frameworks emphasized corporate goodwill and ethical commitments, recent years have witnessed the emergence of national legislation, regional initiatives and international debates that impose mandatory due diligence and accountability requirements. This evolution reflects a recognition that voluntary CSR alone cannot adequately address human rights violations or provide remedies for affected communities. National Legislation A landmark development in this shift is France‘s Duty of Vigilance Law (2017), which requires large companies to implement vigilance plans to prevent human rights violations and environmental harms within their global supply chains. Failure to comply exposes companies to potential civil liability (Bose, 2023). Similarly, Germany‘s Supply Chain Due Diligence Act (Lieferkettengesetz, 2021) obliges companies above a certain size to conduct human rights and environmental due diligence across supply chains, with penalties including administrative fines and exclusion from public contracts (Wilhelm, 2024). Other countries have also moved in this direction. The UK Modern Slavery Act (2015) requires companies to disclose measures against forced labor and human trafficking, although it has been criticized for focusing on reporting rather than substantive obligations (LeBaron, 2021). In the United States, the Dodd-Frank Act (2010), Section 1502, imposes mandatory reporting on the sourcing of conflict minerals, linking corporate supply chain management with human rights concerns (Danysz, 2021). Australia‘s Modern Slavery Act (2018) mirrors the UK‘s approach but strengthens compliance through centralized reporting mechanisms. Collectively, these initiatives illustrate the trend of transforming CSR principles into binding legal frameworks. Regional Initiatives At the regional level, the European Union (EU) has advanced several measures to harmonize CSR-related obligations. The most significant is the proposed Corporate Sustainability Due Diligence Directive (CSDDD), which would require companies operating in the EU to identify, prevent, mitigate and remedy human rights and environmental harms across their global operations (O‘Brien & Christoffersen, 2023). Complementary measures, such as the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation, integrate sustainability and social responsibility into financial decision-making, thereby indirectly reinforcing corporate accountability (Sjåfjell, 2022). Given the EU‘s economic influence, these initiatives are expected to shape global standards beyond Europe. Global South Perspectives In the Global South, the move toward binding CSR obligations has been slower and uneven, often due to weak state capacity and reliance on foreign investment. For example, India‘s 701 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) Companies Act (2013) introduced mandatory CSR spending, requiring certain companies to allocate two percent of their net profits to socially responsible activities. While this model emphasizes philanthropy rather than human rights due diligence, it represents one of the earliest legislative efforts to codify CSR obligations in a developing country (Bihari & Shajahan, 2023). In South Africa, the King IV Report on Corporate Governance has been influential in embedding CSR principles into business practices, though its provisions remain more normative than binding (Phiri et al., 2024a). In Latin America, countries such as Brazil and Chile have adopted sector-specific regulations, particularly in mining and extractive industries, that reflect CSR considerations, yet comprehensive legislation mandating human rights due diligence remains limited. Similarly, Southeast Asian countries, while integrated into global supply chains, have largely relied on voluntary codes, with binding laws emerging only under international pressure (Greve, n.d.). Toward a Global Norm These national and regional initiatives demonstrate a gradual ―hardening‖ of CSR norms. What was once considered voluntary corporate discretion is now increasingly viewed as a matter of legal accountability. Nevertheless, the landscape remains fragmented, with differing enforcement mechanisms, scope and remedies across jurisdictions. The challenge lies in developing coherent international frameworks that harmonize these diverse approaches while respecting national sovereignty and developmental priorities. CSR and Human Rights in Developing Countries: A Comparative Perspective The debate on the effectiveness of CSR becomes particularly complex in the context of developing countries, where state capacity is often limited, governance structures are weak and economic development heavily relies on foreign investment. Although multinational corporations (MNCs) bring capital, technology and employment opportunities, their operations frequently intersect with issues of human rights, labor exploitation and environmental degradation. The following comparative analysis highlights how CSR has been shaped by legal, political and social realities in Pakistan, Africa, Latin America and Southeast Asia. Pakistan In Pakistan, CSR is largely understood through a philanthropic lens, with corporations engaging in charitable donations, health initiatives and educational projects (Kharabsheh et al., 2023). However, systemic integration of CSR into corporate governance remains weak. The Securities and Exchange Commission of Pakistan (SECP) has issued guidelines encouraging CSR practices, yet compliance is voluntary and lacks enforcement mechanisms (Akhtar & Zia, 2022). The textile and manufacturing sectors, heavily reliant on global supply chains, face persistent criticism regarding labor rights violations, poor working conditions and environmental pollution (Zaighum et al., 2021). Despite these challenges, some positive trends are visible. The Pakistan Stock Exchange (PSX) has introduced reporting requirements linked to sustainability and corporate governance, while multinational corporations operating in Pakistan have adopted UN Global Compact principles and supply chain codes of conduct. However, these efforts remain fragmented and victims of 702 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) corporate abuse often lack effective access to remedies due to weak judicial enforcement (Majeed & Shaikh, 2024). The broader problem lies in the absence of binding legislation that integrates CSR with human rights protection. Africa In Africa, CSR has gained traction primarily in the extractive industries, where multinational corporations play a dominant role. Mining operations in countries such as Nigeria, South Africa and the Democratic Republic of Congo (DRC) have generated serious concerns regarding displacement of communities, labor exploitation and environmental degradation (Gyane et al., 2021). While companies often engage in CSR initiatives, such as community development projects, they are frequently criticized as compensatory gestures rather than mechanisms of accountability. South Africa represents a partial exception, with its King Reports on Corporate Governance (most recently King IV) embedding sustainability and stakeholder responsibility into governance structures (Phiri et al., 2024b). Nonetheless, these frameworks remain more normative than legally binding. Across much of the continent, enforcement depends heavily on civil society activism and international scrutiny, underscoring the gap between CSR discourse and actual corporate accountability. Latin America Latin America presents a mixed picture, shaped by both progressive constitutions and persistent governance challenges. Countries like Colombia and Brazil have integrated CSR considerations into national legislation, particularly in mining, energy and agribusiness sectors (Peinado-Vara, 2022). Yet implementation is uneven, with corruption, weak regulatory oversight and political instability undermining enforcement. Notably, regional courts such as the Inter-American Court of Human Rights have played an important role in reinforcing the link between corporate conduct and human rights. Landmark decisions on indigenous rights and environmental protection have increased pressure on corporations to adopt socially responsible practices (Tomaselli & Cittadino, 2021). However, much of CSR in Latin America remains voluntary, with companies adopting codes of conduct primarily to satisfy international investors and consumers. Southeast Asia Southeast Asia, as a hub for global supply chains in textiles, electronics and agriculture, has witnessed intense debates over CSR and human rights. In countries like Bangladesh, Cambodia and Vietnam, the garment industry has been plagued by poor labor conditions, low wages and factory disasters such as the Rana Plaza collapse in 2013 (Frenkel et al., 2022). While voluntary CSR codes introduced by Western buyers have improved transparency, enforcement remains inconsistent. Some countries, such as Indonesia and Thailand, have adopted laws requiring companies to include CSR in corporate reporting. However, these laws are often weakly enforced and emphasize philanthropy over rights-based due diligence. Regional organizations such as ASEAN have endorsed CSR principles, but their impact is limited due to the non-binding nature of 703 Journal for Current Sign Online ISSN (3006-1504) Print ISSN (3006-1490) ASEAN frameworks. Overall, the Southeast Asian experience highlights the difficulty of relying on voluntary standards in environments where labor exploitation and environmental damage are systemic. Structural Challenges in Moving from Voluntary Standards to Binding Obligations The transition from voluntary CSR standards to binding legal obligations is fraught with structural challenges that complicate the effective enforcement of corporate accountability. While recent legislative initiatives mark important progress, several obstacles persist at the levels of enforcement, corporate compliance, state capacity and global economic governance. Enforcement Gaps A primary challenge lies in the enforcement gap between legal frameworks and practical accountability. Even where laws exist, such as the French Duty of Vigilance Law or the German Supply Chain Due Diligence Act ,effective monitoring and sanctioning mechanisms are often weak (Gustafsson et al., 2023). Many regulatory authorities lack the capacity, resources, or political will to investigate violations thoroughly. This gap allows corporations to adopt superficial compliance measures, such as publishing CSR reports, without fundamentally altering exploitative practices in their supply chains. Corporate Resistance Corporations often resist binding obligations by invoking arguments of economic competitiveness, regulatory burden and sovereignty concerns. Business lobbies have consistently argued that mandatory due diligence laws increase operational costs and put domestic firms at a disadvantage compared to competitors in less regulated jurisdictions (Černič, 2022). In some cases, corporations relocate production to countries with weaker enforcement, thereby creating a ―race to the bottom‖ in labor and environmental standards. Resistance is further reinforced by the asymmetry of power between MNCs and developing states, where governments may hesitate to impose strict regulations for fear of losing foreign investment. Weak State Capacity In developing countries, state capacity and institutional weaknesses exacerbate the problem. Judicial systems in countries like Pakistan, Bangladesh and Nigeria face significant backlogs, corruption and limited technical expertise, reducing their ability to enforce corporate accountability (Leslie et al., 2021). Furthermore, regulatory agencies are often underfunded and lack independence, leaving enforcement vulnerable to political and economic pressures. This structural weakness results in a reliance on voluntary CSR and external international scrutiny rather than effective domestic enforcement. Globalization and Supply Chain Complexity Globalization has created complex, multi-tiered supply chains that obscure accountability. A multinational corporation sourcing materials or products from multiple suppliers across different jurisdictions may find it difficult, or convenient to claim it is difficult, to ensure compliance with human rights standards (Bernaz, 2021). Victims of corporate abuses are often located in