“The Rule of Law and Business: Lessons from Experiments in South America” is the eighth article in a series on intersections between business law and the rule of law, and their importance for business lawyers, created by the American Bar Association Business Law Section’s Rule of Law Working Group. Read more articles in the series.
“The rule of law is crucial for promoting economic growth, sustainable development, human rights and access to justice. Where the rule of law is strong, people and businesses can feel confident about investing in the future.”
Former United Nations Secretary-General Ban Ki-moon
The United Nation’s Sustainable Development Goal 16 (SDG 16) reflects a global commitment to “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels.” Considered both a goal, in and of itself, and a key enabler for the rest of the United Nations 2030 agenda, SDG 16 is grounded in the understanding that promotion of the rule of law is good for business. Despite this global and unequivocal recognition of the link between the rule of law and business, business lawyers still face resistance when introducing the Rule of Law as a tangible aspect of their professional practice, in part due to an apparent lack of opportunities to advance this fundamental principle in a pragmatic way, while providing advice to their clients.
Experimenting with reimagining what lawyers can do to advance business and the rule of law, CAMINNOS Soc. Civ., a business lawyer–led organization, is testing and developing novel approaches to business law tailored to support communities in rural South America using innovative approaches to individual and collective entrepreneurship. CAMINNOS works with new entrepreneurs to help them build capacity to engage with real world challenges by helping them cultivate experience- and results-driven thought leadership. One of the main goals of this approach is to empower small and medium business owners to engage with lawmakers to collaborate around using business frameworks to proactively solve or regulate societal problems. In supporting this kind of capacity building through law in business, CAMINNOS (co-founded and led by the author) operates on the understanding that the Rule of Law is of paramount importance—for businesspeople—in solving business problems and creating a healthy business environment in the long run.
CAMINNOS’s approach to business advising is grounded in educating clients on their Rule of Law obligations. At the big picture level, CAMINNOS uses Base-of-the-Pyramid (BoP) business models and blockchain technology to empower rural communities in strategic sectors to generate resources for development in their territories, with a focus on sustainability. In CAMINNOS’s case, the governance model of its community-owned companies provides families within each community with control and equal voting power to determine how to reinvest the companies’ revenue into sustainable development projects. Moreover, the start-up companies that CAMINNOS structures and advises allow each of the communities that have ownership in them to create an additional income source, to diversify their local economies through revenue reinvestment, and to change their members’ mindset, from a welfare to an entrepreneurial mentality. Thus, CAMINNOS acts to serve not only its clients’ businesses but also its clients’ larger vision of how these business will live in and impact society for the good.
Legal advising is at the core of these projects, and CAMINNOS adapts traditional approaches to lawyering by designing into them capacity-building programming and technical support that allow clients to learn how to operate their business entities independently by complying with sector regulations providing transparency, and promoting good governance across large shareholder bases. Based on this experience on the ground, CAMINNOS sees the role of the lawyer, particularly for lawyers advising small, medium, and new businesses, as including educating clients on the rule of law, including by emphasizing corporate ethics and the role of environmental sustainability and social impact together with profit.
At CAMINNOS, business law advising is not only about helping clients mitigate risk but also about empowering clients to learn to identify and address the legal frameworks underlying the root causes of such risks. Implementing such an approach, in 2021, CAMINNOS developed a project to introduce indigenous populations to the rural tourism sector through companies owned by the members of their communities. This project was the winning initiative in the Local Innovators Contest 2021 organized by the Local Innovation Network and Ashoka, and selected from the proposals of more than 120 local government leaders paired with social entrepreneurs. The innovative component of the project was the design of a digital inclusion program that allowed collaboration between business lawyers, local government, and rural communities to develop and implement a digital tourism program formed as business entity run by its shareholders, with equal participation from business and the community. By facilitating multistakeholder collaboration in response to client demands, CAMINNOS was able to find long-term and systemic legal and business law solutions to the difficulties and limitations that rural tourism in Bolivia had to face during COVID-19 lockdowns. Reaching out to key allies, CAMINNOS gathered the National Protected Areas Authority, tech startups, NGOs, and academic institutions to design strategies to support rural communities in the tourism sector, creating legal frameworks to integrate such communities as direct participants in the sector. This collaborative public-private pipeline was able to implement a digital tourism program for rural communities to gain skills to create digital tourism experiences and digital artwork using blockchain technology that promoted and sold the works as non-fungible tokens in cryptoart galleries. The initiative was selected from among 80 public-private partnership proposals, as the most innovative project in the Local Innovators Contest 2021 international competition. This project and CAMINNOS’s work provide an example of the potential at the intersection of business and public policy that will be replicated in 2022 by other communities and the public sector in Bolivia and Argentina.
From working at the intersection of business and law, CAMINNOS has learned that business lawyers are key to activating the potential for businesses’ leadership within the business community. Moreover, CAMMINNOS has found that delivering innovative legal advice to clients that allows them to go beyond compliance with “minimum” safeguards to focus on the more enterprising “do no harm” principle invigorates business and inspires business leadership. It also creates within business clients an interest in and a commitment to engage in strengthening the rule of law by building and growing more accountable business institutions. These actions can be defined as part of the “changemaker” movement, a rather uncommon term for the legal profession, yet understandable enough to indicate that professionals on this level of engagement are committed to assume a different approach to attain new and better results in their effort to uphold the Rule of Law and achieve their clients’ social goals. Driven by its clients’ goals and aspirations, CAMINNOS is creating a community development model through new governance structures in rural communities, causing a change of mindset that redefines the relationship and power dynamics in communities, with a special focus on gender equity and the interactions between communities and other actors such as governments, private investors, NGOs, and civil society movements. The organization continually works to promote specific legal regulation to change the status of sustainable development for rural areas to allow indigenous communities’ inclusion in disruptive and scalable industries, such as the energy and technology sectors, enabling them as business actors.
Applying business law frameworks, CAMINNOS has trained rural communities on how to construct and operate community-led gas stations, as well as how to reinvest their profits into sustainable development projects. Anchored in business law and principles of rule of law, CAMINNOS has also deployed multidisciplinary teams of researchers, engineers, and financial and legal specialists to structure a corporate governance model that has enabled the creation of community-owned gas stations for five communities, granting ownership to more than 4500 families and enabling them to exercise their shareholder rights and comply with corporate regulations that govern commercial entities in that jurisdiction.
Some of the lessons that CAMINNOS has learned through its work are specific to South America. However, the core of CAMINNOS’s approach appears to have universal application. For example, incorporating advising on the nature and value of the rule of law into traditional business advising to help clients cultivate business leadership skills is an approach that business lawyers advising new or socially minded business clients can immediately experiment with and adopt. Moreover, business lawyers can also begin to develop networks beyond the legal community so that, where affordable, they can offer their clients collaborative and big picture opportunities for business growth and innovation that support and enhance the rule of law in a way that advances their clients’ leadership positions. In this context, an innovative approach to legal advising can be understood as a process to provide clients with effective solutions to systemic social and environmental issues, using strategic and multidisciplinary approaches, grounded first and foremost in business law and, more broadly, in principles of rule of law. The concept itself calls for an intervention that goes beyond traditional legal counseling, requiring a deeper understanding of the social problems, the culture, and the context, driving business lawyers to question whether existing law is helpful to the highest aspirations of the businesses and business clients they serve in given circumstances and how the Rule of Law can be upheld and relied upon in such work.
As an added fruit, given that the impact of socially conscious business projects is measured in both financial and social terms, this approach to business lawyering also allows lawyers to measure their own social impact, in addition to their financial impact—a measure that might make them more appealing and attractive to socially-minded entrepreneurs, who are increasingly numerous. Keep in mind that measuring social gains initially requires the design of a theory of change model, understanding the underlying needs of your clients and the communities they wish to serve and translating them into objectives, which must be aligned to identified needs in the relevant communities, needs also targeted as pressing social issues listed in the 17 Sustainable Development Goals promoted by the United Nations.
The term is used in economics to refer to the poorest two-thirds of the economic human pyramid, a group of more than four billion people living in abject poverty. Business for the Base of the Pyramid as a strategy was popularized by C.K. Prahalad, as well as other writers, such as Ted London, reframing the world’s poor living on less than US$ 1.25 per day as “resilient and creative entrepreneurs” as well as “value-conscious consumers.” ↑
Blockchain can be understood as a system to record information in a way that makes it extremely difficult to change or be hacked. It works as a decentralized ledger that records the origin and ownership of a digital asset. It gained notoriety as the technology used to created and support cryptocurrency, such as Bitcoin, Ethereum, and other digital coins. It is used for many purposes, such as to register digital assets, create Decentralized Finance (DeFi) structures, program Smart Contracts, and form Decentralized Autonomous Organizations (DAO), among its most common applications. ↑
More information can be found at https://caminnos.org/. See, “Assessing the Impact of Social Enterprises Using the U.N. Sustainable Development Goals and IRIS,” http://www.sonencapital.com/news-posts/assessing-impact-social-enterprises-using-u-n-sustainable-development-goals-iris/. “Social entrepreneurship is increasingly recognized as a means of addressing the world’s most pressing social and environmental problems. However, assessing the impact of social enterprises continues to be challenging. Part of the challenge is to find a shared language of impact in the myriad approaches used by social entrepreneurs, impact investors, and development agencies to code, classify, and interpret impact.” ↑
See, e.g., “Rural Youth Innovation Award honours youth leaders fighting COVID-19,” https://www.ifad.org/en/web/latest/-/rural-youth-innovation-award-honours-youth-leaders-fighting-covid-19. CAMINNOS works closely with rural communities, and we will see two of the projects launched by this organization led by an attorney in Bolivia that are examples of systemic change as an effect of strategic legal advice. ↑
The Local Innovators Contest is an initiative driven by Ayni | Systemic Innovation Communities, an alliance between different organizations of the Latam region with a strong commitment to innovation and the transformation of our cities. Its fifth edition, Collaborative Cities, was targeted to foster territorial transformation through open and participatory work between local government leaders and social innovators (social entrepreneurs). More than 120 teams registered for this initiative to co-design transformative solutions to local problems in areas as diverse as citizen participation, waste management, environmental issues, social inclusion, health, and food security, among others. ↑
The Local Innovation Network (Red de Innovación Local) supports local government teams to become leaders in the development of their communities through the improvement of their management capacities, the construction of collaborative networks, and the promotion of innovative public policies. ↑
Ashoka: Innovators for the Public, an NGO based in the United States and ranked as the fifth best NGO in the world by independent media organization NGO Advisor, builds and cultivates a community of over 3900 social entrepreneurs and change leaders who transform institutions and cultures so they support changemaking for the good of society. ↑
“Driving deep social change most often requires us to work in collaboration with diverse stakeholders on shifting a system together. While such multi-stakeholder collaboration can have a transformational impact on a system, it also comes with its own challenges and requires a specific type of leadership and strategy to be effective.” Ashoka Europe Fellowship Program developed a course to strengthen the leadership skills and strategy of social entrepreneurs for facilitating multi-stakeholder collaboration: https://fellowship-europe.ashoka.org/multi-stakeholder-collaboration. ↑
Non-fungible tokens (NFTs) are digital art pieces registered as unique tokens or items, using blockchain technology to create a smart contract that grants authenticity and proof of ownership. Its value is in the blockchain, which removes the middleman and confirms the origins or authorship of the art. ↑
See “Emerging Voices: ‘Do No Harm’ and The Development of General Corporate Human Rights Obligations,” Gabriel Armas-Cardona, Opinio Juris (August 28, 2015), http://opiniojuris.org/2015/08/28/emerging-voices-do-no-harm-and-the-development-of-general-corporate-human-rights-obligations/. (Emphasizing that “The principle of ‘do no harm’ has been used as a touchstone in corporate human rights obligations since at least 2002 and is a surprisingly suitable standard for developing a structure for general obligations.” Yet, this principle is not designed to guide the actions of business entities towards social good contributions, but to restrict them to avoid human rights violations.) ↑
See “Assessing the Impact of Social Enterprises Using the U.N. Sustainable Development Goals and IRIS,” http://www.sonencapital.com/news-posts/assessing-impact-social-enterprises-using-u-n-sustainable-development-goals-iris/, quoted at note 5. ↑