3. The case for greater industry involvement in support of nonproliferation
Industry generally abides by the international nonproliferation regime, in most instances cooperating with national safeguards obligations, physical protection of nuclear materials and export controls.42 Industry must, in partnership with government and the IAEA, manage the unique threats of nuclear accident, nuclear terrorism and nuclear proliferation, all of which have significant public policy implications. The industry does not actively promote nonproliferation, though it actively manages and mitigates the threats of nuclear accident and, to a lesser degree, nuclear terrorism, at both the industry-wide and company level.43
The lack of active industry engagement in nonproliferation advocacy does not necessarily increase the risk of proliferation. That said, a more active partnership on nonproliferation may well be needed for the future, as the world’s nuclear industry grows, and where, as a consequence of growing demand, governments look to tighten the nonproliferation regime.
The nuclear industry, fairly or unfairly, continues to suffer public image problems and must be, like Caesar’s wife ‘above suspicion’. The slightest misstep is likely to have far graver consequences for the industry than for other industries utilising different sources for energy production. The Chernobyl and Three Mile Island incidents and their effect on the acceptability of nuclear power were dramatic enough. (If another country were to acquire nuclear weapons using technology sold by a particular company, its corporate image and the image of the industry as a whole would be tarnished.44 Were a nuclear weapon detonated, either by a state or non-state actor, then the nuclear power industry would come under massive public and governmental pressure to demonstrate that it posed a zero proliferation risk.) This could badly damage the industry’s prospects and perhaps even its survival.45 So industry has a strong impetus to support nonproliferation.
The proposition that an active nonproliferation stance by industry could be a public confidence-building tool and even a commercial imperative rather than primarily a box to tick should at least be tested.
Obstacles and incentives to greater industry involvement in nonproliferation
Depending on one’s perspective, obstacles and incentives for greater industry involvement in nonproliferation are two sides of the same coin, given the high degree of public/private and cross-border ownership in the industry. It is not so easy to determine where private interests end and public interest starts. As many nuclear companies are wholly or partially government-owned, or enjoy close links with government, this should augur well for tighter government-industry cooperation in nonproliferation, provided there is a commitment to this by both government and industry.
That said, a strong perception persists within the nuclear industry that nonproliferation is a government responsibility and is adequately managed by governments.46 Governments tend to see proliferation as a political issue which is not the domain of industry. On the other hand companies are concerned that recognising a link between their activities and weapons proliferation could tarnish their corporate image and damage business.47 There is also a common perception that the nuclear industry is already overregulated and does not require any additional regulatory burden to address proliferation. In particular, industry is concerned by additional costs that may be incurred in actively preventing proliferation.48
On the face of it, the disincentives for industry to get ahead of government are wide-ranging, from loss of profits, to corporate image concerns, to loss of competitiveness within the industry. Companies fear that if they tighten their conditions of sale to prevent proliferation, they will be undercut by less scrupulous suppliers seeking to improve their market share, resulting in a loss of competitiveness and profits. They are also wary of the effect nonproliferation cooperation would have on their image of independence from government.49 Companies are rightly concerned that information sharing resulting from any increased cooperation with government raises the issue of the protection of proprietary information.50 Companies offering products or services that are more proliferation prone than others on the market will suffer a loss of sales and profits and may go out of business if they act in furtherance of nonproliferation.51
The nonproliferation rules and treaties are drafted by government and governments are responsible for ensuring they are implemented through domestic legislation. Governments rarely include industry representatives in proliferation information exchanges or policy discussions in groups such as the Nuclear Suppliers Group (NSG), except through the occasional outreach activity. Another obstacle arises from differing levels of support for the nonproliferation regime among governments and divergent attitudes towards the acquisition of enrichment and reprocessing technology by states not already possessing them. It may be the case that were industry to be more supportive of the nonproliferation regime than governments, corporate interests and national interests might also diverge.52
The close relationship between government and the nuclear industry does not guarantee that nonproliferation commitments will take precedence. Nuclear cooperation agreements continue to be pursued between advanced nuclear states and countries in all regions of the world, apparently without real concern about the possible proliferation dangers that such assistance might give rise to.53 There are instances where governments have not acted in the interests of nonproliferation first, and where they have been swayed by the commercial interests of their nuclear industry or by overriding strategic and security concerns.54
Industry surveys in the US have shown that industry assesses its own performance in meeting export controls requirements as less than perfect.55
What this suggests is the need for a concerted effort by industry and government to develop jointly a new set of understandings of what the future proliferation dangers are as well as a demonstrable commitment to nonproliferation, which can also be as good for business as they are for security. To be really effective, this probably needs to be at the global level.
Active industry support and engagement will be necessary if major changes are made to the international market structure in order to make it more proliferation safe, for example in placing enrichment facilities under multilateral control. Given the high costs of fuel cycle activities, it has been suggested that finding economies of scale through a multinational approach could fulfill the dual role of keeping costs down while helping support nonproliferation policies. For example, companies and states might consider becoming shareholders in multinationally-owned modern centrifuge facilities, using leased centrifuge machines under ‘black box’ conditions as an alternative to investing in their own smaller, high-cost enrichment facilities.56 Such facilities would, of course, need to be accessible to nations yet to develop their own fuel cycle facilities, maybe even as joint plant operators as well as consumers.57 These facilities would need to develop appropriate rules for the supply of nuclear fuel which not only supports nonproliferation but effectively guarantees security of supply free of capricious political interference.
Industry is also at the front line of the development and spread of dual-use nuclear technology and has the capacity to prevent, limit or place conditions upon the spread of that technology, as well as report it, and to influence the type of nuclear technology that is developed in the future. Industry reporting of sales could assist the IAEA in assessing the completeness of member-state declarations.
Large nuclear companies can exert considerable pressure upon their national governments in their nuclear policy choices. Therefore an industry which makes nonproliferation a priority may also help reinforce the nonproliferation commitments of government. Making a commitment to nonproliferation part of the corporate brand might in fact deliver practical benefits for companies, helping to cultivate better relationships with regulators and nonproliferation advocates, and dispel the poor image created by the anti-nuclear lobby. Of course there are limits to the pressure that even larger nuclear companies can exercise when they are publicly owned and where broader national security and strategic concerns come into play.
Industry-wide initiatives to stem proliferation would require a harmonisation of business practices, ensuring that no company was disadvantaged for being more proactive on proliferation and thereby discouraging the first mover.58 More generally, industry should be an active partner with governments in the drafting of regulations and treaties that affect their activities, to ensure that they make operational sense and to encourage compliance.
4. Initiatives to engage industry
The nuclear industry currently cooperates with governments to fulfill their nonproliferation obligations, abiding by export controls and their safeguards inspection and reporting requirements. Industry has been effectively engaged in Generation IV reactor activities under the Advanced Fuel Cycle Initiative of GNEP, to develop proliferation safe reactor designs with US government R&D funding.59 Beyond their obligations and R&D cooperation, the industry contribution to nonproliferation is minimal, and advances in nuclear safety and security have little to offer by way of precedent, as they have primarily engaged nuclear operators. Nonproliferation values are, however, contained in the WNA Charter of Ethics and Principles of Uranium Stewardship.60
What more can be done?
Not enough is known about how far industry is prepared to go in taking a more prominent stand on nonproliferation. Members of the Australian Uranium Association (AUA) have shown an interest in encouraging industry to become more prominent and confident advocates in favour of nonproliferation because they think, by and large, industry has a good story to tell and because of their commitment to uranium stewardship principles.
We have listed here some general considerations and ideas for designing initiatives to further engage industry on nonproliferation. This includes examining the pros and cons of an industry-wide Code of Conduct and a government-industry conference which might help set the tone for the future management of the ‘second nuclear age’.
More information is needed on how industry would respond to these ideas, or indeed other ideas for how such increased engagement might be effected.
Such information could be obtained in numerous ways. One way would be a survey which could be put to a selection of key industry representatives on which a future government-industry dialogue might be based.
The Commission could consider asking the ICNND Secretariat or one of the participating research centres to design and send a survey to the key industry players and perhaps also to IAEA member states to assist in shaping the ICNND’s own recommendations about greater industry engagement in nonproliferation.
Whom to engage
The answer to this question will depend upon the type of initiative and desired outcome of any industry engagement. There are two broad options for whom to engage: key companies supplying sensitive nuclear technology, or as many nuclear industry companies as possible.
Targeting the suppliers of sensitive nuclear technology would engage those whose conduct will bear most directly upon the future of the nonproliferation regime. Stemming the expansion of enrichment and reprocessing capabilities and/or multilateralising those existing facilities will require the direct cooperation of those companies. Companies to be engaged on this matter should include Areva, Rosatom, Urenco, Eurodif, China National Nuclear Corporation, Japan Nuclear Fuel Limited, Westinghouse, GE Electric, Silex, Industreas Nucleares do Brasil, BNFL, Cameco, the Pakistan Atomic Energy Corporation, Nuclear Fuel Complex (India), the Nuclear Energy Corporation of South Africa and any other company with control of enrichment or reprocessing facilities and technology.
Another possibility is to engage as many nuclear industry companies as possible, whether they engage in fuel cycle, reactor or support activities, in order to create an industry-wide norm and momentum in favour of nonproliferation. This broader strategy would ensure that smaller companies were as committed to nonproliferation as the market leaders, and that industry leader commitment to nonproliferation would not be undermined by other companies who had not been similarly engaged by government. It also addresses the concern that a large number of nuclear activities have the potential to contribute to a weapons capability by building up the necessary infrastructure and expertise.
Whether done sequentially or at the same time, targeting the key industry players in sensitive nuclear technology and engaging the wider industry will be necessary to achieve an industry-wide commitment to nonproliferation that is also capable of delivering practical results. It is likely that the companies dealing with sensitive nuclear technology will not commit to nonproliferation without an assurance that the rest of the industry will support rather than undercut them, while the industry as a whole is unlikely to commit to nonproliferation without the leadership of the major companies.
This might be a role for an industry peak body such as the WNA, which could begin by engaging the suppliers of sensitive nuclear technology with the intention of associating a commitment to nonproliferation with leadership of the industry, as well as encouraging smaller companies to comply with new standards of appropriate industry behaviour.
Two types of outcomes may result from industry engagement – symbolic outcomes, in which industry declares its support for preventing proliferation as an exercise in public diplomacy, and practical outcomes, in which companies take active measures in order to prevent proliferation. Both types of outcomes are desirable and mutually reinforcing. A symbolic commitment would raise awareness of the role of industry in facilitating or preventing proliferation and provide a standard against which industry could be held responsible for the proliferation implications of its conduct, while generating a positive public image for the industry.
Practical outcomes could fill some of the gaps in the nonproliferation regime and contribute to the overall strengthening of the regime. Examples include:
Industry collaboration in the establishment of multilateral fuel cycle services;
Making minimum nonproliferation standards a condition of supply of nuclear technology written into contracts e.g. requiring that states purchasing nuclear reactors have an Additional Protocol (or equivalent safeguards agreement) in place with the IAEA;
Reporting suspicious procurement efforts to national authorities or the IAEA;
Disclosing sales information to assist the IAEA in verifying the completeness of state nuclear declarations;
Developing technologies with a lower proliferation risk and ceasing sales of products that pose an unacceptable proliferation risk;
Government-industry-IAEA consultation in the drafting of any new regulations, treaties or protocols, or in updating existing instruments to ensure that they are as effective as possible;
Mechanisms for sharing nonproliferation best practices, and for enforcing compliance with such measures;
Assisting states with fledgling nuclear power programs to develop or strengthen their competence in regulation, safety and effective export controls.
These outcomes may be achieved through industry self-regulation or through cooperative action between government and industry. They are more likely to be successful if done collaboratively with government and agencies like the IAEA.
5. Code of Conduct
Industry Codes of Conduct are a form of business self-regulation61 and may be divided into three main types of codes, those with an aspirational purpose (a code of ethics), an educational or advisory purpose (a code of conduct) or a restrictive purpose (an enforceable code of practice).62 The Biological Weapons Convention experience with codes of conduct is not entirely applicable to the nuclear industry,63 yet the Biological Weapons Convention experience highlights some important questions that any nuclear industry code of conduct would need to respond to, including the need to clearly define the purpose, audience and function of the code of conduct.
The WNA has a series of principles and codes it has developed over time, the latest iteration of which was published in January 2008 called the ’New WNA Policy’. These polices include the WNA Charter of Ethics, the WNA Principles of Uranium Stewardship and Principles for Managing Radiation, Health and Safety, Waste and the Environment and the International Council of Mining and Metals (ICMM) Sustainable Development Principles. These policies have, according to the WNA, been developed by industry leaders with the support of the full WNA membership and key organisations such as the IAEA and the ICMM. According to the WNA, these codes ‘hold the status of a policy and ethical declaration by the full WNA membership, which encompass most of the wide range of enterprises that comprise the global nuclear industry-from uranium miners, to equipment suppliers, service providers, and generators of electricity.’64
With around 180 members, the WNA represents 90% of worldwide uranium production and of nuclear power generation. The WNA has pledged to obtain, from all relevant enterprises, formal commitment to a Code of Practice that translates its principles into worldwide industry performance; to conduct periodic audits, peer reviews and public information activities. The WNA does not have a mandate to enforce any of the provisions of its code of practice and ethics. These codes and principles are ultimately enforceable through national legislation and regulation in accordance with a number of international treaties and statutes covering the range of peaceful nuclear activities.
In the nuclear industry there are also two examples of more elaborated processes for sharing and disseminating best practice and information, one of which is still under development:
The World Association of Nuclear Operators (WANO), formed in May 1989 in response to the Chernobyl accident to improve safety standards at nuclear power plants worldwide such that a repeat accident would never occur, provides a forum for the exchange of operating experience in a 'culture of openness' amongst various nuclear operators. WANO conducts voluntary peer reviews of nuclear safety at another member's plant and provides a report on that plant based on safety criteria and quantitative performance indicators, in addition to providing workshops and seminars and technical support and exchange.65
The effectiveness of WANO is attributed to the fact that 'the nuclear industry perceived them as its own ideas, operating to serve the industry's own interest. These organizations also had direct access to the utility CEOs, who could bring powerful peer pressure to bear on any CEO whose utility was lagging behind.'66
The recently-established World Institute for Nuclear Security (WINS), a joint initiative of NTI and the Institute of Nuclear Materials Management, intends to bring together representatives from government, industry, academia and think tanks in an effort to share best practices on nuclear security, in a similar model to WANO.67
WANO (and possibly WINS also, in the future) provides an example of how industry initiatives to improve the safety record of nuclear operators have surpassed the minimum safety standards imposed by national legislation and have facilitated more uniform safety standards internationally. A commitment to nuclear safety is a very common corporate social responsibility principle for companies operating nuclear reactors. The sharing of best practices, performance indicators and peer reviews are mechanisms that could be transposed into the nonproliferation arena, as WINS is attempting to do for nuclear security.
What could a global code on nonproliferation add?
Nonproliferation involves a broad and complex network of treaties, rules, and actions in multiple locations using open-source and classified information. It does not seem to lend itself to location-specific safety and security codes of conduct. The question must therefore be asked whether any kind of code of conduct can add anything to practical nonproliferation efforts. It might be said that any code of conduct is no replacement for rules and regulations pursuant to international treaty obligations and export control legislation and that in fact it may be inimical to nonproliferation to settle for a ‘Code of Conduct’ in lieu of legal obligations.
While codes of conduct may be implemented at many different levels (company, national, regional, universal), a nuclear industry code of conduct would also be ineffective if it were not universal in application. As noted, codes of ethics relating to nonproliferation already exist in the industry68 and have probably done little to deter those entities determined to sell equipment to sensitive locations, as the most recent information about Chinese sales of dual-use equipment to Iran would suggest.69
A new code of conduct would be either advisory or enforceable, and draw lessons from the lack of success of present codes of conduct. The difficulty of devising international industrial enforcement mechanisms (especially if customer/government complicity is involved) suggests that an advisory code of conduct would be the most achievable for the nuclear industry at present.
An industry code of conduct would need to be drafted by industry representatives in consultation with government regulators, nonproliferation experts and representatives of intergovernmental nuclear agencies to ensure that all stakeholders are included in the drafting stage and are more likely to accept the finished product. The process of drafting a code of conduct could be beneficial in raising awareness of issues and facilitating debate about appropriate conduct, and should entail provisions for review and revision in order to ‘keep the conversation going’.70 A provisional code of conduct could be drafted by a ginger group of companies, or a working group of WNA members, which would then seek the input of governments, international agencies and other companies. The draft code of conduct could then be presented to an industry conference,71 or at a special conference called for the purpose of improving industry contribution to nuclear nonproliferation (this need not necessarily be the government-industry conference discussed below). The code of conduct would be implemented by companies, but could benefit from government and industry body promotion.
This could be a lengthy process, and seen to be duplicating obligations which government and industry already have under existing legal regimes. It could be difficult to enforce. However, we were encouraged to hear from some industry representatives that they viewed the process itself as part of the answer, as it would highlight engagement which, properly managed, would eventually lead to the right result.
An interim step would be to encourage nuclear industry companies to include a commitment to nonproliferation in their corporate social responsibility statements, alongside commitments to sustainable development, nuclear safety and security.72