Corporate social responsibility under debate

In 2001, the issue of corporate social responsibility is high on the agenda of Dutch social partners and politicians. In January, the tripartite advisory Social and Economic Council published a unanimous recommendation on the issue. The subsequent debate mainly concerned the desirability of legislation compelling companies to report on their policies in areas such as the environment and human rights. The social partners reject legislation for the time being. Meanwhile, the concept of sustainable investment is playing an increasingly important role for institutional investors.

In January 2001, the Social and Economic Council (Sociaal-Economisch Raad, SER) - an advisory body which comprises representatives of employers' associations and trade union federations, plus independent members - published a recommendation concerning corporate social responsibility, entitled 'The return on values' (De winst van waarden). The recommendation had been requested by the State Secretary of Economic Affairs, Gerrit Ybema.

The request for the recommendation included a description of a socially responsible business as 'one that visibly takes part in society and reaches beyond the core business and minimal requirements imposed by law, all of which translates into added value for the company and society'. The SER bases its opinion on a broader definition, namely, 'consciously focusing business activities on the creation of value in three dimensions: not only in financial-economic quantities, such as profitability and market value, but also in an ecological as well as a social sense (…) This means that a company allows operating profits to be guided at each of these dimensions, known collectively as the Triple P bottom-line: profit - the creation of goods and services, profit as a measuring stick for resulting social appreciation; people - the consequences for people, in and outside of the company; planet: the effects on the environment.' In contrast to what the state secretary's stated in his request, corporate social responsibility does indeed include a company's core business, according to the SER.

The recommendation is based on the idea that corporate social responsibility is primarily a concern for companies themselves. The government is at most responsible for drawing up preconditions and offering the companies incentives in the form of supervising market mechanisms, competition and transparency, and offering sufficient public facilities such as education, infrastructure and healthcare. Education must also nurture sound entrepreneurship.

Political discussion regarding legal duty to report

The SER recommendation met with mixed responses. One of the parties in the coalition government, the social democratic Labour Party (Partij van de Arbeid, PvdA), along with the opposition GroenLinks, supports a legal requirement for companies to include information about their policies regarding the environment, human rights and other aspects of corporate social responsibility in their annual report, and in February 2001 it announced plans to introduce a bill on the subject. However, a parliamentary majority of the other two government coalition parties, the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) and the social liberal Democraten 66 (D66), and the opposition Christian Democrats (Christen Democratisch Appèl, CDA) opposes such a move. One of the proponents' arguments is that the Annual Report Council (Raad voor de Jaarverslaggeving) has already recommended that companies report on corporate ethical responsibility, but this recommendation has so far basically fallen on deaf ears.

The cabinet has welcomed the SER recommendation through State Secretary Ybema, who also believes that corporate social responsibility is mainly a matter for businesses themselves. He asserts that the business community has already embraced corporate responsibility. A survey among 300 large and small companies has indicated that 51% of the companies are involved in corporate social responsibility. Mr Ybema, however, wants to make sure that companies making use of export and foreign investment subsidies comply with Organisation for Economic Cooperation and Development (OECD) guidelines on corporate social responsibility. In order to do so, some type of test needs to be developed.

Despite the difference of opinion regarding the need for legislation on this matter, in June 2001 the Lower House of parliament expressed its support for the bulk of Mr Ybema's policy. However, PvdA and Groen Links have not withdrawn their proposed bill.

Social partners' attitude

The SER recommendation was unanimous. During the resulting debate, the VNO-NCW employers' confederation in particular stressed the importance of self-regulation by the business community. It stated that any new legislation in this area would mean an unwanted increase in demands on business. Moreover, corporate social and ethical responsibility is still a relatively new concept. Therefore, it would be premature to try to establish regulations at this stage.

Interestingly, the trade unions, which have long been proponents of legislation, are now endorsing self-regulation, mainly though fear of merely symbolic legislation. According to a spokesperson for the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), and a member of the committee that drafted the SER recommendation, it is unrealistic to think that mandatory reporting will lead to increased transparency. So far, there is no experience with how such a report should be prepared, particularly since no clear-cut criteria have been issued for the topics to be addressed, one of which is labour standards. FNV does, however, support the idea of monitoring companies which receive government subsidies to ensure they are in compliance with OECD requirements. It should be mentioned that the trade unions do not rule out the possibility of legislation in the long run.

The example of IHC-Caland

The activities of the Dutch-based dredging and offshore company IHC-Caland in Burma/Myanmar gave the corporate responsibility discussion an extra impetus in 2000. The company has been involved in constructing and managing a floating storage facility used in the extraction of natural gas off the coast of Burma. The project is controversial due to allegations by human rights organisations that it helps finance the Burmese military junta. Since 1997, the USA has banned new investments in Burma, and the UK government has asked a British oil company to pull out Burma. In the Netherlands, FNV has been trying for quite some time to force IHC-Caland to cease activities in Burma. The company rejects criticism of its operations in Burma and has called on the government to draft clear-cut rules regarding operations in countries guilty of human rights violations.

In May 2000, it was revealed that an investment fund of ABN Amro, the Dutch finance group, had disposed of its shares in IHC-Caland stock on the heels of ABN Amro closing its only branch in Burma. According to an ABN spokesperson, both decisions were based on economic grounds, but the political implications figured heavily. Prior to this, Heineken, the Dutch brewing concern, had withdrawn from Burma. During the IHC-Caland general shareholders' meeting in 2000, the ABP pension fund - the largest investor in the Netherlands, with an interest of 5% in IHC-Caland - criticised the company's activities in Burma. The fund announced plans to reconsider its interest.

In the meantime, IHC-Caland has drawn up a code of corporate conduct focusing on ethical responsibility. However, activities such as those in Burma would not be covered, according to the company.

Pension funds and corporate social responsibility

The ABP pension fund's concern related to IHC-Caland is not an isolated incident. For a number of years, pension funds and insurance companies have been discussing socially responsible investment. A March 2001 study indicated that 70% of corporate investors in the Netherlands have an active interest in socially responsible investing. In mid-2000, the pension fund for the healthcare sector, PGGM- the second largest pension fund in the Netherlands in terms of volume - announced a plan gradually to channel all investments into socially responsible shares. In 2000, PGGM had an invested equity of NLG 111 billion, of which 62% was invested in shares.

FNV also published a report on socially responsible investing in 2000. The Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV) published a similar report a year earlier. The trade unions are an important actor in this area since union representatives make up half of the boards of pension funds. The funds have a collective invested equity of NLG 1,000 billion. The unions' codes include a ban on investing in countries and companies where human rights, including trade union rights, are violated. CNV is pushing for direct implementation of a measure requiring pension funds to use 1% of invested equity for investments in environmentally-sound energy and development projects.

Commentary

Corporate social responsibility is currently a hot topic in the Netherlands, as well as in many other countries and at the EU level (EU0107228F). The definition of the concept, however, is subject to many interpretations: in its recommendation, the SER defines it as a 'container term' that may change over time. A flexible approach is the obvious choice, albeit one that carries the inherent risk of informality.

A point that merits further consideration is whether corporate social responsibility is a 'luxury item' or whether companies will have no choice but to take account of it in the future. Will the topic be as compelling in times of recession as it is in times of economic prosperity? This question applies to companies and trade unions alike. After all, the 1980s illustrated that ethical methods can clash with trying to preserve jobs at home. (Robbert van het Kaar, HSI)