Most large companies take socially responsible approach

Increasing numbers of companies are seeking to adopt a more responsible approach by integrating economic, environmental and social aspects into their operations, as part of a form of governance which is extended to include all of their partners. Such an approach is known as corporate social responsibility (CSR). An audit was carried out on companies in Luxembourg in order to evaluate the extent of their CSR activity and to look at the way in which they report on these activities,

Context

The legal structure for the publication of accounts on corporate social responsibility (CSR) is not yet highly developed: legislative texts only exist in the United Kingdom in the form of the Core (Corporate Social Responsibility) Bill and in France in the form of the Law on new economic regulations (Loi No. 2001-420 du 15 mai 2001 relative aux nouvelles régulations économiques, NRE) (FR0105156F). The implementation of CSR primarily involves the application of international agreements and principles on a voluntary basis – in other words, ‘soft’ law – rather than regulations which are identical for everyone – that is, ‘hard’ law.

Companies set their own CSR targets as they seek to adopt a more responsible approach, and thus place an emphasis on relationships with particular stakeholders in specific dimensions, such as social and environmental. Stakeholders include shareholders, suppliers, customers, employees, local authorities and non-governmental organisations (NGOs). To increase the legitimacy of their actions, the companies choose their own benchmarks. For example, they may refer to the Kyoto Protocol if they want an approach which will help to protect the environment. Others may refer to the rules set out by the International Labour Organization (ILO) for business involving subcontracting in the third world.

Study methodology

An audit sought to evaluate the CSR activity of companies located in Luxembourg and, more specifically, to explore the way in which they report on these activities through their website or annual reports. The study (in French, 705Kb PDF) was carried out by the University of Toulouse 1 Social Sciences in France and by the Centre for Population, Poverty and Public Policy Studies (Centre d’Études de Populations, de Pauvreté et de Politiques Socio-Économiques)/International Network for Studies in Technology, Environment, Alternatives, Development (CEPS/Instead) in Luxembourg.

The audit related to companies located in Luxembourg with at least 250 employees. One in four of the 109 companies concerned belongs to the industry sector (24.7%) or the financial intermediation sector (25.7%). The two other main economic sectors covered in the study are construction, and business activities in the services sector.

The documentary audit was conducted on the basis of the companies’ external communications, and in particular the information published on their websites. It is, however, possible that a company engages in CSR activities without reporting this on its website. Such information could be gathered through a survey, but this was not the aim of the audit.

CSR activities covered by audit

Information relevant to the audit related to the following dimensions:

• the environment, encompassing emissions, energy consumption, consumption of raw materials, noise pollution, olfactory nuisance, visual pollution, use of renewable energy, means used to protect the environment and repair of damage caused;

• the social sphere, including occupational health and safety, equality of treatment and skills management;

• activity in society, comprising local development, customer relations and sponsorship;

• the economic sphere, including socially justified investments, and sustainable and ethical trade.

Intensity of CSR approach among large companies

With the exception of three companies which did not have a website, the 109 enterprises audited in Luxembourg can be classified into three categories:

• 52 companies make no reference to any CSR approach;

• 21 enterprises refer to a global CSR approach for the group to which they belong, without referencing their stakeholders in Luxembourg;

• 33 companies refer to a CSR approach aimed at stakeholders in Luxembourg.

Figure 1 outlines the proportional distribution of these three categories.

Distribution of large enterprises and their CSR activities (%)

Source: CEPS/Instead, Audit de la responsabilité sociale des grandes entreprises luxembourgeoises : les défis de la RSE, 2007

Figure 2 reveals that the environmental and social dimensions are taken into account by the same number of companies (21). Just six companies had a CSR approach with an economic dimension. The CSR approach is based on one aspect in 19 companies: 12 enterprises focused on the social dimension and seven focused on an environmental perspective. A total of 13 companies based their CSR activities on two aspects: eight companies chose environmental and social concerns, while five enterprises highlighted environmental and economic dimensions. Just one company based its CSR activities on the three aspects of society, the environment and economics.

Companies in Luxembourg, according to the focus of their CSR approach

Note: This breakdown of data refers to the 33 enterprises in Luxembourg with 250 employees or more which were audited and found to report on local or national-level CSR activities on their website.

Source: CEPS/Instead, 2007

An analysis based on sector of economic activity reveals that the social dimension is most commonly cited by companies in the services sector, encompassing transport, trade, real estate and business services, personal services and financial intermediation. Meanwhile, the industry and construction sectors more frequently report the environmental aspect; these sectors include cleaning companies and cement works, which are aware of the impact of their activities on the environment.

Communication about CSR

The CSR actions taken by companies are not presented in accordance with established standards, such as those defined in the Global Reporting Initiative. Each company has its own communication approach. Information about CSR is often difficult to find on companies’ websites. The study authors offer four possible ways of improving the dissemination of information:

• improving the accessibility of information on the website and retaining access to previous reports so that interested readers can judge for themselves what progress has been made;

• devoting an entire report to sustainable development even if this means reprinting some of the information from it in the annual report for the shareholders;

• presenting the reader with plans to improve on reported activities over a number of years, for example setting specific targets;

• inviting companies to improve the quality of feedback on their report.

Reference

Igalens, J. and Poussing, N., Un audit de la responsabilité sociale des grandes enterprises luxembourgeoises : les défis de la RSE (705Kb PDF), University of Toulouse 1 Social Sciences, France and CEPS/Instead, Luxembourg, Economy and Enterprise Series, No. 9, December 2007.

Véronique De Broeck, Prevent