Commission launches new strategy on corporate social responsibility

In July 2002, the European Commission launched a new EU-level strategy on the development of corporate social responsibility (CSR). The strategy will sit alongside a range of existing projects and help to improve the transparency and credibility of CSR initiatives. It sets up a 'multi-stakeholder forum' which will seek to establish a common EU-level approach to CSR. It also focuses on the needs of small and medium-sized enterprises.

The debate on corporate social responsibility (CSR) at EU level dates back to 1995, when a group of European companies and the then President of the European Commission, Jacques Delors, launched a 'Manifesto of enterprises against social exclusion'. Out of this was developed a European Business Network which promoted business-to-business dialogue and the exchange of best practice on CSR-related issues.

CSR gained a higher political profile at the time of the March 2000 Lisbon European Council summit (EU0004241F), at which EU heads of state and government appealed to companies' sense of responsibility to help achieve the target of the EU becoming the most competitive and inclusive economy in the world by 2010.

Reactions to the 2001 Green Paper

The European Commission issued in July 2001 (EU0107228F) a Green Paper on the topic of CSR, inviting the views of the social partners and any other interested parties on this issue. The Commission has received more than 250 responses, making the following main points:

  • CSR means that business needs to address the social, economic and environmental impact of their activities. This is the so-called 'triple bottom-line approach';
  • CSR should involve activities which are integrated into a company's overall business strategies, rather than being an 'add-on' to its core strategies;
  • CSR is linked to sustainable development and is a global issue;
  • in order to be successful, CSR requires the establishment of a dialogue between businesses and other stakeholders;
  • it is vital to ensure that managers and other actors involved in the process are properly educated and trained;
  • CSR does not mean shifting public responsibilities to the private sector. It should also complement legislation and social dialogue, rather than replace it; and
  • if CSR is to succeed, there must be transparency and credible validation tools.

Views of the social partners

Reactions from the business community tended to focus on three main points: that profitability is a precondition for CSR; that it is vital to tailor arrangements to individual companies, particularly small and medium-sized enterprises (SMEs) - there should be no imposed harmonisation; and that CSR should be market-driven.

Trade unions and non-governmental organisations (NGOs), on the other hand, had different priorities. They stressed that: first, all stakeholders need to be involved in the development of CSR practices if they are to be credible; second, social and environmental reporting should be mandatory and verifiable; and third, CSR should be linked to corporate governance, as companies must be accountable for their operations.

The new strategy

Taking on board the comments attracted by the July 2001 Green Paper, the Commission launched on 2 July 2002 a Communication setting out a new strategy on CSR, aimed at complementing existing initiatives set up by companies (such as codes of conduct) and bodies such as the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN). The main aim of the strategy is to promote the business case for CSR in order to make it more attractive to employers and in particular to SMEs. The Commission hopes that the strategy can add value to existing initiatives.

The Commission notes that there is increasing interest in CSR within the investors' community, as witnessed by the spread of 'ethical funds', 'social indexes' and 'social screening' of companies. Further, pension funds in EU Member States are beginning to disclose their ethical and environmental policies.

Multi-stakeholder forum on CSR

One of the new strategy's main innovations is to set up a new 'European multi-stakeholder forum' on CSR, to be made up of representatives of European organisations representing employers, employees, consumers and civil society, in addition to representatives from business networks. The forum will aim to promote transparency and convergence of CSR practices and instruments through exchange of experience and good practice. This will then shape a common EU approach and guiding principles on the issue. The forum will present to the Commission, by the summer of 2004, a report on its work. The Commission will then evaluate the report and then decide on further action.

One of the forum's main focuses will be the issue of a framework for CSR reporting. The Commission states that it its difficult to 'benchmark' companies' performance in this area as there is no agreed reference for evaluating CSR. The forum will therefore exchange best practice on reporting instruments.

The business case

The Commission stresses that its new strategy will help to clarify the business case for CSR. Noting that up until now, many aspects of the business case are intuitive, relating to issues such as employee retention, increased productivity and improved relations with local communities, it hopes that the strategy will make it clear that a business model integrating CSR can lead to competitive advantage and a better brand image.

Further, the Commission states that risk management and prevention are issues which are central to CSR: 'issues that were once considered "soft" by investors and managers (ie human rights, community relations, environment, health and safety) are now hard. Hard to manage, hard to ignore and very hard if you get them wrong. And potentially very costly, not only in financial terms but also because they may influence the company's licence to operate and its acceptance by society at large.'

SMEs

The Commission stresses that the needs of SMEs are different from those of larger organisations and that an EU CSR framework therefore needs to be flexible and adapted to suit their specific situation. It adds that they also need assistance in adopting a more strategic approach to this issue. This could include guidance and training, developing appropriate tools and collecting evidence on the business case for different types of SMEs.

The Commission therefore states that it will:

  • foster the exchange and dissemination of good practice;
  • facilitate the development and dissemination of user-friendly, tailor-made instruments such as self-evaluation tools;
  • support SME associations and networks in their attempts to promote awareness and guidance to their members; and
  • facilitate 'mentoring' schemes between larger and smaller companies.

Commentary

The launch of the Commission's strategy is an important step in the development of a coordinated EU-level approach to developing and promoting CSR and the culmination of several years of work in this area. It will give shape to and work alongside existing initiatives developed by a range of bodies and by companies themselves.

The central plank of the strategy is the creation of the multi-stakeholder forum on CSR, which will bring together all those involved in this issue and work on developing transparency and convergence in CSR approaches. Another important element in this strategy is the acknowledgement that the needs of SMEs are different from those of larger companies and that they will benefit from tailored help and advice in developing initiatives in this area, including a strategic approach.

The employment and social policy Commissioner, Anna Diamantopoulou, welcomed the launch of the strategy, stating that: 'Many businesses have already recognised that CSR can be profitable and CSR schemes have mushroomed. However, the EU can add value in at least two key ways: by helping stakeholders to make CSR more transparent and more credible and by showing that CSR it not just for multinationals: it can benefit smaller businesses too. Corporate social responsibility and corporate governance are two sides of the same coin: "greenwashing" your social and environmental performance is as bad as "whitewashing" your profits. CSR is no longer just a job for marketing departments'. (Andrea Broughton, IRS)

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