Green Paper promotes greater corporate social responsibility

A Green Paper on the promotion of a European framework for corporate social responsibility was published by the European Commission in July 2001. The document, which aims to stimulate general debate, covers a wide range of topics, including responsible actions during corporate restructuring, promotion of "work/life balance" and corporate codes of conduct on social rights.

On 18 July 2001, the European Commission issued a Green Paper on promoting a European framework for corporate social responsibility. It is intended to function as a "launch-pad for debate", encouraging companies to take the "triple bottom-line" approach – ie giving attention to social and environmental concerns in addition to economic goals. It also aims to encourage companies to strike a balance between flexibility and responsibility.

Social responsibility within firms

In the Green Paper, the Commission states that there has recently been much attention given to the way in which companies deal with and interact with their employees when managing large-scale redundancies. This is due to a number of recent and high-profile cases, such as the French-based food group Danone and the UK-based retail multinational Marks & Spencer (FR0104147F). It goes on to say that in 2000 there were a large number of corporate restructurings, including mergers and acquisitions. However, it maintains that, according to a number of studies, few of these restructurings reached their goal of reducing costs, increasing productivity and improving quality and customer service, as many were carried out in such a way as to damage the morale, creativity and productivity of employees. The Commission therefore stresses that responsible "downsizing" must include the involvement and participation of those workers affected, by means of information and consultation, the safeguarding of employees' rights and vocational retraining where necessary.

The Green Paper then widens the discussion, stating that this debate takes place within the wider framework of a Commission proposal on a European strategy on sustainable development, which was endorsed by the conclusions of the Gothenburg European Council in June 2001 (EU0106221F). According to this strategy, long-term economic growth, social cohesion and environmental protection must "go hand in hand".

Socially responsible human resource management is another area of focus in this Green Paper, which describes it as including a commitment to lifelong learning, health and safety, "work/life balance", workforce diversity, equal pay and career advancement, profit-sharing and share ownership schemes. It argues that these kinds of practices can increase productivity, decrease staff turnover, make employees more amenable to change and more innovative, and make output more reliable. Further, "peer respect and a good name as employer and firm are highly marketable assets."

Social responsibility and society

The Green Paper argues that corporate social responsibility also means the relationship between companies and their environments, at local, national, European and worldwide level. It states that good relations with local settings are important for companies as this is where they recruit the majority of their staff. It is also important for companies to develop networks and create links to other businesses.

While there is a strong tradition of corporate social responsibility at local level by small and medium-sized enterprises, corporate social responsibility has a growing international dimension due to the increasingly global nature of company supply chains. The Paper notes that a growing number of firms are adopting codes of conduct covering a variety of social issues such as working conditions, human rights and environmental aspects. However, the Commission makes it clear that these codes should serve to complement, rather than replace, national and international laws. It adds that their effectiveness depends on proper implementation.

A holistic approach

The Green Paper notes that successful corporate social responsibility means including it fully in the culture of the business and being seen to do so. It states further that although many multinational companies already publish reports on corporate social responsibility, "less attention is paid to areas such as human resource management, information and consultation, child labour and human rights." The Commission therefore states that there should be greater consensus on the type of information disclosed and more comprehensive coverage in social accounting, reporting and auditing.

The document also examines "ethical labelling", noting that a growing number of labels are being devised either by individual manufacturers or industries or by non-governmental organisations (NGO s) and governments. The Commission states that in order to increase these labels' effectiveness, mechanisms should be introduced in order to verify their ethical claims with relation to sourcing or labour standards.

The Commission goes on to say that "socially responsible investing" (SRI), under which funds are directed towards companies which comply with specific social criteria, has been gaining in popularity. However, it adds that in order to prove more useful and to provide potential investors with a clear picture, greater harmonisation of evaluation tools for SRI is needed.

Debate

The Commission hopes that the Green Paper will serve to stimulate debate on all aspects of corporate social responsibility and invites public authorities, international organisations, businesses of any size, social partners, NGOs and any other "stakeholders" or interested individuals to send in their views, by 31 December 2001, on how to develop a partnership approach to corporate social responsibility. Contributions should be sent to the following address: European Commission, Corporate Social Responsibility Green Paper consultation, Rue de la Loi/Wetstraat 200, B-1049 Brussels, Belgium or by-email to CSR@CEC.EU.INT

Launching the Green Paper, the Employment and Social Policy Commissioner, Anna Diamantopoulou, and the Enterprise and Information Society Commissioner, Erkki Liikanen, stated that: "More and more firms are realising the link between profitability and best ethical and environmental practice. Conscientious firms not only attract and retain the best workers, they can also get ahead in the technology game, vital for that all-important competitive edge."

Commentary

This Green Paper can be seen as an important step in stimulating debate in an area where there has been a significant amount of interest and corporate activity in recent years. Corporate social responsibility is potentially a very broad area, encompassing both how companies treat their own staff and suppliers – in terms of both stable employment situations and restructuring programmes – and how companies interact with their environment, both in relation to the physical environment and the treatment of people in their surrounding location.

The Commission makes no secret of the fact that some elements of this Green Paper – notably those relating to the treatment of workers affected by restructuring – have been influenced by recent high-profile restructuring programmes involving large-scale job losses, including those most recently at Marks & Spencer and Danone. There are a number of initiatives related to this area currently underway, including the draft Directive on national-level information and consultation of workers, on which political agreement on a common position was reached by the Council of Ministers in June 2001 (EU0106219F). Further, a Commission-sponsored high-level group on industrial relations and managing change is currently meeting and will report by January 2002 (EU0103200N), while in February 2001 the European Parliament (EP) adopted a resolution on the social consequences of industrial restructuring (EU0103199N) Thus, any debate and/or initiatives in this area ensuing from this Green Paper will need to proceed alongside these other developments. This Green Paper should also be seen in the context of a new Commission Communication, also launched on 18 July, to promote the observance of core labour standards and improved "social governance" in the context of globalisation (EU0107229F).

The topic of corporate codes of conduct is also an area which has seen much activity in recent years as more and more multinational companies devise such codes governing their activities, which in some cases guarantee labour rights for their workers and pledge to monitor conditions in their suppliers. In a small but growing number of cases, these codes of conduct or "global agreements" have been agreed with trade union organisations. Recent examples include the international fruit and vegetable producer and distributor Chiquita Brands International Inc (EU0106222F), the Swedish-headquartered construction company Skanska, the Spanish-based telecommunications group Telefónica and the French-based commerce multinational Carrefour (EU0105213F). However, the Commission is right to stress that these codes should never become a substitute for complying with national and international legislation and to draw attention to the difficulties related to compliance.

Once it has gathered information from all interested parties, the Commission is expected to prepare a White Paper on these issues. (Andrea Broughton, IRS)

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