Social partners debate corporate social responsibility

Corporate social responsibility (CSR) has been a particular focus of debate in Austria in recent years and several initiatives and 'guiding visions' have been drawn up. Although the social partners cooperate in this area, their opinions on these initiatives and the development of CSR diverge in some cases. This article reviews the situation in early 2005.

In reaction to financial scandals in the USA and to a lesser extent in Europe in the late 1990s and dwindling trust among the public in business, a discussion on the social responsibility of companies started in Austria in 2002. The most important developments since have been as follows.

  • The 'CSR Austria' initiative was founded by the Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ), the Ministry of Economic Affairs and Labour (Bundesministerium für Wirtschaft und Arbeit, BMWA) and the Federation of Austrian Industry (Industriellenvereinigung, IV) in 2002. This initiative aims to promote a proactive corporate social responsibility (CSR) policy and a positive dialogue. CSR Austria analyses CSR models and tries to raise people’s awareness of the necessity of CSR.
  • CSR Austria issued a 'guiding vision' entitled 'Economic success. Responsible action' in December 2003. Arguing that CSR strategy pays off, CSR Austria thereby encourages Austrian companies to increase their efforts. The guiding vision presents 16 basic principles. In short, for CSR Austria social responsibility means: successful economic action over the long term; involving others; orientation towards the environment and the future; and a commitment to implementation.
  • In response to this document, a guiding vision for CSR among 'civil society' was issued, which exceeds the employers’ associations' vision in essential respects.
  • In May 2004, the Trigos prize was awarded for the first time to companies that already practise social responsibility in the form of concrete projects or have implemented it in their corporate strategy. The initiators of Trigos are Caritas, theRed Cross, SOS Children’s Village, WWF Austria, IV, WKÖ and Humans World.
  • A working group on the creation of a 'seal of quality' for products by the Austrian Standards Institute (Österreichisches Normungsinstitut, ON) was set up in 2004. By November 2004, it had not yet been decided if the seal should be given to individual products or to companies.
  • An ON guide on the implementation of a CSR management system in companies was published in May 2004. This guide has been developed in cooperation with representatives of organised labour.
  • The voluntary Austrian Corporate Governance Code came into force in 2002. The code targets enterprises that raise funds through the capital markets and lays down principles of good corporate governance. This voluntary initiative is designed to reinforce the confidence of investors by improving reporting transparency and the quality of cooperation between supervisory board, management board and shareholders, and by taking long-term 'value creation' into account.

Demands and concerns of trade unions and civil society

The Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB), the Chamber of Labour (Arbeiterkammer, AK), Amnesty International, the Working Association for Development Cooperation (Arbeitsgemeinschaft Entwicklungszusammenarbeit, AGEZ) and Ökobüro (a coordination office for 14 Austrian environmental NGOs) has issued comments on the guiding vision of CSR Austria. They offer their support for its further improvement and call on WKÖ and IV to implement CSR themselves and to become role models.

Civil society organisations stress that the current law must not be undermined by CSR initiatives. Works councils and co-determination must not be challenged and the further development of national and international environmental and social legislation must not be hindered. Another demand is the active involvement of stakeholders (labour representatives, NGOs and people in the surrounding area) in the development, implementation and evaluation of CSR measures. Every company must fully recognise employees’ right to collective bargaining, even if this right is not embodied in law. CSR criteria have to be applied to the whole 'value chain'. All parties working for a company (outside suppliers, subcontractors, home workers etc) should fall under the purview of its code of conduct.

A further demand is the integration of women on the basis of equal rights. Women are often under-represented in companies where CSR measures are developed. although the number of female employees exceeds the number of male employees in many sectors. Therefore it is essential to involve women (and also female workers’ representatives) in every phase of the development of a company's CSR strategy. CSR should be considered a chance to strengthen the role of women in society.

Efficient control mechanisms (eg 'social audits') must be established in order to guarantee that voluntary CSR measures are actually implemented, it is argued. Stakeholders (NGOs, employees and workers’ representatives) have to be involved, comprehensive information has to be provided to the public and reports have to be examined by independent institutions. Otherwise, company publications on these issues will not be reliable.

The signatories of the comments on the CSR Austria 'guiding vision' demand that over the medium term binding CSR standards must be embodied in a law, similar to a 'Corporate Responsibility Bill' promoted by a platform of British NGOs.

Eva Angerler of Austria’s largest trade union, the Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA), stresses that CSR engagement must surpass legal standards and cannot be limited to particular charitable projects but has to be understood as an all-embracing corporate strategy. The voluntary approach to CSR is acceptable for GPA, but there must be clearly defined rules for the evaluation of this commitment. Trade unions and NGOs have to be involved in the evaluation. Ms Angerler argues that the prevalent company codes of conducts usually contain very general statements that are no more than recommendations. International standards (such as the OECD guidelines) are ignored and there is a lack of control mechanisms. Individual charitable projects and sponsoring may co-exist with violations of the law, and 'social accounting' is therefore necessary. Trade unions fear that voluntary company initiatives such as 'social charters' and CSR might supplant works councils and undermine labour law.

However, for GPA, CSR also represents an opportunity, especially in areas where there are no or insufficient legal regulations. However, a recent survey among works councils found that in areas covered by legal regulations (eg employment of people with disabilities, or employee protection) the implementation of additional voluntary action is more likely than in those areas with few legal regulations.

'Little commitment' to Corporate Governance Code

A study by Heinz Leitsmüller of AK has found that only 38% of the companies (mainly the largest) listed on the Viennese stock exchange had signed up to the Corporate Governance Code by September 2004. There are hardly any reports on actual compliance with the code and monitoring is unusual. Around 31% of those companies committed to the code had commissioned an external audit of their statements. AK demands:

  • a revision of the code;
  • yearly reporting on compliance with the recommendations;
  • yearly external audits;
  • commitment by all public limited companies; and
  • more legal regulations in this field.

Employers’ associations’ perception of CSR

IV notes the calls for more transparency and responsibility towards civil society and considers the declining confidence of customers, investors and employees a business risk. CSR is seen as a reaction to two significant developments: the aim of obtaining quick profits on the stock markets; and globalisation. IV is convinced that economic gains and responsible actions are not in contradiction but a competitive advantage. CSR Europe has found that a majority of studies between 1972 and 2000 showed a positive correlation between social performance and financial performance. IV recognizes the potential of CSR for sustainable development in Austria and states that corporate responsibility towards the different stakeholder groups is the basis for long-term success. CSR offers companies the chance to improve their image and to turn their social responsibility into economic success.

Christoph Leitl, president of WKÖ, argues that CSR is not really a new phenomenon, but just fell into disuse during the boom on the stock markets at the beginning of the 1990s. The social market economy and the basic idea of Austrian social partnership (the close voluntary cooperation of employers, employees and the state) is in fact no different from CSR. According to Mr Leitl, the social partners should focus on their role as managers of the transition process to a socially responsible economy. Lorenz Fritz, the general secretary of IV, appreciates the new form of dialogue between the government, civil society and the private sector that is already underway.

Employers’ associations agree with trade unions that CSR may not substitute for existing regulations or hinder future developments in this field. However, the further development of global rules may not only be left to legislation but also comes under the field of the responsibility of business.

Awareness of the opportunities represented by CSR is not yet widespread, but rather limited to multinational companies. CSR Austria aims to disseminate knowledge about CSR among small and medium-sized enterprises.

IV wants to prevent any new regulations in this field. WKÖ makes the same argument, stating that even the current number of regulations is already difficult for many entrepreneurs to cope with. There should be a reduction of this 'bureaucratic burden' rather than an increase.

For WKÖ and IV, a basic principle of CSR is voluntarism because compulsory measures in this field could harm companies decisively during hard times. Furthermore Reinhard Mitterlehner, deputy general secretary of WKÖ, states that the introduction of obligatory measures would not be in line with the EU's Lisbon goal of reducing regulation. Employers’ associations stress that ethical behaviour cannot be enforced. Austrian social partnership has been able to produce such excellent results because it is a voluntary institution.

In connection with a flooding disaster in December 2004, employers’ associations once more demanded general tax deductibility for charitable donations. They are convinced that this step would encourage the social engagement of companies. A survey among companies commissioned by CSR Austria found that the deductibility of donations would motivate 78% of the respondents to increase their support of non-profit organisations and CSR initiatives. According to a study by the Institute for Advanced Studies (Institut für höhere Studien, IHS), Austrian tax regulations on this issue are extremely rigid compared with international standards.

Commentary

CSR is a management strategy that is first of all adjusted to countries with few regulations. Austria is still a country with extensive regulations on social and environmental issues, but these achievements are threatened by the globalisation and neo-liberalism. Growing attention is also paid to CSR because several professional groups want to make money through consulting and auditing CSR.

CSR is taken seriously by companies only when the stakeholders (especially consumers and investors) put them under pressure by preferring the products of companies that act in a socially responsible way or by investing in Socially Responsible Investing (SRI) funds. However, the awareness of these groups still has to be developed. If competitive advantages can be expected from the implementation of CSR measures, CSR will become an integral part of the economy. In every scenario, legal regulations will continue to be very important in order to guarantee certain minimum standards. (Sonja Strohmer, University of Vienna)

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