CORPORATE SOCIAL RESPONSIBILITY IN GENERAL
1. CSR values and practices, including levels of support from government, business and the general public
Governmental attention to CSR has increased significantly in the last four years, largely as a result of the European Union Guidelines (Green Paper of the European Union Commission of July 2001 and Communication of July 2002). In November 2003, during the Third European Conference on CSR in Venice, the Italian Ministry of Labour and Social Affairs presented a draft framework for measuring, evaluating and monitoring CSR performances by Italian companies. Its purpose was to investigate and illustrate the degree to which Italian enterprises had adopted CSR measures. On December 10, 2004 a National Conference on CSR was held in Rome, with the purpose to evaluate strategies for a future development of CSR in Italy.
Medium and large corporations, listed companies and financial institutions have in recent years become increasingly aware that socially responsible behaviour may represent a competitive advantage, and have begun focusing more attention on the social and environmental implications of their business. Many listed companies and financial institutions now regularly issue social and sustainability reports. Cause-related marketing activities, which create a relationship between social issues and corporate targets, have also become increasingly popular.
The Italian economic environment, however, is characterised by the predominance of small size enterprises, which is generally viewed as an obstacle towards the widespread dissemination and adoption of CSR. Small enterprises have in fact so far shown a limited commitment to CSR practices, with the exception of the environmental area (in particular ISO 14001 certification and Eco-Management and Audit Scheme (EMAS) registration) and quality certification of products and services. A key initiative in this respect is the Relationship between Business and Society (REBUS) project, which researches CSR on a European level. REBUS, which is financially supported by the European Commission (EC), aims to monitor the level of attention paid to CSR issues by the executives of small and medium size enterprises, and to promote the exchange and awareness of best practices. In October 2004 a national award for the CSR commitment of enterprises was presented under the patronage of the Ministry of Labour and Social Affairs. The jury will be composed by representatives of different stakeholders and the prizegiving will take place in Spring 2005.
2. Laws, statutes, government publications or other significant framework documents
The recognition of the social relevance and implication of economic activities is a fundamental principle of the Italian Constitution of 1948. Article 41, while recognising the freedom of private economic activity, provides that (1) it may not be carried out against the social good, or in a way that may harm public security, liberty, or human dignity, and (2) the law determines appropriate planning and controls in order to ensure that public and private economic activities are directed and co-ordinated towards social ends. Moreover, Article 42 of the Constitution provides that private property is recognised and guaranteed by laws, which may impose limits on it in order to ensure its social function and to make it accessible to all.
In November 2003, during the Venice Conference on CSR, the Ministry of Labour and Social Affairs introduced the CSR-SC Project, aimed at promoting adequate management systems and raising awareness of the potential competitive advantages deriving from the adoption of a CSR-active conduct. There are three steps in this programme: (i) promotion, training and information activities on CSR, carried out by business associations and qualified stakeholders; (ii) obtaining a commitment from companies to prepare a social statement illustrating socially responsible actions through standards that enable a comparative analysis of results; and (iii) obtaining financial support from enterprises for a special fund created in the state budget to support socially-related activities. This project also provides for certain benefits including tax incentives.
On 27 November 2003, the Ministry of Labour and Social Affairs and Unioncamere, an association of Italian Chambers of Commerce, signed a memorandum of understanding within the framework of the CSR-SC Project to increase awareness of, and adoption of, CSR by Italian enterprises. After the adoption of this memorandum of understanding, the Chambers of Commerce of Milan and Rome recently opened two public offices specifically devoted to CSR issues.
3. International treaties, conventions or standards
CSR standards in Italy have developed significantly under the influence of the European Union, mainly as a consequence of the 2001 Green Paper and the 2002 Commission Communication. Italy has ratified a number of international treaties and conventions relating to CSR, including: the 1997 Brussels Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European Union, the 1997 Paris Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; ILO Conventions such as No. 87 of 1948 on Freedom of Association and Protection of the Right to Organise Convention, No. 111 of 1958 on Discrimination (Employment and Occupation), No. 100 of 1951 on Equal Remuneration, No. 105 of 1957 on Abolition of Forced Labour, No. 138 of 1973 on Minimum Age and No. 182 of 1999 on Child Labour; the 1979 Geneva Convention on the Atmospheric Pollution, the 1992 Rio de Janeiro Convention on Biodiversity and the 1997 Kyoto Protocol on Climate Change.
4. Non-statutory sources of liability for companies
The general principle of Italian tort law is set forth in Article 2043 of the Civil Code, providing that any person who causes unjustified damage to another, by negligence or wilful conduct, is obliged to pay compensation for damages. Companies are subject to vicarious liability, regardless of their negligence or wilful conduct, with respect to damages arising from the conduct of their business. For instance, entrepreneurs are liable under specific provisions of the Civil Code for any damage caused to third parties by any of their employees in connection with their duties, or for damages caused by any machinery, equipment or assets that is in the entrepreneur’s custody. Product liability is governed by Presidential Decree No. 224/1998, which implemented European Directive No. 85/374/EEC, which holds companies liable for any damages caused by defective products, regardless of their negligence or wilful misconduct. Tort law has been widely used by the courts in holding companies liable for damages and other external impacts of the conduct of their business on the environment, customers, workers or third parties, even where there is no specific provision of law regulating the subject matter.
5. Principal institutions, government agencies and/or major non-governmental organisations (NGOs)
The Minister of Labour and Social Affairs is in charge of CSR initiatives at a national government level. Other entities engaged in the development of CSR programmes include the CSR Forum, Unioncamere and the Centre for Ethics Law & Economics (CELE). The CSR Forum was founded by the Ministry of Labour and Social Affairs in the context of the CSR-SC Project, to preside over the collection and evaluation process of social statements. In addition, the CSR Forum is vested with the power to identify specific projects which deserve to be financially supported by the SC Fund in the framework of nationally recognised priorities. Unioncamere is an association that represents Italian Chambers of Commerce, which are in charge of promoting CSR initiatives at local level, in particular focusing on small and medium size enterprises. The CELE is a research centre of the University Carlo Cattaneo of Castellanza, Varese, whose primary purpose is to investigate and monitor moral, legal and social provisions which are essential to promote a rational and efficient economic growth and ensure that economic activity complies with moral and social values.
SPECIFIC AREAS OF CORPORATE SOCIAL RESPONSIBILITY
6. Human rights
The promotion and protection of human rights is one of the founding principles of the Italian Constitution. Article 2 provides that the Republic recognises and guarantees inviolable human rights of persons, whether considered as individuals or as groups in their social organisations, and requires the fulfilment of mandatory duties of political, economic and social solidarity. On the basis of this fundamental principle, Italy has ratified several international treaties and documents on human rights, including: the 1950 Rome Convention; the 1994 Strasbourg Protocol, pursuant to which individuals are entitled to bring actions before the European Court of Human Rights; the 1949 New York Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others, and the 1966 New York International Covenants on Economic, Social and Cultural Rights and on Civil and Political Rights. With specific respect to CSR issues, Italian companies are bound by the UN Resolution 16/2003 on human rights concerning “Responsibilities of Multinational Corporations and other Business Enterprises with regard to Human Rights”. The promotion and protection of human rights at a national government level are monitored and co-ordinated by the General Directorate for Multilateral Political Affairs and Human Rights in the Ministry of Foreign Affairs.
7. Corruption
In 2000 Italy ratified the 1997 Brussels Convention on the Fight against Corruption involving Officials of the European Communities or Officials of Member States of the European Union, and the 1997 Paris Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. On the basis of these international conventions, the Italian Criminal Code was amended and specific provisions on international corruption and on liabilities of Italian companies, and their officers and directors, introduced in the code. Italy, as a EU member state, is concerned and bound by a number of measures, declarations and policies of international organisations, such as the UN 1996 Declaration against Corruption and Bribery in International Commercial Transactions, the policies on corruption adopted by the World Bank and the International Monetary Fund, and conventions of the Council of Europe, such as the 1999 Criminal Law Convention on Corruption, the 1999 Civil Law Convention on Corruption and the 1990 Convention on Laundering, Search, Seizure and Confiscation of Crime Proceeds. Another significant initiative in which Italy is involved is the Group of States against Corruption (GRECO).
8. Corporate governance and business ethics
Corporate governance is regulated by the general corporate law in the Civil Code, and by specific rules governing listed companies in the Legislative Decree No. 58/1998. Generally, under Article 2387 of the Civil Code, by-laws may impose on company directors special requirements with respect to their personal and professional qualities and their independence. Corporate by-laws may require that directors comply with codes of conducts, ethic codes or similar regulations issued or published by stock exchange regulators, such as the Milan stock exchange (Borsa Italiana S.p.A.). In 1999 the Milan Stock Exchange issued a Corporate Governance Code for listed companies. It is not mandatory, but it is recommended that listed companies must publish an annual report on corporate governance, discussing the degree of adoption of the Code and corporate governance practices implemented. Major listed companies have in recent years increasingly adopted ethical codes, which generally contain reference to (i) ethical principles which impact on the scope of the company’s activity; (ii) moral provisions governing the company’s relationships with stakeholders (consumers, suppliers, employees, etc); (iii) ethical behaviour standards; (iv) sanctions for breaches of ethical provisions; and (v) tools for putting the provisions into effect.
9. Corporate responsibility to employees
Labour is one of the founding principles of the Republic of Italy. Many provisions of the Italian Constitution are devoted to labour and social welfare matters, including:
Law No. 300/1970 sets forth the general principles governing labour related issues, including the prohibition of any form of discrimination and the right of employees to be represented by trade unions. Several laws deal with specific aspects of labour law and employees’ rights, including Legislative Decree No. 66/2003 (on working hours), Law No. 223/1991 (redundancy fund, mobility and unemployment), Law No. 144/1999 (reorganisation of social security), Legislative Decree No. 151/2001 (maternity and paternity), and Legislative Decree No. 196/2003 (protection of personal data).
Article 37 of the Constitution prohibits any form of discrimination on the basis of gender. Law No. 125/1991 and the subsequent Ministry of Labour Circular No. 31/2001 promotes equality of opportunities for men and women. A Ministry for Equal Opportunities is in charge of these matters within the Italian government. Other forms of discrimination (ieon the basis of political or religious opinions, adherence to trade unions, personal health conditions, including disabled or HIV-positive workers, etc) are dealt with by other provisions (Law No. 300/1970, Law No. 68/1999, Law No. 135/1990). Protection is also granted to non-EU employees by the Legislative Decree No. 286/1998 on Immigration, Law No. 189/2002 and Law No. 222/2002.
The protection of health and safety is based on constitutional principles and has been developed by case law, in particular by decisions No. 5172/1979 and No. 8699/1996 of the Supreme Court, recognising an individual right to a healthy and safe working environment. Several statutory sources of law set forth specific requirements with respect to health and safety at work and the prevention of accidents, including Legislative Decree No. 626/1994, Legislative Decrees No. 242/1996, No. 359/1999, No. 66/2000, Law No. 422/2000, Legislative Decree No. 25/2002 and Law No. 39/2002. These provisions recognise the active role of employees and their right to be informed and consulted on these matters. Violation of certain provisions on health and safety at work is a criminal offence. Adoption of labour-related certifications (particularly the SA8000) has significantly increased in the last years.
10. Corporate responsibility towards the environment
The source of Italian environmental protection legislation is Article 32 of the Constitution, which provides that the Republic protects health as a fundamental right. Until 1986, there was no general regulation of corporate responsibility to the environment. However, case law developed the principle set forth in Article 32 of the Constitution, by recognising an individual right to a healthy environment, ie a right to the protection and preservation of environmental conditions necessary for, and suitable to, human health. This principle has generally been used to hold companies liable for environmental damage arising out of their operations.
Legislation on environmental protection has been enacted starting from 1986, under the influence of the EC. Corporate responsibility to the environment is regulated by Law No. 349/1986, which created within the government a ministry for the environment; Presidential Decree No. 203/88, on atmospheric pollution; Law No. 61/1994, which created Regional Agencies for Environment Protection responsible for the control and prevention of pollution in regional areas; Legislative Decree No. 22/1997, on land clean-up and owner’s liability; Law No. 447/1995, on acoustic pollution; Presidential Decree No. 152/1999 on water pollution, and Law No. 36/2001 on electromagnetic pollution. The EC recently enacted Directive 2004/35/EC on environmental liability, providing for common European provisions on the prevention and reparation of environmental damage, with particular reference to co-operation among member states. The Directive 2004/35/EC, when translated into national law, will significantly alter the legislative framework of corporate responsibility to the environment. Laws No. 349/1986, No. 241/1990, No. 146/1994 and, in particular, Legislative Decree No. 112/1998 require that major infrastructural works, industrial plants and settlements must pass through a preliminary analysis of their environmental impact and provide for specific administrative procedures in this respect, which involve local authorities and communities. This legislation has been enacted as a consequence of EC Directives No. 85/337/CEE and No. 97/11/CE, which incorporated some principles of the 1991 ONU Convention on Environmental Impact Assessment in a Transboundary Context. In December 2004, Law No. 308 delegated the government to recognise and integrate revisions on the environmental matter: a global recognisation on this subject is currently expected during 2005.
The adoption of environmental certification (specifically, the EMAS and ISO 14000) has been growing in recent years. Italian companies tend to adopt the ISO 14000 certification (in particular, ISO 14001 on environmental management system and ISO 14002 addressed to small and middle sized enterprises), which is deemed more flexible and simple in its procedural and documental requirements. Regulation CE No. 761/2001 integrated ISO 14001 requirements into EMAS systems, to permit easier access to EMAS certification for companies already certified with ISO 14001. EC Regulation No. 880/1992 introduced the ecological quality mark (Ecolabel) which is now regulated by EC Regulation 1980/2000: the purpose of this form of certification is to grant consumers precise information on the source and quality of products, with specific reference to environmental issues. Ecolabels have been issued for more than 60 groups of products so far.
Italy has ratified several international conventions on environmental protection, including the 1972 Stockholm Declaration on the Human Environment, the 1997 Kyoto Protocol and the European Commission communication COM (98) 353 Climate Change
– Towards an EU post-Kyoto strategy, the 1979 Geneva Convention on the Atmospheric Pollution and the 1992 Rio de Janeiro Convention on Biodiversity.
11. Corporate responsibility to communities
Italian legislation recognises the essential role that business may play in the development of local communities, for example by providing incentives and benefits to companies that operate or build facilities in economically depressed areas (Law No. 488/1992 and Legislative Decree No. 96/1993). Local authorities are increasingly active in promoting and developing CSR-related practices by companies operating within their jurisdiction. For example, the region of Umbria created a Regional Register of SA 8000 – certified companies under the Regional Act of the Umbria region No. 20/2002 and enacted specific provisions under Regional Act No. 21/2002 for the “certification of quality, environmental, safety, and ethical systems of Umbrian companies”.
12. Corporate responsibility for overseas activities
Article 4 of Legislative Decree No. 231/2001 provides that entities which are headquartered in Italy are responsible under Italian law for crimes committed abroad, subject to condition that the state in which the crime has been committed does not proceed against the responsible entity. This provision applies only to specific criminal offences, such as crimes which involve state persons or have a political aspect, or, in any case, are punished by serious sanctions which imply restrictions of personal freedom. Legislation on corporate responsibility for overseas activities has been materially influenced by European and OECD provisions, as discussed in section 7 above.
13. Procurement
The Minister of Infrastructure and Transport supervises government procurement. Procurement is regulated by Law No. 109/1994 and by several EC Directives, including Directive No. 89/665/CEE, which established the Supervision Authority of Public Works and requires that entities in charge of public works must be certified pursuant to a procedure under the President Decree No. 34/2000 (with reference to international quality standard UNI EN ISO 9000) and base their activity on quality, professionalism and correctness principles. Certification, pursuant to applicable Italian provisions, must also be applied to products, processes, corporate quality control systems used by these entities.
14. CSR reporting and socially responsible investing
CSR reporting is generally not covered by specific provisions of law and is done voluntarily. Charitable and voluntary organisations (identified in Italian law as non-profit socially useful organisations or Organizzazioni non lucrative di utilità sociale or ONLUS) are required, under Article 8 of Legislative Decree No. 460/1997, to include in their annual reports a special account detailing costs and expenses incurred in relation to socially responsible initiatives and programmes. CSR reporting is promoted and regulated, on a voluntary basis, by various organisations at both international and national level: in addition to the Sustainability Reporting Guidelines prepared by the Global Reporting Initiative, which are based on a three-pronged approach (reporting on economic, social and environmental issues), there are models proposed by two Italian organisations, the Gruppo di studio sul Bilancio Sociale (GBS, Studying Group on Social Reporting) and the Istituto europeo per il Bilancio Sociale (European Institute for Social Reporting). GBS’s social reporting model suggests that social reports (i) describe the company’s identity and the values applied in preparing the report, its orientation in corporate decision-making, management approaches and their outcome and impact; (ii) set out targets for improvement; (iii) provide details on interactions between the company and its environment; (iv) show value added and how it is allocated. The IBS and GBS models are similar, but the former has a more specific focus on financial institutions. The Italian Financial Institution Association (Associazione Bancaria Italiana or ABI) recently published a communication on Social Report Models for Financial Institutions, recommending the GBS standards.
Socially-responsible management of savings and ethical finance has grown significantly in the last years. The number of ethical mutual funds has increased steadily and in 2004 exceeded twenty. In this context, the ABI, the Italian Insurance Companies Association and major financial institutions created the Forum for the Sustainable Finance (Forum per la Finanza Sostenibile), aimed at promoting sustainable development among representatives of the financial community. EC Capital Partners S.p.A., one of the largest ethical rating companies, is active in Italy and, since 2000, has launched two stock indexes – Ethical Index Euro® and Ethical Index Global® – and four bond indexes.
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