CSR World

Heuking Kühn Lüer Wojtek Dr Gabrielle H Williamson JD

1. Introduction

Now that business is expected to be accountable for its impact on society, corporate social responsibility is being increasingly debated in the EU. Accelerating economic liberalisation without effective global governance, and the defective corporate governance practices of some multinational companies, have focused public attention on the issue. The period 2000-2002 has been a milestone in terms of establishing the importance of CSR and sustainable development at national, EU and international levels. On the eve of the millennium, UN Secretary-General Kofi Annan appealed to business leaders to “give the market a human face” and launched the UN Global Compact Initiative, which is now supported by more than a thousand companies worldwide. Subsequent events such as the 2002 Johannesburg World Summit further underlined the importance of CSR and sustainable development at the highest levels of the policy agenda, producing both a Global Progress Report and the first-ever worldwide Implementation Plan on Sustainable Development.

Business, meanwhile, has increasingly recognised the compelling case to implement CSR policies and their interrelationship with sustainable development. This is shown in a multitude of individual company, network and sector initiatives, as well as in the growth of responsibility reporting. The number of corporate non-financial reports available in electronic form is estimated to have risen from less than 50 to almost 1,000 between 1997 and 2002, and 34 per cent of the companies listed in the Dow Jones Sustainability Index are reporters under the Global Reporting Initiative (GRI), an independent institution whose mission is to develop and disseminate globally applicable sustainability reporting guidelines.

2. CSR and the EU – setting the political agenda

CSR, defined as industry’s contribution to sustainable development, ie, a management approach enhancing competitiveness, social cohesion, and environmental protection, entered EU politics officially in 1998 with the Gyllenhammar Report. This was produced by the Gyllenhammar Group, a High Level Group on the economic and social consequences of industrial change created as a result of the Luxembourg Jobs Summit in November 1997, and suggested that “businesses with more than 1000 employees should publish a report on the management of change” on an annual basis in order “to give an account of the impact of their social activities”.

European heads of state created significant momentum on CSR at the Lisbon Summit of March 2000 with a “special appeal to companies’ sense of corporate social responsibility” to reach Europe’s strategic goal for 2010 – a knowledge-based, highly competitive and socially inclusive Europe. Underlining the importance of the private sector’s contribution to achieving this goal, the European Council for the first time addressed businesses directly regarding best practices on lifelong learning, work organisation, equal opportunities, social inclusion, and sustainable development. This approach was complemented by the European Council in 2001 in Gothenburg, Sweden, which decided that the EU sustainable development strategy should complete and build on the Lisbon commitment by including an environmental dimension. This recognises that in the long term, economic growth, social cohesion and environmental protection must go hand in hand. Since then, CSR has been a major topic at European Summits. Answering the Special Appeal set up in Lisbon, the EU’s business leaders confirmed that they would lead a ‘European campaign’ aimed at mobilising more than half a million business people. Since its inauguration in 2001, the Campaign has held an EU CSR marathon of major national CSR Conferences in 13 countries so far and drawn together the energy of more than 20 national organisations and thousands of EU companies. The Social Policy Agenda adopted in June 2000 (COM (2000) 379 final) stresses the importance of CSR essentially in terms of employment and the social consequences of economic and market integration and adaptation of working conditions to the new economy. Consequently, the European Commission announced it would issue a Communication to “support initiatives related to corporate social responsibility and the management of change”.

The European Commission enhanced public awareness of CSR in July 2001 by adopting the Green Paper Promoting a European Framework for Corporate Social Responsibility (COM (2001) 366 final), which aimed to launch a wide debate on how the EU could promote CSR at European and international levels. The Green Paper focused on how to make the most of existing experiences, to encourage the development of innovative practices, to bring greater transparency and to increase the reliability of evaluation and validation and suggested an approach based on deepening partnerships in which all actors have a role to play. It divided the concept of CSR into two parts: an internal dimension, ie human resources management, health and safety at work, adaptation to socio-economic change, and management of environmental impacts and natural resources; and an external dimension, including taking account of local communities, business partners, suppliers and consumers, human rights, and global environmental concerns.

The Commission received more than 250 responses to the Green Paper, which welcomed the debate and overwhelmingly supported Community action in this field. However, there were also significant differences between the positions expressed:

• Enterprises stressed the voluntary nature of CSR, its integration in the sustainable development context and that its content should be developed at global level;
• Enterprises emphasised there would not be ‘one-size-fits-all’ solutions. In the view of business, attempts to regulate CSR at EU level would be counter-productive, because this would stifle creativity and innovation among enterprises that drive the successful development of CSR, and could lead to conflicting priorities for enterprises operating in different geographical areas;
• Trade unions and civil society organisations stressed that voluntary initiatives are not sufficient to protect workers and citizens’ rights. They advocated for a regulatory framework establishing minimum standards and ensuring a level playing field. They also insisted that, in order to be credible, CSR practices could not be developed, implemented, and evaluated unilaterally by businesses, but rather only with involvement of relevant stakeholders. They also asked for effective mechanisms to ensure a company’s accountability for its social and environmental impacts;
• Investors stressed the need to improve disclosure and transparency of companies’ practices, rating agencies’ methodology, and investment management of SRI (Socially Responsible Investment) funds and pension funds;
• Consumer organisations underlined the importance of trustworthy and complete information about the ethical, social, and environmental conditions in which goods and services are produced and traded to guide them in their purchase choices;
• The European Council, in its Resolution of 3 December 2001 (Official Journal C 86, 10 April 2002, p.3), stressed that an EU approach to CSR could complement existing measures at local and national levels, imparting to them an added value, in order to contribute to the development of CSR. The Council mentioned that CSR can contribute not only to encouraging a high level of social cohesion, environmental protection, and respect for fundamental rights, but also to improving competitiveness in all types of businesses;
• The European Economic and Social Committee highlighted that the principles of voluntary action and environmental, economic, and social sustainability, together with guidance from international organisations’ existing agreements, are to be the framework of reference for further EU initiatives in support of companies’ efforts to act in a socially responsible way;
• The European Committee of the Regions saw a role at EU level in providing a framework for raising awareness, promoting responsible principles, and assisting businesses and public authorities in incorporating CSR in their activities;
• The European Parliament proposed to mainstream CSR in all areas of EU competence, in particular regional and social funding, and to create a EU multi-stakeholder CSR platform. It called for triple bottom-line reporting by companies on their social and environmental performance, including the human rights dimension.

3. The European Commission Communication on CSR

Once the consultation process had indicated support for European Community action on CSR, the European Commission produced its 2002 Communication Concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development (COM (2002) 347 final), outlining the official EU strategy on CSR and sustainable development.

The Communication starts off by defining CSR as a concept “whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. The Commission recognised a growing perception among companies that sustainable business success and shareholder value cannot be achieved solely through maximising short-term profits, but instead through market-oriented yet responsible corporate behaviour. Companies are aware that they can contribute to sustainable development by managing their operations in such a way as to enhance economic growth and increase competitiveness, while ensuring environmental protection and promoting social responsibility, including consumer interests – and so more of them have embraced a culture of CSR.

Despite the wide spectrum of approaches to CSR, the Commission took note of a significant consensus on its main features:

• CSR is behaviour by companies over and above legal requirements, voluntarily adopted because companies deem it to be in their long-term interest;
• CSR is intrinsically linked to the concept of sustainable development: companies need to integrate the economic, social and environmental impact in their operations;
• CSR is not an optional ‘add-on’ to core business activities, but about the way companies are managed.

Where is the motivation for companies to engage themselves in CSR? In a market economy, the function of a business is defined mainly as the creation of value through producing goods and services that society demands, thereby generating profit for its owners and shareholders, as well as welfare for society, particularly through job creation. But new social and market pressures are gradually leading to a change in these values. Among these, the Commission enumerates the following:

• Considerations of image and reputation play an increasingly important role, as consumers and NGOs ask for more information about the conditions in which products and services are generated and the sustainability impact thereof, and tend to reward, with their behaviour, socially and environmentally responsible firms;
• Partly as a consequence of this, financial stakeholders ask for disclosure of information going beyond traditional financial reporting so as to allow them better to identify the success and risk factors inherent in a company and its responsiveness to public opinion;
• As knowledge and innovation become increasingly important for competitiveness, companies have a higher interest in retaining highly skilled and competent personnel;
• Globalisation has created new opportunities for companies, but has also increased their organisational complexity. The extension of business activities abroad has led to new responsibilities, particularly in developing countries; and
• Developing practices that take account of environmental and social considerations help to modernise business activities and thereby increase long-term competitiveness.

Nowadays, multinational enterprises are sourcing from subsidiaries and suppliers from all over the world, including from developing countries. Therefore, global governance and the interrelation between trade, investment, and sustainable development have become key issues in the CSR debate. Emphasising the global dimension of CSR, the Commission refers to its Communication on Promoting Core Labour Standards and Improving Social Governance in the context of Globalisation (COM (2001) 416), which deals with the universality of basic labour standards and the need for codes of conduct to integrate the ILO fundamental Convention. Moreover, it includes the OECD Guidelines for Multinational Enterprises as a further international standard and agreed instrument to promote CSR at international level. Thereby, the risk that globalisation may result in negative effects if it is uncontrolled can be reduced substantially.

Apart from these international agreements, Community action on CSR has to be developed in full respect of subsidiarity principles. Within this framework, the Commission identifies two fields of action: first, CSR may be a useful instrument in furthering Community policies; second, the proliferation of CSR instruments (management standards, labelling and certification schemes, reporting, etc) are difficult to compare and potentially confusing for all parties, this could in turn be a source of market distortion, and there is, therefore, a role for Community action to facilitate convergence in the instruments, to ensure a proper functioning of the internal market and the preservation of a level playing field.

The Commission proposes to build its strategy to promote CSR on a number of principles. These are: æ Recognition of the voluntary nature of CSR; æ Need for credibility and transparency of CSR practices; æ Focus on activities where Community involvement adds value; æ Balanced and all-encompassing approach to CSR, including economic, social, and

environmental issues, as well as consumer interests; æ Attention to the needs and characteristics of SMEs; and æ Support and compatibility with existing international agreements and instruments,

(eg ILO core labour standards, OECD Guidelines for Multinational Enterprises).

More specifically, the Commission sets out a catalogue of priority actions on which its further approach to CSR is based. These can be broadly divided into three priorities:

• Promotion of CSR practices;
• Credibility of CSR claims; and
• Coherence with relevant Community policies.

The first priority aims at promoting socially responsible practices among companies. CSR is about daily management of social and environmental issues in every department of a company. Companies are not expected to adopt CSR practices for marketing or philanthropic reasons, but because it makes sense for their competitiveness. CSR should not just be a public relations exercise, but should lead companies to reassess and reorganise their core business activities and ensure that they manage risk and change in a socially responsible way. In order to show companies a way to such a business approach, the Commission identifies the following actions:

(i) Spreading information on the benefits of CSR for business and states. Despite the broad consensus regarding the importance of CSR, companies find it difficult to measure exactly what the practical impact of such action will be. The Commission, therefore, launches studies showing the positive impact of CSR on business competitiveness to support activities to increase awareness of CSR and to analyse and disseminate information on socially responsible practices. Funding is provided by the Framework Programme 2002-2006 of the EU for research, which has gained a special priority area on “citizens and governance in the knowledge-based society”. Moreover, support is given to awareness-raising activities promoted by businesses, social partners, educational institutions and other stakeholders: recent examples were the conferences on 18 November 2004 of the European Savings Banks Group and of the Committee of the Regions. In the context of promoting an EU framework for CSR, the European Commission has taken the initiative regularly to identify three outstanding workplace award winners in the fields of lifelong learning, gender equality, and promoting diversity. In addition, one hundred workplaces in the EU will be honoured for the exceptional quality of their workplace environments. Both the 2004 List of 100 Best Workplaces in the EU and the three special award nominees have been announced recently.

(ii) Increasing the exchange of good practice between businesses and between EU member states. Companies themselves have emphasised the importance of exchanging their respective CSR experiences and good practices. They must, therefore, improve existing fora through better networking and co-ordination; the same is true for member states. The Commission suggests integrating CSR into the work of EU business support networks to facilitate dialogue and co-operation.

(iii) Developing CSR management skills. CSR principles must be integrated into general education and business administration training. Moreover, structural funds, and in particular the European Social Fund, are acknowledged to be suitable tools to promote CSR in management training and training for other employees.

(iv) Encouraging SMEs to adopt CSR strategies. Since CSR was developed mainly for large companies, it is important to put an end to the indifference of SMEs, especially because, and in contrast to the US, more that 95 per cent of all EU companies fall in this category. The main problems of SMEs in this respect are insufficient awareness and limited resources. It is, therefore, necessary to study SME-specific aspects of CSR, foster the exchange and dissemination of good practice, introduce SME associations and business support organisations to the concept of CSR, facilitate co-operation between large companies and SMEs and raise awareness among SMEs with regard to the impact of their activities on developing countries. On 12 October 2004 the Commission launched a new campaign to raise awareness of CSR among SMEs and to encourage them to embrace CSR practices. This campaign will run for nine months and will include 65 educational one-day events throughout the EU.

As far as the second priority is concerned, the Commission acknowledges that CSR, though defined as voluntary, in order to be credible still requires measurement and assessment. CSR performance assessment helps businesses to improve their practices, as it facilitates an effective and credible benchmarking of their social and environmental performance. Transparency about CSR performance also enables stakeholders to measure how businesses meet their expectations. To ensure that CSR contributes to sustainable development, it is essential to use benchmarks that properly reflect its factors, ie competitiveness, social cohesion, and environmental protection; otherwise, there would be a risk of promoting ineffective practices and behaviour. As transparency has become a key element of the CSR debate, this trend resulted in an increase of codes of conduct, reports, labels, awards, indices, and other funds during the last decade. CSR, as described above, is a market issue for consumers and investors, and CSR claims, like any information related to the market, must be substantiated. When individual consumers or investors are not in a position to verify the information provided, a level playing field must be established by public authorities to protect them against unfair practices. In this respect, the Commission targets the following actions:

(i) To ensure transparency for CSR practices and tools. Transparency is vital, in the first instance because it facilitates the exchange of best practices and, as a result, the improvement of all practices. Secondly, it helps companies measure results achieved. For this reason, greater transparency is desirable in the following areas:

• Codes of conduct on workers’ rights, human rights, protection of the environment, etc;
• Management standards for integrating social and environmental policies into companies’ day-to-day activity, such as the Eco-Management and Audit Scheme (EMAS) (see Regulation 761/2001 of the European Parliament and of the Council of March 2001, Allowing Voluntary Participation by Organisations in a Community Eco-Management and Audit Scheme);
• Measurement, reporting, and assurance, including internal reporting by companies on CSR activities. In its Communication on the EU Strategy for Sustainable Development, the Commission invited all publicly-quoted companies with more than 500 staff to publish a ‘triple bottom line’ in their Annual Reports to shareholders that measures their performance against economic, environmental, and social criteria (see Directive 2003/51/EC of the European Parliament and of the Council Amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the Annual and Consolidated Accounts of Certain Types of Companies, Banks, and Other Financial Institutions and Insurance Undertakings);
• Labels, such as the EU Ecolabel (‘the flower’) awarded to products of the highest environmental quality, which address consumers’ right to information on products through labelling. In its new consumer policy strategy for 2002-2006, the Commission commits itself to examine existing private labelling schemes, such as organic labelling, fair trade and CSR measures, to assess their effectiveness and the need for measures to achieve transparency for consumers with a view to promoting sustainable development; and
• Socially responsible investment (SRI), for which enterprises’ CSR results are highly relevant, and of which there are basically two types:
  (i) consumer (or retail) SRI, ie individuals’ investments (eg personal pensions) made according to their personal values and
  (ii) institutional SRI, ie investments made within an SRI framework by institutions such as pension funds, foundations, banks, and asset management and insurance companies.

(ii) To launch a multi-stakeholder forum at EU level. Given the diversity of CSR traditions, general solutions will not be possible. However, the participation of all stakeholders is vital to guarantee the acceptance and credibility of CSR. For this reason, the European Commission launched a multi-stakeholder forum on CSR, which has the objective of exchanging experiences, bringing together existing initiatives in the EU, and identifying areas where Community action is appropriate. The forum should comprise a plenary session, to meet twice a year, and more frequent thematic round-tables. Guidelines in the following fields were due by mid-2004:

• The link between CSR and competitiveness;
• The contribution of CSR to sustainable development, particularly in developing countries;
• SME-specific aspects;
• The effectiveness of existing codes of conduct;
• Establishment of guidelines and common criteria to measure performance;
• The definition of common guidelines for labelling programmes; and The dissemination of information on SRI policies.

Concerning the third priority of the action plan, the Commission points out that CSR, as an instrument for sustainable development, can be used more widely in all policies, including employment and social affairs, enterprise, environment, development, and trade, etc. The EU has, therefore, undertaken to integrate economic, social, and environmental considerations, as envisaged by the concept of CSR, into its policies and actions. Its approach was outlined in the Strategy for Sustainable Development adopted by the European Union at the Gothenburg Summit in June 2001, and in the Charter of Fundamental Rights of the European Union proclaimed in Nice in 2000. CSR principles are particularly relevant to the following EU policy areas:

• Employment and social affairs policy (education, lifelong learning, information, consultation, equal opportunities, integration of people with disabilities, anticipation of industrial change, and restructuring). In its Communication Adapting to Change in Work and Society: A new Community Strategy on Health and Safety at Work, 2002–2006 (COM (2002) 118 final), the Commission has expressed its intention to encourage instruments that promote innovative approaches, to encourage the various parties to go a step further and to associate all the interested parties in achieving the overall objectives of this strategy, especially in new areas which do not lend themselves easily to a normative approach.
  
• Enterprise policy (balanced approach that maximises synergies between economic, social, and environmental dimensions).
  
• Environmental policy (evaluation of environmental results, the concept of environmental effectiveness that compares the quantity of goods produced with the impact of production on the environment, consideration of environmental aspects in company annual reports, contribution to developing technology which is more environment-friendly and provides long-term benefits for companies). In its Communication on Environmental Technology for Sustainable Development (COM (2002) 122), the Commission has underlined the importance of environmental technologies and their ability to contribute both to profitability of individual companies and to the competitiveness of the economy as a whole. In particular, cleaner ‘integrated’ technologies are often associated with improved efficiency and can provide savings due to improved resource efficiency, reduced waste, etc. This provides clear guidance for action by companies willing to improve environmental performance. The Commission intends to address this issue in the context of its forthcoming Action Plan to promote green technologies.
  
• Consumer policy (consideration of the interests of consumers who are increasingly aware of environmental and social issues). The Commission is now consulting interested parties on the detail of a possible Framework Directive to harmonise national rules on the fairness of commercial practices between businesses and consumers (advertising, aggressive marketing, after-sale customer assistance, etc) (see COM (2002) 289 final; COM (2001) 531 final).
  
• Public procurement policy/public purchasers (taking advantage of the fact that public purchasers are often in a better position to take account of social and environmental considerations, facilitate the exchange of best practices in the field). The EU public procurement rules are essentially economic, but also have to be seen in light of the sustainability requirement of Article 2 of the EC Treaty. The interpretative Communications of the Commission on Community law on public procurement (COM (2001) 566 final and COM (2001) 274 final) have clarified how Community law offers possibilities to public purchasers which wish to integrate social and environmental considerations into public procurement procedures. At the same time they ensure respect for the principle of value for money for taxpayers and equal access for all EU suppliers. In addition, non-compliance with relevant legislation, ie in the social or environmental field, may be taken into account by the purchaser in order to exclude a contractor from participating in a contract.
  
• External relations policy/development policy/trade policy (taking advantage of various links with states around the world through political and trade agreements to ensure compliance with international rules governing social, environmental, and human rights issues; have the EU address multinationals directly to promote these views). The EU’s approach is set out in the Communications on the EU Role in Promoting Human Rights and Democratisation in Third Countries (COM (2001) 252 final), and on Promoting Core Labour Standards and Improving Social Governance in the Context of Globalisation. It includes the use of bilateral dialogue with governments and development assistance, to build capacity; and the use of additional trade incentives under the EU’s Generalised System of Preferences where countries comply and apply minimum social and environmental standards. The Generalised System of Preferences also provides for its temporary withdrawal if countries commit serious and systematic violations of any of the core labour standards referred to in the ILO Declaration on Fundamental Principles and Rights at Work.
  
• Public administrations (integrate CSR principles into their own management, including that of the European Commission; specific projects within the European Commission to promote the CSR concept within its services).

The European Parliament issued an Initiative Report to react to the Commission’s Communication (A5-0133/2003 final of 28 April 2003). While welcoming such points as a European strategy on CSR and the establishment of a multi-stakeholder forum, the Parliament argues that the latter’s work is untransparent and that the entire Communication does not pay enough attention to CSR-related gender policy issues. Moreover, it calls on the Commission to make proposals aimed at giving the public access to environmental, health and safety-related, and human rights-based, information held by companies with a view to facilitating external scrutiny and corporate accountability to citizens. Finally, the Parliament proposes that a register of blacklisted companies, ie companies convicted of corruption by an EU court, should be kept, in order to exclude such companies from EU contracts for a period of three years.

4. The EU CSR multi-stakeholder forum

The European CSR multi-stakeholder forum, established in October 2002, made an important contribution by exploring the relationship between CSR and sustainable development and the extent to which common guiding principles are appropriate. The forum was composed of representatives of stakeholders, including companies, trade unions, NGOs, investors, and consumers; the Commission held the chair and other EU institutions and international organisations had observer status.

After 20 months of intense discussions, on 29 June 2004, the forum presented a final report drawing on the work of four round-tables that examined in depth four aspects of CSR: knowledge, SMEs, development and transparency. In total, 12 round-table meetings were held, at which 50 actual company experiences were presented and discussed. The report contains nine ‘mutually reinforcing’ recommendations addressed to enterprises and their stakeholders, public authorities, and EU institutions. These are set out below:

(i) Raising awareness of core values and key principles embodied in reference texts. The forum recommends that public authorities and all other stakeholders increase awareness of the key principles and reference texts on CSR. This could be achieved by codes of practice, collective agreements, partnerships, and global framework agreements. Stakeholders should ensure that they co-operate, particularly in the area of how to turn values and principles into practice.

(ii) Collecting, exchanging, and disseminating information about CSR. The forum recommends that all stakeholders contribute to the process of collecting, exchanging, and disseminating information about CSR and that, in order to make information publicly and easily available, there should be an EU multi-stakeholder-run internet portal.

(iii) Researching and improving knowledge about and action on CSR. The forum states that there is a lack of empirical research on CSR and recommends that more comparative, qualitative research be undertaken, and in particular, multi-disciplinary, multi-stakeholder and ‘action’ research, based on actual case studies. Special attention should be paid to areas such as:

• the impact at the macro level of CSR on competitiveness and sustainable development;
• the integration of social and environmental criteria in public procurement and the impact of such integration;
• supply-chain issues and partnerships between large and smaller companies;
• the relationship between corporate governance and CSR; and
• making CSR information accessible to consumers, investors, and the public.

(iv) Enhancing the capacity of business to understand and integrate CSR. The forum recommends that there should be more co-operation within and between companies, business organisations, and stakeholders to develop and implement CSR policies, and that easily accessible, ready-to-use, practical information and advice on how to secure “coherent, incremental implementation” of CSR should be made more generally available. There should also be more exchange of experiences between purchasers and suppliers to build capacities in sustainable supply-chain management. For companies trying to integrate CSR into business operations, the forum recommends that they adopt tools to take account of their needs and circumstances; be willing to examine performance against CSR objectives; offer appropriate training to people working on CSR issues; and focus on developing internal learning opportunities on CSR.

(v) Strengthening the capacity of ‘CSR catalysers’. Organisations including business advisors, consumer organisations, investors, trade unions, and the media can play a catalysing or support role for companies on CSR. The forum recommends that these organisations develop relevant understanding, skills and capacities; in particular, business advisors and support organisations should, if they wish, develop know-how on effective CSR practices and assist businesses in their CSR efforts. Finally, public authorities, companies and other stakeholders should support capacity-building activities, and CSR should be included in education and the curriculum.

(vi) CSR in education and the curriculum. The forum states that business schools, universities, and other educational institutions have an important role to play in building capacity for CSR strategies, and recommends that CSR and related topics be mainstreamed into traditional courses, in the curricula of future managers and graduate students, in executive education, and in other educational institutions.  

(vii) Creating the right conditions for CSR. The forum calls on EU institutions and governments to step up efforts towards a more co-ordinated policy approach. It also calls on public authorities to ensure that there is both a legal framework and the right economic and social conditions in place to allow companies which want to implement CSR to benefit from it in the marketplace, both in the EU and globally. The forum recommends that companies ensure that information reaching different stakeholders is meaningful and credible; identify the items that are pertinent to the company’s vision and objectives; and use relevant tools and frameworks to help them in the development of CSR strategies.

Further, it recommends that information about Socially Responsible Investment (SRI) and other funds and their approach to CSR be made accessible so that potential investors and companies can understand, evaluate, and use them better.

(viii) Developing stakeholder dialogue. The forum recommends that companies and stakeholders contribute to a dialogue, with a clear understanding of roles and expectations and a willingness to pursue “innovative, inclusive and dynamic co-operation”. It stresses that dialogue with employees and trade union/worker representatives at company level are particularly important.

(ix) The role of public authorities and the EU. The forum recommends that EU institutions and governments be consistent across policy areas and set a context for CSR. They should assist countries to ratify and implement international conventions protecting human and social rights and the environment. Public authorities should recognise the role they can play in driving CSR and should evaluate how to use public funds in the most responsible and effective manner.

Commentary

The multi-stakeholder forum’s report made a valuable contribution to the EU debate on CSR. Having looked at 50 actual case studies, its recommendations are addressed to all stakeholders, urging them to take practical action, and encourage those companies, organisations, and individuals already involved in its implementation or who want to begin to put CSR into practice. The Commission will now assess the progress of its CSR strategy and is expected to adopt a new Communication on the issue in March 2005.

5. In conclusion: an ongoing agenda

CSR feeds on the creativity and dynamism of companies’ voluntary activities and initiatives, as they respond to their own ethical standards, to civic pressure, and to customers’ demands, by striving to innovate and learn. Companies, sectors, and countries are at different levels and operate in different contexts on CSR activities. In short, no one size fits all.

A number of questions remain: is a voluntary approach to CSR – leaving it to companies to respond to markets, to innovate products and processes and to set standards – not a failure by the state? Or, on the contrary, will regulation lead to the lowest common denominator for CSR, taking away the incentive for business itself to progress? Or is there a third way, a means to overcome the dichotomy between regulation and voluntarism? There is no scientifically correct answer to these questions. Political conviction and ideologies count. The great challenge for policymakers, nationally, at EU level and globally, is to find ways to promote and encourage incentives and facilitate a debate and exchange of views and experiences between stakeholders. The main objective of the different initiatives must remain the achievement of a global, equitable, and sustainable development.

The recent EU Communication on CSR and the report of the multi-stakeholder forum described above are important initiatives. However, in order to make CSR a factor in promoting sustainable development, it is of great importance that it is not limited to selected policy fields or Directorate Generals in the Commission. The wider societal business case for CSR must be situated within the overall objectives and policies of the EU. A variety of policies are involved, including employment and social affairs, trade, development, enterprise, competition, environment, agriculture, etc. If the EU succeeds in promoting and facilitating the creation of a cohesive and comprehensive business case for CSR, this will constitute a major step forward in achieving the objectives defined in the Lisbon Declaration and, further, in contribution to global sustainable development.

All in all, there is a steady momentum for CSR and sustainable development. Government ministers, EU institutions, and business leaders agree that CSR will remain a live issue for many years. There could be no stronger reinforcement of this than the opening sections of the draft of the European Constitution. Article 3.3 states that the Union “shall work for a Europe of sustainable development based on balanced economic growth, with a social market economy aiming at full employment and social progress. It shall aim at a high level of protection and improvement of the quality of the environment. It shall … combat social exclusion and shall promote social justice”. Article 3.4 continues the theme, declaring that “in its dealings with the wider world, the Union shall … contribute to peace, security, the sustainable development of the earth … free and fair trade, eradication of poverty and protection of human rights and in particular children’s rights, as well as to strict observance and development of international law, including respect for the principles of the United Nations Charter”. This describes an agenda in which there is an inescapable role for business, not only as the engine for economic growth, but also as a key contributor to social and environmental well-being in the EU and in other regions where it operates.

Much remains to be done. Progress is patchy, and CSR principles need to be adopted and implemented by all sectors, not just by businesses. Matters are complicated by the changing roles of companies, social partners, public authorities, academia and non-governmental organisations. That is why some governments are considering innovative approaches based on enabling and partnering, to complement classic regulation or funds redistribution, against a background of mounting overall engagement in CSR and sustainable development activities.

At the European Commission, CSR is managed jointly by the Directorates-General of Enterprise and Industry and Employment and Social Affairs. These portfolios have gone, respectively, to Commissioners Günter Verheugen and Vladimir Spidla. Verheugen, a German Social Democrat, is a political heavyweight in the Commission and widely respected by EU decision makers; he will be closely involved in invigorating the Lisbon strategy and will not want to hamper Europe’s competitiveness. Former Czech Prime Minister Spidla is responsible for Employment and Social Affairs, which was the main motor for developing CSR thinking in Brussels.

As a general policy matter, nobody is against CSR. What is important is to ensure that broad policies are implemented by concrete practical actions and enforced in companies with total management commitment.

SOURCES

The Gyllenhammar report is available at http://europa.eu.int/comm/employment_social/socdial/csr/gyllen_en.pdf

Responses to the Green Paper Promoting a European Framework for Corporate Social Responsibility are available at http://europa.eu.int/comm/employment_social/socdial/csr/csr_responses.htm Information on the EU workplace award is available at http://greatplacetowork-europe.com/ A list of CSR-related projects funded under the European Social Fund is available at

http://europa.eu.int/comm/employment_social/soc-dial/csr/dgempl_csr_projects.html

For an overview on the relevant EU and international initiatives on codes of conduct, see

http://europa.eu.int/comm/employment_social/soc-dial/csr/abc11.htm

A document prepared by the European Commission listing all common management standards and frameworks relevant to CSR (eg quality, environmental, health and safety, workplace standards) is available at http://europa.eu.int/comm/employment_social/soc-dial/csr/abc12.htm EC initiatives in the field of reporting are summarised at

http://europa.eu.int/comm/employment_social/soc-dial/csr/abc13.htm

An overview of EU labelling initiatives, divided into fair-trade and social labels, is available at http://europa.eu.int/comm/employment_social/soc-dial/csr/abc2.htm An EU document summarising all initiatives on Socially Responsible Investment is available at http://europa.eu.int/comm/employment_social/soc-dial/csr/abc3.htm