Corporate social responsibility should remain voluntary, says Commission

The Commission signalled last week that it would not yield to European Parliament pressure to propose binding legislation for firms to report on social and environmental issues alongside their annual financial accounts (see related story).

The strategy paper follows a consultation launched by a green paper last year. At the Green Paper presentation, the European Commission underlined the importance of CSR in an age of large-scale redundancies and high incidence of restructuring, mergers and acquisitions. The Commission cited studies which showed that few restructuring operations achieve their goal of reducing costs, increasing productivity and improving quality and customer service as they are invariably undertaken in a way which damages morale, creativity ad productivity of employees.

Commissioners Diamantopoulou and Lukanen explained, “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.”

The latest strategy paper will come as a relief for the many firms that expressed concern over the possibility of enforced CSR. Barclays, the largest presence in Europe of any UK financial services group expressed concern in an official response to the Green Paper in December 2001, saying, “Formal regulation will encourage compliance rather than embed true commitment to CSR”. It also stated “Companies should be allowed sufficient latitude to define the CSR issues most relevant to their own business and social/environmental context and develop their own integrated CSR strategy and management systems”.

Now the Commission’s proposals for moulding an EU approach to CSR rest mainly on the creation of a multi-stakeholder forum to advise on future steps by mid 2004. The Commission says that engaging in CSR is “clearly a matter for enterprises themselves”, though with a subsidiary role for public authorities and the EU.

The proposed stakeholder forum is to decide how strong this public role should be. It will comprise 40 organisations representing employers and employees, consumers and civil society in addition to professional and business associations. It will meet in plenary session twice annually with smaller ‘theme-based’ round-tables tackling specific issues.

One of the first tasks of the forum will be an appraisal of CSR’s contribution to firms’ competitiveness. According to the Commission, one main barrier to increased uptake of CSR is a lack of awareness of the ‘business case’ for CSR. The forum will look into the credibility of existing CSR codes of conduct and will advise on disclosure related to pension funds and socially responsible investment.

The strategy paper also outlines an initiative by the Commission to integrate CSR into its own activities with a social and environmental report in 2004.