First launched in 2001, the European Commission (EC) is now reviewing its strategy for corporate social responsibility (CSR) to maximise the creation of shared value for society and companies.
Corporate social responsibility
In mid 20th century, academic literature introduced the concept of CSR as a practice meant to “align company decisions with objectives and values of society.” Today, CSR is a management tool used by a large share of EU companies. However, analysts believe acting responsibly does not necessarily improve profitability, and that public policies should therefore complement companies’ voluntary initiatives to tackle all challenges of sustainable development. In the light of the crisis, some argue such policies (e.g. incentives, regulation, stakeholder forums and information provision) gain in importance as companies shift away from CSR, whereas social and environmental issues become more exposed.
Renewing the EU’s CSR strategy
Whilst explicitly linked to companies’ competitive positions in its 2002 and 2006 Communications, the EC redefines its CSR approach in its latest Communication of October 2011 “A renewed EU strategy 2011-14 for Corporate Social Responsibility.” Departing from a purely voluntary approach, CSR is seen as the “responsibility of enterprises for their impacts on society,” supported by public authorities if necessary.
The Commission emphasises both the importance of international approaches such as the OECD Guidelines for Multinational Enterprises (recommendations for responsible global businesses) and the UN Guiding Principles on Business and Human Rights and the multidimensional nature of CSR in their definitions. As such, CSR is to cover a wide range of topics ranging from human rights, employment practices, environmental issues, corruption, to consumer interests and disclosure of non-financial information.
The Communication sets out several factors to boost the impact of CSR policy such as a balanced multi-stakeholder approach and greater attention to human rights. Actions included for 2011-14 are: enhancing CSR’s visibility and trust in businesses, self- and co-regulation schemes, market rewards, better company disclosure, integration of CSR into education, Member States’ CSR policies and the alignment of EU and international approaches. The Commission sets 18 priorities, ranging from sectoral strategies to responsible supply chain practices.
The new EC definition is received positively in the Employment and Social Affairs Committee’s report “CSR: promoting society’s interests and a route to sustainable and inclusive recovery” (Richard Howitt, S&D, UK), in particular given its consensus-building potential. Stressing the social effects of the crisis, the report, inter alia, invites the Multi-stakeholder Forum on CSR to investigate growth in sub-contracting and calls on businesses to take job creation initiatives. It supports the Commission’s adherence to international approaches and calls for EU solutions to bridge governance gaps with them, as well as to improve CSR disclosure. It also proposes further ideas to advance CSR.
A second report, by the Legal Affairs Committee “CSR: accountable, transparent and responsible business behaviour and sustainable growth” (rapporteur Raffaele Baldassarre, EPP, IT), also supports the EC definition, which allows for companies to contribute to the social market economy, helped by innovative business models. Other ideas put forward are an EU award scheme for CSR firms and dissemination of best practices, in particular for SMEs. As for CSR transparency, the report draws attention to ambiguous marketing and public procurement criteria. Finally, it warns of creating “unnecessary red tape” by using EU-wide performance indicators and indicates a preference for sector-specific approaches.