Corporate Social Responsibility - Main Issues
Definitions
Definitions of Corporate Social Responsibility vary but they all contain the view that:
- Corporate social responsibility is about companies having responsibilities and taking actions beyond their legal obligations and economic/business aims. These wider responsibilities cover a range of areas but are frequently summed up as social and environmental - where social means society broadly defined, rather than simply social policy issues. This can be summed up as the "triple bottom line approach: i.e. economic, social and environmental".
- CSR Europe (Davignon) define it as: operating in a manner that consistently meets or exceeds legal, commercial, ethical and public expectations. This is similar to a definition by one academic expert in the field that CSR concerns taking action across four areas: economic, legal, ethical and philanthropic.
One of the main points in CSR is that it includes but goes beyond legal obligations i.e. the approach as a whole is voluntary, though some elements of CSR codes of conduct may in fact be legal obligations.
Although called corporate social responsibility, many argue that it should also apply to all types of organisations including for example public bodies and non-governmental organisations (NGOs).
Where do or can companies apply CSR?
We can break down the scope of area of action for CSR in one of the following two ways:
- CSR activities can relate to three main areas: within the firm or enterprise; the local community and environment; and the wider society, economy and community (national and international);
- alternatively, we can see CSR activities as relating firstly to the business environment (within the enterprise, and relations to shareholders, customers and suppliers) and secondly to the wider community, society and environment (local, national and international).
Why should companies apply CSR? And why is there growing interest at the moment?
CSR is a growing political, social and economic issue. We are in a period of substantial social and economic change - new and changing society (reflecting globalisation, technological change, social change, environmental pressures et cetera). CSR is about the new role of companies in this new economic and social environment.
So it is not simply a question for individual companies to decide whether and how CSR is relevant to them. It is also of much wider concern to a range of groups: politicians and decision makers, shareholders, consumers/customers, suppliers, pressure groups, workers and others.
From the point of view of companies, we can say there are three main reasons why they may be interested:
- There may be very direct business-internal economic reasons for going beyond basic legal obligations for example training, working conditions, management-employee relations can all have a direct impact on productivity and quality of the product.
- There may also be concern with the external expectations from companies, which can have an impact on their wider reputation and image and which may also have an important economic impact: this may be linked to consumers or investors differentiating between companies according to their social responsibility activities, or to the interests and activities of NGOs and pressure groups, who can bring unwelcome negative publicity and information.
- Companies may also decide to aim to be seen as good corporate citizens either for genuinely philanthropic reasons or because, even if undertaking actions not directly demanded by consumers or NGOs for example, it may be seen to enhance general reputation and image with stakeholders, with governments et cetera.
It is also of concern to a growing range of so-called stakeholders which in a narrow sense covers: shareholders, customers, suppliers, and workers, but which in a much broader sense can relate to the whole society and so certainly to government, NGOs, political groupings et cetera. There is growing interest in socially responsible investing, and growth of consumers prepared and interested in differentiating their purchases according to the reputation and practices of the company - hence the economic incentives described above for companies.
What is the EU role and interest here?
There is already substantial activity on CSR, in some cases through individual companies proclaiming their own standards and codes of conduct, in some cases (such as CSR Europe) with companies coming together in groups and networks to promote common approaches, or through consumer and other pressure groups and NGOs demanding certain types of actions, and through national and international bodies taking action (ILO, OECD, UN et cetera). We can observe two basic approaches here: one is to set out broad principles and standards, from which organisations can devise their own particular approach; the second, is to set out a detailed best practice approach in a particular area (for instance, agreed international code of conduct in the textiles sector).
The EU approach is to establish where it can add value and complement existing activities. Given on the one hand the growing interest in, and importance of, this area, and on the other hand the myriad different activities and initiatives, the EU's main contribution can be to provide clarity and coherence in two main areas:
- To promote the development of an overall European reference framework, or umbrella, making transparent and comparable what CSR is, through establishing broad principles, approaches and tools, and through promoting best practice and innovative ideas. The two main tools that receive most attention for CSR are codes of conduct and social labels. Within this it is desirable to establish a consensus on the main areas of activities that these tools may cover, and to establish best practice activities. The Green Paper looked at these tools, but also at the complementary role of other tools such as EU development and social funds / technical assistance, and political dialogue (particularly internationally).
- To define and promote best practice approaches to evaluation and verification of companies' CSR activities. Evaluation and verification is probably the most important issue in CSR, since without effective evaluation and accountability, the use of CSR as a soft tool will be very limited. It is not for the EU to do or undertake evaluation (other bodies including as appropriate international institutions or appropriate private sector bodies can do this) but the EU could facilitate a process between stakeholders with the aim of identifying what would constitute a solid, independent verification approach. Note that we are at a very early stage here - but approaches are developing such as having social accountability standards (notably the SA8000) based on the same broad approach as the now well grounded quality standards certification approach. There has also been development of the so-called European Social Index to promote socially responsible investing by equity investors.
Is this a European or an international approach?
We already have important international standards and approaches. We have the ILO four categories of fundamental rights (as set out in the eight ILO fundamental conventions): freedom of association; abolition of forced labour; equality; the elimination of child labour. These are agreed and the key question is the implementation (note the link to the trade round issues here - the EU is not in favour of sanctions, and is in favour of establishing a multilateral forum to discuss trade and social development including core labour standards, but not of including core labour standards in WTO negotiations). We also have importantly the OECD guidelines for multinational enterprises (covering a wide range of economic, social and environmental principles). We also have the UN's global compact promoting human rights, labour and the environment.
The EU supports these international approaches and does not intend to replace them with any of its own initiatives. The EU's framework must therefore work with and be additional / complementary to these international initiatives.
The Green Paper gave particular attention to looking at ways that CSR can be operable and effective for small and medium-sized enterprises (SMEs). However, many if not most of the large companies in the EU are multinational enterprises - and EU companies are investing abroad and importing and exporting goods. This means we cannot have one approach for the EU and one approach for the rest of the world.
The EU's strategy must incorporate and be based on the existing international approaches, notably the ILO fundamental labour rights, basic human rights and environment. This (the ILO plus the OECD) sets out the minimum standards that should be adopted and implemented wherever a company is operating - and one way for this to be made more effective is to take further the concept of social labelling. Many of these areas that go beyond the basic minimum international standards are linked to the Lisbon agenda. The Lisbon Summit made a special appeal to companies sense of corporate social responsibility, particularly with respect to 5 areas: lifelong learning, work organisation, equal opportunities, social inclusion, and sustainable development. The Green Paper was not restricted to these 5 areas - both as it needs to take on board the important international dimensions of fundamental labour rights, human rights and environment.
The Commission received more than 250 responses to its Green Paper, which are posted on the Europa website http://europa.eu.int/comm/employment_social/soc-dial/csr/csr_index.htm. About half of these responses came from employers' organisations, business associations and individual enterprises. Trade unions and civil society organisations accounted for another large portion of responses. Furthermore, organisations at local, regional, national, European and international level as well as academics and other interested individuals have responded.
The European Institutions, Council, Parliament, Economic and Social Committee, Committee of Regions equally adopted positions on the Green paper. Finally a number of Member States sent their comments to the Commission.