Commission treads softly on corporate social responsibility

By Anna McLauchlin

Date: 14/04/05

The European Commission is about to water down a policy statement on Corporate Social Responsibility (CSR) in the face of business opposition. An initial draft was sent last week to the offices of the two commissioners responsible, employment and enterprise, and will be circulated to Commission departments in the coming days before final adoption at the beginning of June.

The term CSR describes declarations made by companies as to how business decisions will be linked to social and environmental concerns, including activities in business units based in poor countries.

A draft outline of the communication, released in January, called for the incorporation of CSR into EU policy on corporate governance and financial markets, including financial reporting, prospectuses for listing on the stock market and mutual fund information. But, according to sources, the wording is likely to be softened in the final draft.

European businesses have warned that transparency issues should be left up to companies and that the voluntary nature of CSR is not compatible with the legal obligations placed on firms through corporate governance rules.

As it stands, companies can include their CSR activities in their annual accounts, but they are not obliged to do so.

Business groups were also concerned that CSR regulation at EU level would stifle innovation in this area, as companies currently have a free rein to pursue whatever forms of CSR they choose.

"There is no 'one-size-fits-all' approach to CSR, including transparency issues," said Natascha Waltke from European business association UNICE.

A source at the Commission's DG Enterprise said that any part of the text that might hint at future legislation had been removed, but a source in the Commission's DG Employment said that this did not necessarily mean that the Commission would not legislate if need be.

"Nowhere in the text does it say there will never be a directive," he said. "We will choose the most effective way to achieve the objectives."

Trade unions argue that workers are not protected enough by companies' voluntary initiatives and have called for EU regulation of CSR to establish minimum standards and ensure that CSR practices are developed in conjunction with all relevant players.

Walter Cerfeda at the European Trade Union Confederation (ETUC) said that linking corporate governance to CSR was a responsible idea.

"Companies that choose to undertake CSR should present a report each year on what they have done," he insisted.

The communication will set out a five-year action plan aiming to promote the awareness of CSR across the EU, encourage businesses to engage in CSR practices and set out non-binding guidelines to make CSR practices more transparent and credible.

Next Tuesday (19 April) the European Commission will hold a conference on CSR and competitiveness in Brussels. Originally timed to coincide with the communication, which was then delayed, the conference will investigate the idea that CSR can help EU boost growth.

"Faced with competition from China and other emerging markets, CSR can be a selling point for EU companies," a Commission official said. "Products may not be cheaper but they are manufactured in a socially responsible way."

Article reports that the European Commission has made amendments to an initial draft in January 2005 of a Communication on corporate social responsibility (CSR). After business opposition every reference to possible legislation in the field had been deleted.

European Commission: DG Enterprise and Industry: Corporate social responsibility http://ec.europa.eu/comm/enterprise/csr/index_en.htm

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