CORPORATE SOCIAL RESPONSIBILITY: Capitalism with a human face

Date: 28/03/02

The European Commission's green paper on corporate social responsibility (CSR) is likely to receive a lukewarm response from the Parliament. Peter Chapman delves into the background - and the issues at stake

THE 300,000 anti-globalisation campaigners and trade unionists protesting on the streets of Barcelona earlier this month had a simple message for the EU leaders closeted away in their economic summit.

The world is turning rotten for most of the planet's 6.3 billion people because multinationals do not give a stuff for the environment - or their staff. Dismantle capitalism and the world will be a better place.

Unfortunately, revolutions are a bit out of fashion at the moment. Most people, though sympathetic to the demonstrators' concerns, realise that the corporate world is not about to halt its relentless search for wealth and shareholder value (and the developing world is not going to stop its attempts to catch up).

For many, corporate social responsibility - or CSR - appears to be the only way to bring the world wealth and, at the same time, environmental health.

Ask a dozen business executives what CSR means and you will get a dozen different opinions.

But what it boils down to is companies taking a decision to pursue strategies that look beyond short-term profit or 'product' - and focus on their impact on people and the planet.

Confusingly, many experts prefer the term 'sustainability' to describe a strategy that looks beyond the people to planetary concerns.

Cynics argue that CSR and sustainability were invented a decade ago by politicians to show sceptical voters that the capitalist system has a caring side.

In many cases, the disbelievers claim, it amounts to a way for firms to crow about things they were already doing before the concept became fashionable.

Or worse, companies unlikely to encounter an environmental problem because they make biscuits in Bradford or lingerie in Leuven could stick a CSR or sustainability label on their box to show they were 'holier than thou'.

But the fact that investment fund managers - not just those running special ethical funds - believe it can be good for your bottom line, and are demanding proof from companies of their CSR policies, must count for something.

The department store that consults workers on key decisions or even lay-offs, and if the worst happens helps retrain them to find another job, is likely to have a happier workforce - and a more productive one.

Companies that do charitable work for the benefit of the local community are likely to give workers and managers a sense of bonding that boosts morale - again, good for productivity and not bad for public relations.

The furniture maker might turn a faster profit now if he chops down all the trees to make furniture. But once he has chopped them all down there will be no more furniture. The CSR-conscious furniture maker will chop down some trees, but also plant a few.

What is more, he won't get little kiddies who should be at school to do the work. In fact, he will be keen to look after his workers because keeping hold of a motivated, skilled and adult workforce is good for business.

Supply-chain management means that if the furniture maker doesn't actually own any forests, he will ensure that the man who does follows sound CSR practice.

The problem is, unlike Big Macs, Coca-Cola, Nestlé baby milk, Nike trainers or Adidas footballs, CSR is not a homogeneous product; though many practise it, not everyone does.

That is where the policy makers come in. Should it be compulsory? Should there be standards? Should it be left to the market to decide?

Most companies would say no, no, yes.

But some countries have adopted laws that have given CSR and its close cousin sustainability a kick-start.

For example, in the UK, pension fund trustees must disclose their ethical investment policies.

They do not have to have an ethical policy. But if they do, everyone must know what it is.

The rules mean future pensioners can put their retirement cash elsewhere if their fund manager is investing in arms, tobacco or alcohol.

It also means that firms wanting to be part of huge pension fund portfolios know what they have to do to make the cut.

The question now facing EU policy makers is what can and should they do about CSR.

Social affairs and employment chief Anna Diamantopoulou entered the fray last year with a green paper on the issue. 'Our first role at EU level concerns awareness raising,' she said, adding, 'by no means do we wish to duplicate what exists. However, we can also add value by supporting, highlighting and facilitating exchange of best practices'.

Her view is that CSR should be encouraged, but that too much intervention is a bad thing.

On the whole, the green paper was given the thumbs up from business.

However, it was also lambasted by economic purists who believe unfettered market forces provide the most efficient results, and anti-capitalists who think the opposite.

Some favoured a far broader approach concentrating more on sustainability. They claimed Diamantopoulou was focusing too narrowly on the 'people' and not enough on the 'planet' - not surprising given her portfolio.

Some trade unions and NGOs, she said, feared firms could use CSR 'to undercut or sideline existing responsibilities' and that 'voluntary action on CSR would not be enough'.

That's a view shared by Richard Howitt, a British socialist looking at CSR for the European Parliament. He attacks the Commission's assertion that while the prime responsibility of a company is to generate profits,

they can at the same time contribute to social and environment objectives. This, Howitt argues, suggests that CSR is 'an optional extra add-on to normal business'.

'In reality, it must become a mainstream part of all business activity,' he says.

Howitt believes voluntary action by firms to embrace codes of conduct and to ensure they honour their social and environmental responsibilities is laudable.

'However,' he says, 'there are countless examples which show that the voluntary approach in itself is inadequate and needs to be reinforced by complementary measures'.

So what will be the concrete results of this year-long exercise?

In the Commission's illustrious history, many a green paper has been consigned to the scrap heap.

Indeed, Commission sources believe this one will not lead to legislation, but instead flag the need for a quality control system to prove that companies are delivering what they say they are. For example, take a firm operating in Burma, a country which is not a signatory to International Labour Organisation (ILO) standards.

If the company decided to meet ILO standards anyway - for reasons of good CSR - who would check it actually was? The Commission isn't saying. For MEP Howitt, whose report is due to be voted on by the employment committee next month, that is simply not good enough.

Even if fellow MEPs like what they read, its interventionist tone is unlikely to win the day outside Parliament unless the EU suddenly elects 15 Lionel Jospins - very unlikely given the drift to the centre right in recent elections.

Nevertheless, more and more firms do seem to be taking the CSR concept seriously. But let's not get carried away: after all, Enron was a model student...

Major feature on the European Commission's green paper on corporate social responsibility (CSR).

http://ec.europa.eu/comm/employment_social/soc-dial/csr/greenpaper.htm http://ec.europa.eu/comm/employment_social/soc-dial/csr/greenpaper.htm

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