U.E. şi Tratatul de la Lisabona

Corporate Social Responsibility in the European Union
A Visible Development?
 

LEVENTE GYŐRI

Abstract:
In this work the efforts of the European Union will be analysed in relation to the human rights side of corporate social responsibility with an emphasis on transparency.

Keywords: Corporate social responsibility, transparency, European Union, human rights, self-regulation

Introduction

In developing countries, like Manila, China, Pakistan, India, Cambodia, Vietnam and Bangladesh, workers are extremely low paid and have to work in conditions that are unthinkable in Europe. Indigenous rights are violated, lands, livelihood and sacred places may be destroyed, when natural resources are exploited by foreign companies, and the indigenous population cannot raise its voice. ¹

In these cases, there is a huge difference between the human rights requirements of the home country and the host country of the companies, or the host country is simply not willing to enforce them. According to the UN Special Representative on the Issue of Human Rights and Transnational Corporations and Other Business Entities, John Ruggie, it does not seems that the current international human rights treaties impose direct legal responsibilities on enterprises, as states were unwilling to agree on directly binding instruments.² An approach promoted by the EU is corporate social responsibility (hereinafter: CSR). In this article, the efforts of the European Union will be analysed in relation to the human rights side of CSR with special emphasis on transparency. Is CSR in this light a meaningful instrument or it is only public relation tool promoted by the EU?

In this article, it is not intended to give a full picture of the CSR human rights policy of the European Union. Instead it chooses to analyze the efforts of the EU focusing on the transparency of CSR commitments of European enterprises.

1. Corporate Social Responsibility and Self-regulation

Firstly, CSR is to be defined. If a company is socially responsible, it integrates ‘social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’, as the European Commission gave its definition.³ Practically, CSR means that a company is going to go above and beyond the regulations prescribed for it and willing to act in an environmentally and socially responsible way. Often there is a code of conduct in which it is described, how it foresees to achieve that.

The notion of CSR is closely connected to and stems from the notion self regulation. Self-regulation is taking place, when not the state regulates, but some other entity, which needs to be regulated in another way or wants to regulate itself.⁴ This can be called the broad notion of self-regulation. Besides „pure” self-regulation, when the state is left out completely, there is an other type within the broad notion self-regulation: co-regulation. It allows the state to get involved. One speaks about co-regulation, if the state and the private regulators co-operate in joint institutions.⁵ According to Christopher T. Marsden, co-regulation is a middle way between state and pure self-regulation: as the relevant stakeholders and the state form the parts of the regulation, the mechanism enjoys more legitimacy.⁶

These two notions represent two completely different approaches towards CSR. Which the EU institutions choose, is crucial also from the point of view of transparency. One thing is common: the final decision rests with the companies, if they do not want, they just skip the whole system.

2. Transparency and the EU

Transparency is important, as it is not enough, if a company tells what it does, it also have to show it in a credible way. It allows the public to evaluate corporate performance on human right issues. Therefore, it is a condition for comparison between different companies and public pressure. New issues can be raised, thereby making CSR evolve. It also has a preventive effect. If there is no comparison, the facts themselves lose some of their ‘power’. One of the main reasons for establishing a self-regulatory mechanism is/was precisely public pressure.

What shall be transparent and monitored? According to the ‘Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights’ of the Economic and Social Council of the UN, transnational corporations and other business enterprises have this obligation within their respective spheres of influence and activity. ‘Other business enterprises’ include for example contractors, subcontractors, suppliers, licensees and distributors, regardless their legal form and its ownership.⁷ Obviously, the requirements shall prevail in the home country as well as in the host country. Code of conducts have to be made public, accessible to all people affected, like workforce.⁸

Transparency is achieved through a monitoring system. Companies, if they are not a part of a unified system, apply different standards, which hinders comparison: for instance, if discrimination is not considered to be an issue according to some standards, it will not be observed, it will not be included in any documents, which were made according to these standards. If the right to the highest attainable health is at stake and one company reports about the amount of toxic waste placed while the other is showing the number of illnesses among the local population, these indicators are not really making it easier to judge, which company keeps this standard better.

Even if standards are unified, monitoring may still fragment the system. Why? Standards are substantial rules, whereas the implementation and their supervision/the monitoring are procedural rules. Procedural rules always have a significant impact on substantial rules and on how they work in practice and they may often influence their outcome. For example in criminal law, the acceptance of proof obtained in an unlawful manner does have a decisive effect on the outcome of the case, whatever the criminal code may be.

This work argues for a European framework for the transparency of human rights self-regulation. Already in year 1999, an European Code of Conduct for European enterprises operating in developing countries was proposed in the report of Richard Howitt, then in a Parliament resolution. For global problems global solutions fit best, which could be a counterargument against these kind of national or regional self-regulatory systems. Unfortunately, it is almost impossible to find a consensus on a global code of conduct on the global level; negotiations are cumbersome and time consuming. The capacity of the EU is better to reach such compromises and make standards and standardized monitoring. Compromise between states always have more authority, especially, if it is backed by an EU resolution. States generally are reluctant to accept the international legal personality of companies, which is basically a problem for binding rules.⁹ However, on the EU level there are special corporate forms, which are already designed for the EU level, like the ‘European Cooperative Society’ and the ‘European Company’.

In case of companies, that do not sell products directly to consumers, public pressure cannot work. But if the EU decides to promote human rights this way, it could enforce a responsible conduct through many means, like positive discrimination in public procurement procedures.

One important thing has to be noted here. It is true, that CSR depends on company decision, but if the EU sets up a system or definitely says which they shall follow (and it is communicated to the public), then it is not easy for a company to avoid that system.

3. The Green Paper

The first important document was the Green Paper on Promoting a European Framework for Corporate Social Responsibility, issued by the Commission to launch a wide debate how the EU could facilitate CSR on the European and on the international level. The paper explicitly states that it has a focus on the social field.¹⁰ The Commission probably chooses this approach because it considers in the document the ‘social part’ of CSR issues more problematic than the environmental part of CSR. The Commission argues for an approach, which is integrated in the international initiatives, as the UN Global Compact, the ILO’s Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and especially the OECD Guidelines.

The Commission emphasises that generally greater transparency and improved reporting mechanism is needed.¹¹ Therefore, ‘monitoring should involve’, as a part of the verification procedure, various stakeholders, like public authorities, NGOs, trade unions, which is the so-called multistakeholder approach. In another part the Commission speaks about ‘independent third parties’: auditing companies. Unfortunately audits by companies which are paid by the audited company are in no way a guarantee for independence. Therefore it is not really clear, what role should NGOs, public authorities, trade unions and others play in monitoring according to the Commission.

The EU, in partnership with the actors, should provide an overall framework aiming at promoting transparency. ‘Framework’ is described as containing ‘broad principles, approaches and tools, and promoting best practice and innovative ideas’¹². During the consultation process ‘framework’ should be given a broad interpretation and content shall be clarified. It means, that neither the role of actors generally, nor the role of the EU is clear and the Commission leaves it up to the actors to reach a compromise on transparency. It also shows that there is not really a clear cut definition and understanding of CSR within the EU. This green paper does not address the meaning of voluntarism, which would be decisive, whether CSR is a form of ‘pure’ self-regulation or ‘co-regulation’; which actors shall be involved. The green paper did not move forward the question of transparency and CSR.

4. Questions answered?

After one year of consultation, the European Commission issued the ‘Communication concerning Corporate Social Responsibility: A Business contribution to Sustainable Development’ (hereinafter: Communication), which was intended to present the strategy of the EU to promote CSR.¹³

In the Communication there is a new line of argumentation, which deserves attention. According to the EC Treaty, the consumer has the right to information, which should be accurate, accessible and useful. As there is a growing demand for socially and environmentally responsible products, the right to information should also cover these topics. If there is a claim that a product was produced in socially responsible manner, monitoring shall be made by member states and stakeholders.

In other aspects, after reading the document, one could have the impression that the Commission did not move forward; it is only repeating the arguments already given by the Green Paper. The Commission could still not merge the two lines of argumentation.

The lack of a European framework for monitoring is not even mentioned in the document, which is probably the biggest deficiency. The irony is that the Commission acknowledges, that ‘the proliferation of different CSR instruments (such as management standards, labelling and certification schemes, reporting, etc) that are difficult to compare, is confusing for business, consumers, investors, other stakeholders and the public and this, in turn, could be a source of market distortion’. ¹⁴ The Commission proposes to set up a European Union Multi-Stakeholder Forum on Corporate Social Responsibility to promote transparency and convergence of practices, which shall hammer out such a compromise. The aim of this initiative is the same, as it was of the Green Paper: trying to find out, what the EU shall do in relation to CSR.

The Forum was to foster CSR and improve innovation, credibility and transparency of practices by increasing knowledge about the concept and by exploring the appropriateness of common guiding principles.¹⁵ The Forum was chaired by the European Commission and had different thematic ‘Round Tables’, among which the ‘Round Table on the diversity, convergence and transparency of CSR Practices and Tools’ (hereinafter: Round Table) was entrusted with the task of scrutinising the transparency, credibility, diversity and convergence of CSR practices and tools. Earlier, as put in the Communication, the Forum was supposed to develop guidelines and criteria for CSR measurement, reporting and assurance, whereas here the Forum aimed to focus only on the ‘appropriateness’ of commonly agreed guidelines, which is a step backwards. During the forum talks, CSR generally and also in relation to transparency was described as a ‘learning process’ by enterprises. They emphasized that there is no ‘one-size-fits-all’ solution regarding the format and the details of reporting.¹⁶ Business entities alleged that there are no commonly defined expectations in many areas. It is also not clear, which indicators to choose in order to measure performance and there is also no guidance on how to identify them.¹⁷ Sometimes, expectations of different stakeholders even contradict each other.¹⁸ There was no unity neither on the issue of third party monitoring. Business organisations argued internal auditing and verification are reliable enough, whereas trade unions and NGOs believed that only the involvement of a third party can guarantee reliability.¹⁹

The key question, what the role of the EU (and the public authorities) shall be, was also addressed during the sessions. All parties agreed, that the EU shall promote CSR.²⁰ Business entities and employer organisations were for awareness raising about CSR, and stressed that linking it to a public policy would mean that CSR is not seen as a voluntary concept.²¹ The main argumentation of the business community and the employers was that as CSR is a voluntary commitment of companies, a ‘bottom-up’ approach is needed instead of a ‘top-down’ approach of the EU. The market should lead to better CSR tools and practices, in a way of experimenting, learning and spreading of good practices. ²² Business organisations and employer organisations suggested that it is purely a task for businesses to freely develop their standards, depending on their national and other circumstances. Reporting systems should respond to market demand, so if something is not asked for, it shall consequently not be reported.²³

Although the final report held the understanding of issues and challenges of transparency, greater levels of CSR activity and effective transparency important²⁴, these statements are worthless, if the business community and other stakeholders cannot agree, what does voluntarism mean, what the EU should do. Companies see CSR as a ’pure’ self-regulation, whereas others still want EU involvement, making it co-regulation.

After two years of silence, the Commission issued the Communication on the Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility. It seems, the Commission rather took the view of the business community, putting the emphasis on voluntary business behaviour. The new solution initiated in this document for a better CSR policy is the European Alliance on CSR. Contrary to the Forum its structure and mechanisms leave the multistakeholder approach behind and takes a business approach. There is no criteria for a membership, moreover there is no list kept containing the participating companies.²⁵ This means that even a weak sanction in possession of such organisations is automatically left out from the system: the exclusion from an organisation.²⁶ They do not address the issue of transparency adequately, as it can be seen on its webpage, because it is ‘transparency on supply’ and not a ‘transparency on demand’, based on the international agreements. Would it be the end of a transparent human rights friendly CSR in the EU? Unfortunately not. This will be shown next.

5. Prospects for development?

In the other field of CSR, we can find the Eco-Management and Auditing Scheme based on a joint resolution of the European Parliament and the Council of the EU. They established a common framework in relation to the disclosure of environmentally relevant data: a voluntary auditing scheme based on pre-defined standards and an EU wide monitoring and labelling scheme.²⁷ According to the Hungarian NGO, the Environmental Management and Law Association, the EMAS is an effective mechanism, which provides comprehensive factual data and evaluation, and guarantees publicity.²⁸

There is another example which worth paying attention. Exporting combat helicopters containing European products to countries where they are quite likely to be used against civilian targets is also troubling from the point of view of human rights.²⁹ Therefore a European Code of Conduct on Arms Export was adopted by the Council of the European Union, which contains human rights criteria for exporting weapons from the EU.³⁰ The system includes annual reporting and the implementation of the code is discussed annually. The system suffers from the same shortcomings as voluntary codes of conduct, currently the most problematic issue is the lack of comparable data, as explained in one annual report.³¹ In 2006, the European Parliament urged the states to agree on procedures for monitoring and verification, which means, this system is not perfect yet.³²

Exporting arms is controlled by the states by licensing, so it cannot be considered CSR. Still it is very interesting to see that the problems and the solutions recommended are the same and no one leaves it up to the companies to pursue human right policies of their own.

6. Conclusions

Most currently, in November 2009, the Swedish Presidency expressed its view on CSR in Europe.³³ It puts more emphasis on human rights, but it seems only the ‘planning’ continues. If we want a properly working full CSR system, human rights cannot be left out: improvements are needed. It means a meaningful definition, making the extent of ‘voluntarism’ clear. As it was shown, only standardized human right requirements and monitoring makes a meaningful system possible. Therefore a co-regulatory form is recommended here, which could follow the already existing initiatives, like the Global Reporting Initiative, with a bigger emphasis on human rights and much a wide EU member state participation.

LEVENTE GYŐRI – Hungarian Ministry of Education and Culture, Legal Advisor.

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