Corporate transparency part of the solution

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Information on companies’ performance and prospects is of key interest to investors, decision-makers, the citizen and consumer; so why are member states now blocking corporate social responsibility rules, Jérome Chaplier wonders.

Jérome Chaplier is the coordinator of the European Coalition for Corporate Justice (ECCJ).

Imagine a world where companies did not have to report on their financial performance – or where companies were allowed to decide for themselves how, when and to whom they reported on how much money they made. Devoid of meaningful information, shareholders or investors would be probably be reluctant to risk their cash.

Imagine a world where companies were not required to report on risks to society, such as a risk in its supply chain overseas, even though these risks could mean the company was likely to face future costs.  Perhaps the pollution from a factory was contaminating the local water supply causing health problems for the local community.  Or perhaps poor operating practices and reduced safety budgets were increasing the risk of an accident on an oil platform. Wouldn't shareholders and potential investors still want to know if there will be future costs to the company? Can supplies be guaranteed? What can be done to prevent things going wrong? And shouldn’t local communities, European consumers, and decision-makers also be entitled to know?

Such information is of course also of value to members of the public, as consumers, and as concerned citizen. Can I buy a smartphone safe in the knowledge that it doesn't contain conflict minerals, or metals mined by slave labour. Or can I be sure that I am choosing a model of car where the manufacturer is doing the most to minimise its carbon emissions. Consumers' choices can be based on a range of criteria – and if they are to make informed choices, they need the full picture. Yet according to a Eurobarometer survey, 62% currently feel they do not know enough about the impacts of business.

So when the Commission released a legislative proposal to beef up corporate social responsibility rules to require larger companies to report non-financial information such as environmental and social matters, it sounded like good news for everyone.

Why then are some Member States now set on ensuring that this does not become a requirement? Why would some Member States be so opposed to greater transparency about the impacts of business?  Because it is clear that some states and some within the business community who are working very hard to make sure this measure is blocked.

At the current time, just 2,500 out of 42,000 large companies report on any non-financial information. Of those that do, the reports are often of little value because there is little consistency in what is reported on, or how it is measured.

The measures put on the table by the Commission are straightforward and in reality quite weak. They would require minimal effort from companies. And indeed just 18,000 companies are likely to have to comply. As it stands, they would simply be required to report on their policies and risks on human rights, social, environmental, anti-bribery and diversity issues. They would not be required to have policies covering all of these areas. The proposals already include a number of loopholes, which have been criticised by civil society groups because of the excessive flexibility they provide. Failing to report would even not necessarily lead directly to sanctions.

Progressive companies know that they have far more to lose from burying their heads in the sand. Civil society groups, environmental and human rights campaigners are voicing their support. Surely even the companies with skeletons in their closet realise they have far more to lose from a campaign-led expose, than from openly facing up to their problems themselves.

Yet the business lobby is fighting against the changes tooth and claw – and they seem to have secured the ear of some Member States. It is time for some hard questions about whose interests they represent. Who, they must ask themselves, really benefits from a lack of transparency. Responsible successful companies looking to build a sustainable future – or dinosaur industries who want to be protected from public scrutiny?

MEPs equally have a responsibility to look at the bigger picture and consider the contribution of business to the future of Europe. In the context of the economic crisis, the Parliament has already recognised that fundamental errors were made by the private sector with regard to transparency, accountability and responsibility. Do they think the Europe can afford to repeat these errors across other sectors of industry?

The question of how to build a more sustainable future is at the top of the agenda for many policy makers. Growth at any cost is not a sustainable solution. We need sustainable growth and responsible companies. Transparency is a key ingredient in delivering that.

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