Davignon: Europe needs a new social model

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The first half of 2009 will determine not only whether the EU is successful in leading the global response to the financial crisis, but also what is required to make the European social model work in the 21st century, according to former European Commissioner Viscount Etienne Davignon, president of both Friends of Europe and Corporate Social Responsibility (CSR) Europe, who spoke to EURACTIV ahead of this week’s EU summit.

Viscount Etienne Davignon, a former European commissioner, is president of both Friends of Europe and Corporate Responsibility (CSR) Europe.

President Davignon. How has the work of CSR been affected by the ongoing financial crisis? 

Well, I think if you look at it in terms of substance, everything we [CSR] are trying to achieve – stronger governance rules, transparency, reporting and so on – has been justified based on what we’ve lived through in recent months. 

We have always believed that a stronger economic and financial framework is necessary so that you don’t get the type of reaction we are currently seeing, where stakeholders and shareholders feel they didn’t get the proper information. 

So, if unfortunate events were needed to prove that the preoccupation over these issues was necessary, then that is the answer to your question: the need to address these questions has increased, not decreased. 

And you can take it on from there – if you look at the titles of all the previous CSR laboratories, you will find a direct relationship with the issues that caused the downturn in the economy. 

If you then look at it from the perspective of businesses, the question is whether they still consider corporate social responsibility as a priority, and are prepared to use people to implement these [CSR] possibilities, support reserve seminars, case studies and so on, given that they will be trying to cut down on costs. That is something we will have to see through 2009. 

So there is a sense of paradox: on the one side, there is the necessity and utility of the work, which I think has been unquestionably proven; on the other side, there is the question of whether businesses will still give their time to these types of activities, and I hope we can convince them to do so. It’s too early to say, but we are at the start of a difficult period. 

You have considerable personal experience in the upper echelons of both the corporate world and the European Union. Do you think the EU has been successful in its attempt to spearhead a global regulatory response to the current crisis? 

Again, it’s too early to say. First of all, I would hesitate to use the word ‘regulate’, as I don’t believe you regulate an economy – I think an economy works inside a framework. 

I’m not a believer in autoregulation. If you don’t believe certain regulations settle anything, this does not automatically mean you believe in regulating everything! There’s a balance to be found between a framework and entrepreneurship. 

I would say this: when the Lisbon Strategy was launched, there was a small paragraph in the press release in relation to these issues. I think the upcoming Commission document relating to what we have to do now will highlight the link between competitiveness and corporate social responsibility, and I suspect this will take a larger share of the report than it did before. 

So for the debate over what the EU should do, in terms of accountability, supervising regulators in the financial area and so on, I think it’s too early to pass judgement, but quite clearly we didn’t have enough regulation to avoid this systemic crisis, and it is a systemic crisis. 

I think these questions will be answered in the first six months of 2009. 

The ‘green agenda’ and the creation of green jobs seem central to all EU solutions being suggested. Do you think the EU Council summit will succeed in pushing through a green package for innovation, creating green jobs and so on? 

I expect so. I think it’s a mistake to qualify a green agenda as opposed to any other agenda. It has now become obvious to everybody that an energy policy and its consequences for the environment are two sides of the same coin. They are no longer two different topics needing two different strategies. 

I like the expression ‘sustainable development’ – this is the agenda. I don’t think anyone can claim ownership of this agenda, as opposed to the green agenda, which sounds like it belongs to one category of opinion-makers. 

In fact, this agenda permeates everything, and this will lead to something serious emerging at the summit. 

Beyond 2010, beyond the current Lisbon Strategy, describe to us CSR’s perfect world, taking into account recent events. 

This would be the implementation in all businesses of the good practices which make them a good part of society. I mean, business is a very important part of society – it’s absolutely as stupid to say that society can do without business as it is to say that business can live outside the reality which encompasses it. 

The important thing for me is that this agenda of social responsibility stands as high on management priorities as cash management and recruiting good people. 

EP President Poettering expressed the goal of making Europe a ‘pole of excellence’ for CSR. Is Europe, has it been, and can it continue to be, a pole of excellence given the risks inherent to the current crisis? 

I think there’s a very simple answer to that, although giving oneself praise is always a very delicate exercise, and we’re not going to go to the public and declare that we are doing this well or badly. 

But the evidence is there at events like this, where we have participants from China, Korea, and South America who have become interested in these issues as their economies become more sophisticated – this is an indication that they feel we have something to bring to them. I prefer this to any praise. 

I think what we are trying to do is keep this reputation, and open up what we do beyond Europe. We can share what we have and hope that other people do the same. 

We seem to be going through an epochal shift in Europe. How can the EU reconcile its twin policy goals of being a global hub for innovation and research while at the same time protecting and perhaps reconstructing the European social model? 

First of all – you’re right: September 2008 will go down in the history books and things will not be the same afterwards as they were before. How different they will be is part of the uncertainties we have to cope with, as it’s so difficult to assess when the crisis will end. 

I do not believe that the fundamental values we have – let’s use the ‘social market economy’ catchphrase – will change. I think that will very strongly remain. 

What will change is what is required to make this social model work. It’s the end of an era and it cannot work as it did before, but that doesn’t mean we should throw it away. 

Instead we must draw from the lessons of what went wrong and recreate the basis of what will allow the social market economy to deliver a certain degree of justice and a certain degree of growth. 

As someone who sits on a number of corporate boards and is simultaneously pushing for social responsibility in Europe and beyond, how do you respond to the public outrage at corporate bonuses and the ‘rewarding failure’ culture? 

I can only reconcile this in terms of where I have some degree of responsibility or influence. Happily, in relation to excess pay and so on, we haven’t fired so many people so we didn’t need to give them so much money. 

We’ve got very good policies on all those issues, and we never went along with being told that “this is the rule of the market, you won’t get the right people if you don’t do this or that”. 

The outcry against people who have failed their companies yet go away with millions of dollars is justified – this is totally unacceptable. I can’t even dream how anyone is worth so much – what do you have to do to have a salary of 50 million dollars? 

Happily, in the companies where I’ve been involved, we’ve never had that kind of problem. We’ve always been careful to resist the prevailing mood, because a lot of these problems arose when Company B did the same as Company A. 

I understand the shock of the people. I always remember amusing a journalist who asked me ‘what have you regretted in your life?’; I jokingly told him that I had never been fired, and I was much poorer for that reason! 

I think that this type of failure is precisely what gives a bad name to a system, and if people are not reasonable enough to do what is reasonable, regulation becomes required. 

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