Europe must continue to lead on corporate social responsibility

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

Richard Howlett

Richard Howitt

Although Europe has led the way in the corporate social responsibility debate, according to MEP Richard Howitt, but it must now reshape the whole structure of remuneration across markets, to incorporate social and environmental goals.

UK Labour MEP Howitt (Socialists & Democrats) is a member of the European Parliament’s foreign affairs committee and of its subcommittee on human rights. He is speaking today (3 February) at the EU Forum on Corporate Social Responsibility being held in Brussels.

Together Europe has achieved a lot over the last decade when it comes to Corporate Social Responsibility (CSR).

We have firmly placed responsible and moral business practice at the heart of new European action, but are meeting this week to determine how we can achieve even more.

We’ve stayed true to a multi-stakeholder approach, recognising employees, trade unions, interest groups, communities and citizens – as well as the ecology of the planet itself – all have a legitimate interest in the company.

We have rejected the old false dichotomy between voluntary or mandatory approaches. Instead we’ve built a consensus that a ‘smart mix’ between the two paves the way to constructive action.

Public consultation showed widespread support for a new EU law passed last year requiring companies to report on their social, environmental and human rights impact – I am deeply proud businesses as well as others recorded it as our “most significant achievement”.

European action has helped to ensure that many more companies are now asking themselves, and are being asked, is their conduct truly responsible?

This is being played out against a backcloth of inequality, inequity, injustices on Europe’s continent, as well as the global challenges of conflict, poverty and climate change.

In CSR, we’ve learnt not to “blame” companies for what is bad in the world, but to recognise that business needs to be a key stakeholder itself, if Europe and the world are to have any hope that our major challenges can be met.

The stakes are high for business. Given the very hot debate around the EU-US “TTIP” trade negotiations, let us understand that a commitment to high corporate labour and environmental standards is a necessary part of maintaining public support for an open trading agenda for Europe. CSR is key to helping us demonstrate this.

So what can we achieve in the next five years?

Efforts must continue to ‘scale-up’ CSR by affirming CSR amongst more and different European companies, to recognise the responsibility those companies have worldwide by placing a bigger emphasis on the global supply chain and by further matching up European initiatives with global standards.

It is absolutely essential we deal with the traumatic impact youth unemployment is inflicting on our societies, and the enormous social consequences if we preside over an era which produces a ‘lost generation,’ alienated and disenfranchised from the values we like to call common European values.

The ‘youth jobs guarantee’ shouldn’t just be the title of an EU policy, but part of the CSR challenge for every major company in Europe. 

Europe can engage in “CSR diplomacy” abroad, winning new adherents to UN and OECD Guidelines, championing the concept of “integrated reporting” and specifically negotiating a new ‘Sustainable Development Goal’ on mandatory sustainability reporting, as proposed by the UN Secretary-General. Transparency remains the key driver for CSR.

On the landmark Guiding Principles on Business and Human Rights agreed in the United Nations (UNGPs), it was Europe which created an idea of implementation through governmental national action plans. When last Autumn President Obama committed the United States to its own plan, it was a very significant endorsement of Europe’s approach, as well as to the importance of implementing the UNGPs themselves.

I welcome the fact that the Commission’s DG JUST is contributing to new proposals for “Access to Remedy” for victims of corporate abuse.  Developments in the UN Human Rights Council are moving towards an agreement on extraterritorial litigation in the case of egregious corporate violations of human rights. This is not just about the deathly Bangladesh factory collapse at Rana Plaza a year ago, but about the continuing failure to prosecute the mass chemical poisoning at Bhopal in India thirty years ago. How long before action is agreed?

On supply chains, Europe has already been part of drawing up guidance of how companies can ensure responsibility amongst their suppliers in oil, gas and extractive industries, and can do so in the coming period in relation to the food we eat and in the clothes we wear. Indeed a legislative proposal on how European companies can practice what is called ‘due diligence’ in relation to their supply chains, could be considered in the five year time horizon.

Furthermore, CSR brings to centre stage the key global debate about short-termism versus long-termism and about the need for long-term investment, championed by the Juncker Commission.

Today it is evident that too much of the system continues to reward short-termism. The answer will only come by reshaping the whole structure of remuneration across markets, to incorporate social and environmental goals. Financial and non-financial standard-setters and regulators must be brought together in these efforts.

Otherwise we will be making the very same mistake those American banks did – pursuing short-term gain and believing we can pass over long-term risk to someone else, at no cost to ourselves. And look what happened next?

And this is not just about trillions managed by big investment companies or sovereign wealth funds.  It is at the same time about advancing socially responsible investment and recognising that all of us who save for our pensions should be able to know and to make choices to be responsible investors too.

As well as current transparency proposals in parliament on conflict minerals and on shareholder rights, the Commission is already preparing proposals for country-by-country reporting on taxation paid by companies and rightly so given that tax justice represents such a touchstone issue in European public opinion.

Meanwhile future European action must reflect that companies as well as governments are battling in this new digital age, on how to protect privacy and freedom of expression on the one hand, but to avoid complicity in abuses connected to online child sexual abuse, terrorism and conflict on the other.

Overall a truly visionary approach from Europe could start to address some important questions about the very purpose of the corporation.

I have learnt that the concept of ‘fiduciary duty’ – exclusively maximising profits to shareholders – is a norm rather than a requirement of company law.

Perhaps Europe’s corporate governance rules should learn from the CSR debate by redefining this duty, to take account of different stakeholders and of wider goals?

After all, ‘fides’ is Latin for ‘trust’ and it is the loss of trust which, for many, corporate social responsibility has been intended to address. 

 

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