Howitt: Not only one approach to corporate responsibility

Richard Howitt small.jpg

The debate on voluntary versus mandatory reporting is dead and the EU proposal on Corporate Social Responsibility to be unveiled today by the European Commission, after years of deadlock, goes in the right direction, said MEP Richard Howitt in charge of the dossier for the European Parliament in an interview with EURACTIV.

Richard Howitt is a UK S&D MEP and is European Parliament Rapporteur on Corporate Social Responsibility, Member of the Advisory Board of the Global Reporting Initiative, Friend of the OECD Guidelines on Multinational Enterprise and Ambassador for the Prince of Wales Accounting for Sustainability Project

He was speaking to EURACTIV's Managing Editor Daniela Vincenti

The Commission is presenting its new proposals on Corporate Social Responsibility (CSR). Do you think the paper being presented today is ambitious enough and can restore trust in business ethics, especially after the financial debacle of the past years?

Public trust in business has taken such a massive hammering over recent years with the financial crisis that it is vital that we start to rebuild it.  We all know that banks have joined a long line of oil companies, textile manufacturers and food producers accused of shielding irresponsible business behaviour behind the so-called 'corporate veil'.

But we know too some European companies have attempted to be leaders in promoting transition to socially and environmentally responsible business behaviour. 

If the irresponsibility that helped create today's economic crisis can be turned in to a new focus on positive responsibility for all business, then perhaps this can be one good that comes out of the crisis itself. The political momentum behind this drive is clearly illustrated by that fact that today's announcement is coming jointly from Commissioners Barnier, Andor and Vice President Tajani.  

I have been critical of the Commission in the past for being too slow to act in this area but today is a real opportunity for Europe to take leadership I will be working in the Parliament to make sure we grasp this opportunity with both hands. 

Previous attempts to define CSR policies have stumbled over too many blocks—notably having mandatory versus voluntary rules. Do you think we have overcome this debate?

Yes, absolutely, it's a dead debate and let's please finally bury it today! People who think that there is just one approach or the other are wrong, what we are looking at today is the EU adopting a "smart mix" of regulatory and voluntary approaches.

It is an argument that has been won in the debate about Business and Human Rights in the United Nations where it has full support of the major business organisations. Today is a water-shed moment for Europe and European business to do the same.

Look for example at Denmark where they changed the law in 2008 to say that the 1100 largest companies must report on their Environmental and human rights impacts or else be able to explain why they have not. This is precisely an example of the "smart mix" but is one which in the first year alone yielded over 97% compliance.

It's also important to say that in the consultations carried out in the lead up to the announcement today it has  been companies themselves who have along with NGOs, consumers and investors groups been looking for clarity on the standards of behaviour and transparency which should be expected.

However in the European Union's Annual Human Rights Report there is a welcome reference to the European Commission's own research on governance gaps at the EU level that arise out of the UN Framework on Business and Human Rights. I hope in promoting national implementation plans by member states, the EU itself will not neglect the follow-up itself. 

What do you think are the real advances in the new proposal?

I've pressed for the Communication to update the definition of CSR, to provide a strong focus on implementation of global CSR standards by European enterprises and making the way for new proposals for reporting of social, environmental and human rights impacts by business.

Overall, I hope we will see unveiled today a whole new and more direct approach to CSR where the Commission are saying clearly to companies that there is an expectation for many more of them to have a clear plan at the core of the business to really integrate CSR into their business strategies.

In the Parliament, I will be working with colleagues across the parties to strengthen the Commission's draft just like we did with the last Communication in 2006, and I expect this to be a productive debate which can also contribute to determining the way forward.

The goal of this new EU approach must be to maximise the shared value for owners and society at large and also to ensure that companies carry out the necessary due diligence to identify, prevent and mitigate adverse impacts. 

Have we gone beyond the PR exercise as some called CSR process back in 2004-2005? 

The fact that the three European Commissioners responsible for Employment, Industry and the Internal Market are unveiling this new responsible business package at the same time as the Euro Crisis is the subject of EU Summits shows clearly that corporate social responsibility is seen as a core part of the solution. It is increasingly the mainstream business view that CSR is a key part of the competitiveness of a company not just a glossy corporate report.

This process is being driven by the customers and investors who want to know the full list of challenges, opportunities and threats which face companies. The UN Human Rights Council, the OECD, the UN Principles for Responsible Investment and even the Prince of Wales through his Accounting for Sustainability Project are convinced that we need clearer standards and guidance for companies and states and today the EU is reinforcing its own name to that list.

But let's also not forget as consumers that CSR reporting is a key reputational tool for companies and today more than even in the world of ultra fast news, when companies are more transparent about how they operate it provides consumers, shareholders and investors with confidence. I am active on Twitter and Facebook and we all know that the new power of social networks and their amplifying effects on good and bad news only brings into sharper contrast the focus on reputation.

Corporate Reporting is at the heart of transparency and I am working with the International Integrated Reporting Committee (IIRC) and the Global Reporting Initiative (GRI) to raise this both at EU level as we have seen today and also beyond at the G20 level so that we can contribute to the goal of sustainability being fully integrated with company financial reporting worldwide by 2020. 

Do you think new EU legislation on climate and environment adopted in the last 5-6 years can push CSR policy debate further towards a greener agenda and serve Europe 2020 strategy? 

Yes, the whole aim of promoting corporate social responsibility is to create better conditions for sustainable growth and employment. It's about moving away from the short term profit grabbing culture which has left us where we are today.

For example a global company like Coca Cola cannot ignore issues of water supply linked to global warming when they are at the core of the long term future of their business.

No water equals no coke! Environmental impacts are clearly material to the long term operations of companies so companies should spell them out. Sustainability and CSR is at the very heart of the Europe 2020 Strategy.  

In the Parliament, I will be working to ensure that we tie all the tools together to ensure that Europe is working in coordination with business to promote the sustainablility agenda. On climate change governments are saying to business that we can't do it without you. We reject simply letting the argument be dominated by past wrongs, and instead focus on how we can work together in the future to meet new challenges. It is a refreshing change that I hope we can foster for the CSR debate as a whole.

To read a shorter version of this interview, please click here

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