It may seem incredible that anyone can continue arguing that corporations should not be responsible for their impacts on wider society. Yet that was effectively the argument put forward by some European Union member states last week when they attempted to block the EU legislation on non-financial reporting for large companies, writes Richard Howitt.
Richard Howitt MEP is the opinion rapporteur on the draft EU directive on non-financial reporting and European Parliament rapporteur on Corporate Social Responsibility.
This week in Brussels, Governmental representatives meet (in "Coreper"), to take stock of negotiations on the European Commission proposal on Non-Financial Reporting by companies.
Something I first proposed personally more than ten years ago, this is no dry, technical debate simply about company law, but the European vehicle through which many in companies as well as in wider society have chosen to advance the cause of sustainable and socially responsible business – business which respects human rights.
It may seem incredible to non-specialists in the light of the financial crisis that anyone can continue to argue that corporations should not be responsible for their impacts on wider society – or that those impacts are not material to a company’s business plan.
Yet that was effectively the argument put forward by some European Union Member States at the Council Working Group last week, when they attempted to block the EU legislation on non-financial reporting for large companies.
As I've written in EURACTIV before, the proposals on the table were reasonable and struck a fair balance between promoting business transparency without impairing business competitiveness.
I am pleased to say as one of the Opinion Rapporteurs for the draft legislation, that MEPs had made valuable improvements to the Commission’s original proposal, without shifting the balanced nature of the proposal.
Indeed our suggestions to support businesses in identifying risks in their businesses, including in their supply chains, have become the norm in other related global standards where I represent European interests, specifically the move towards "Integrated Reporting" championed by the international financial community, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines on Multinational Enterprise.
The legislation proposed by Commissioner Barnier doesn't buck this international trend, nor in reality does it lead it. Instead, if anything, it represents "catch-up" by the European Union in the fast-moving global debate about responsible business.
In Europe, the proposals themselves have been backed by many in business, human rights campaigners and environmental groups. They have attracted broad support from academia, from trade unions and consumer groups too.
Major European companies such as IKEA, Unilever and Carrefour have all given their public support, as has the "Global Reporting Initiative," representing some 6,000 companies worldwide who currently report voluntarily on sustainability.
Indeed I had the privilege of being at Davos this year, where a group of leading entrepreneurs, including Sir Richard Branson, Arianna Huffington and Mo Ibrahim, intensified the debate, calling for a rethink on the way we do business. They called it Plan B and it is attracting support from many different directions.
In Brussels, just last week I had the privilege of hosting an event in the European Parliament on the very purpose of the corporation. It was an illuminating session that highlighted not only the limits of focusing purely on maximising short-term shareholder value, but also the already diverse notions of what a company is for in different parts of the world.
Indeed more and more people within the business community are recognising the need to view their business in more than fiduciary terms. A recent study by PWC showed that three in four CEOs agreed that non-financial reporting contributed to their long-term success.
Of course there remain some within the business community who see non-financial reporting as a burden. Some have a knee-jerk reaction against regulation of any kind. But there is little room for short-term reactions to the long-term challenges facing modern business.
Businesses that want to succeed recognise that they need to change and adapt to the demands posed by climate change, persistent inequality in the world and the dangers of instability that arise from social disintegration.
In contrast, those who refuse to see that a mandatory approach to company non-financial reporting will provide a level playing field between companies – something their much vaunted voluntary initiatives cannot provide.
Some of these dinosaurs wield considerable influence on national governments – and this perhaps explains the reluctance of some EU Member States to support legislative reform.
Those Member States seeking to remove the teeth of this legislation are still at the negotiating table and MEPs will continue to push for progress before the end of the current terms of the European Parliament and Commission.
This is a unique opportunity to move forward on the CSR agenda and support European companies to play a leading role on the global stage.
For this Government representatives meeting in Brussels this week, they have to decide whether to support 'business as usual' or to have the vision to this in the business community itself who want a 'Plan B.'