How do you make corporations act "responsibly"?
Question is: How do you pull this off? The European Commission recently rejected using regulations to prod corporate social responsibility (CSR) in its newly published white paper on the subject.
The EC does not at present intend to impose responsible behavior on companies by regulation or directive. It rejects mandatory social and environmental reporting, says the EC will not introduce compulsory social labeling of products, and does not propose a Europe-wide regulation requiring pension funds in member states to disclose any socially responsible investment policies they may have.
Instead, the Commission wants to increase knowledge of the business case for CSR, to develop means of sharing best practices, to promote CSR management skills, and to introduce an ethical dimension to its own procurement policies.
Sounds like the path OSHA has chosen to take in the U.S. - use best practices, business arguments, and training and promotion activity to get companies to do the right thing.
In another OSHA-like move, the EC is setting up a "multi-stakeholder forum on CSR," comprising some 40 representatives from businesses, trade unions, consumer groups and non-governmental organizations. The forum will:
- direct EC efforts to put the business case for CSR to large and small companies;
- consider how best to achieve convergence among codes of business conduct;
- strengthen research on CSR;
- attempt to use the European Social Fund to promote CSR in management training;
- agree to guiding principles for voluntary social labeling schemes.
The EC will review the forum's progress in 2004.
On reporting, the white paper repeats an earlier EC invitation to companies to include social and environmental information in their annual reports, but leaves it at an invitation only.
Malcolm Guy of EQ Management, a consulting firm, says: "Is this document a 'fudge,' or is it the beginning of a coherent European commitment to best business practice? The reluctance to legislate will clearly disappoint unions and others who are skeptical of the power of the market as a driver of CSR.
"The Commission's premise that CSR is, by definition, a voluntary activity based on a strong business case, is not a convincing foundation for policy development. In restricting the scope of the white paper to this definition some major legislative and regulatory blind spots emerge, most importantly the role of effective and credible governance.
"There is obviously much debate to be had before the final recommendations are published in 2004. The framework laid out is by no means perfect, but is probably more complete than many had expected."