ICC comments on EU Commission communication about CSR

Source: ICC, 9 July 2002

On behalf of the ICC member companies in all parts of the world, ICC comments with some serious concerns regarding recent developments in the ongoing debate within European Union institutions on the subject of corporate social responsibility (CSR). ICC members feel it is important for you and your colleagues in the Commission to be aware of these concerns in advance of the Commissions forthcoming follow-up Commission Communication on the Green Paper on CSR.
ICC firmly believes that good corporate practices are spread more effectively by example, rather than by prescriptive government codes and regulations. Voluntary business principles have the advantage of bridging cultural diversity within multinational enterprises and offering the flexibility to tailor solutions to particular conditions both at a domestic and at a global level. The emphasis should therefore be on individual initiatives and on a process of gradual improvement rather than judgement on any absolute standard, given the diversity of the business community. Voluntary approaches minimize competitive distortions, transaction costs associated with regulatory compliance, and will continue to inspire many companies to go beyond the regulatory baseline.

ICC considers that corporate responsibility is a global issue that needs to be approached at a global level. Any European approach must be complementary to and supportive of broader international initiatives in this area. To this end, a European approach should not duplicate or overlap with the various initiatives already undertaken at global level, or attempt to promote a European framework as a model for the rest of the world — especially not through measures of an extraterritorial nature such as some of those recommended in the EU Parliament resolution. This would likely prove unacceptable to other parts of the world with different cultural, legal and regulatory traditions, and in particular to the developing world where this might be seen as back door protectionism.

It is especially important not to follow such a paternalistic approach at a time when many efforts are underway — including several supported by the European Union — to encourage companies operating in developing countries to take voluntary corporate initiatives in the social, environmental and other fields. Such an approach would only undermine the effectiveness of ongoing international initiatives, and impose additional and possibly conflicting requirements on companies that are already faced with a growing number of government-mandated corporate responsibility codes and initiatives.

The EU already has a substantial body of national and EU-wide regulations that provide high standards of environmental and social protection, and a mechanism for developing these regulations and their implementation in detail as needed. More EU regulation on corporate social responsibility in a broad sense may discourage ongoing efforts by companies to engage in voluntary corporate responsibility initiatives, particularly those of small and medium sized companies. As the existing regulations are of a high standard, and as all voluntary initiatives by their nature go well beyond the regulatory baseline, ICC believes there is no need to further regulate corporate social behaviour within the EU.

The European Commission should seek to define the limits of corporate social responsibility, explain what it is but also what it is not, and clarify the respective responsibilities of other actors in society, in particular those of governments. Companies, for their part, should not be expected to take on functions that are properly the preserve of governments. For example, companies should not be expected to make up for the lack of political will of some governments to implement existing international standards and conventions that they have undertaken to observe.

The main objective of the EUs approach to corporate social responsibility should be to encourage individual voluntary corporate initiatives by companies and promote best corporate practices, in the light of the different circumstances of those companies and the environments in which they operate.

As you know, ICC strongly supports voluntary corporate initiatives by companies in the social, environmental and other fields. Responsible entrepreneurship is the driving force for sustainable economic development and for providing the financial, managerial, and technical resources to meet social and environmental challenges. ICC and its member companies are already demonstrating their commitment to social and environmental progress through actions taken by individual companies. Furthermore, ICC and its members are making constructive contributions to various broad international initiatives, including the United Nations Global Compact and the OECD Guidelines for Multinational Enterprises.

In light of the above and at this crucial time when the Commission is considering its follow-up Communication on the Green Paper, ICC wishes to express its apprehension about some of the proposals contained in the European Parliament resolution on CSR adopted on 30 May and that seem to be gathering interest.

These specific recommendations are the following:
· requirements for companies to publish annual social and environmental reports, with independent verification;
· the creation of an EU Multi-Stakeholder CSR Forum, where companies can register their voluntary codes of conduct;
· support for linking public sector financial support incentives (i.e. export credits) to adherence to voluntary standards (such as the OECD Guidelines for Multinational Enterprises);
· annual European Parliament hearings on European enterprises operating in developing countries;
· the inclusion of clauses in trade agreements on human rights, sustainability, gender impact assessments etc.
· the establishment of a public contracts tendering blacklist for guilty companies; and
· the creation of a legally binding framework with sanctions for companies that contribute to conflict.

ICC members, and especially ICC national committees in EU Member States, urge the European Commission to reject these proposals, which would be extremely harmful to the European Unions laudable objective of promoting corporate social responsibility.

With the hard copy of this letter to follow by post, I attach for your information an ICC paper entitled Business in society: making a positive and responsible contribution that was released on 7 May at ICCs 34th World Congress in Denver and which we have shared with several of your Commission colleagues. I trust that you will find the paper useful in the context of the forthcoming deliberations of the European Commission on these important issues.