Speech Anna Diamantopoulou (EU Commissioner) about CSR

Source: EU, 17 November 2003

Anna Diamantopoulou European Commissioner responsible for Employment and Social Affairs The role of public policies in promoting CSR Address at the Presidency Conference on Corporate Social Responsibility Venice, 14 novembre, 2003
Ladies and Gentlemen,

I am very pleased to open this 3rd EU Presidency conference on CSR. We have made a journey, in the literal and in the figurative sense. We have travelled from Brussels to Helsingør to Venice, and we have moved from "what is CSR?" to "why CSR?" to "how to promote and implement CSR?"

We are meeting in a city, which, apart from a rich culture, has a reputation for successful business. As Europe’s most powerful financial centre in the fourteenth century, Venice was home to the first entrepreneurs and traders to move away from the traditional family-run business towards joint ventures in Italy and abroad. They also pioneered modern day accounting.

I am not certain that CSR was a concept in the Venetian business world of the thirteen hundreds, but their thriving business and trade owed much to good governance and the ability to adapt and evolve with the times.

The challenge

The theme of Corporate Social Responsibility continues to grow in importance. Sustainable development and business ethics are now high on the public policy agenda.

For business, CSR is enlightened self-interest. Companies exist to make a profit and good CSR pays. Credibility and trust, the focal point of any CSR strategy, are also the key to hiring and retaining the best and brightest staff, and the key to branding which consumers and investors can identify with. It is a clear ‘win-win’ strategy, which goes straight to the ‘bottom line’.

Until quite recently, companies – especially large companies appeared to be all-powerful. They seemed able to use their marketing, advertising and public relations clout to achieve whatever commercial goals they chose. However, recent financial scandals in big-name businesses, as well as widespread questioning of our global economic system, have served to underline the fragility of such assumptions.

For the public at large, CSR plays another role. Trade liberalisation and technological change have opened up unprecedented business opportunities over the past twenty years. Yet the speed of change brings concern about globalisation, economic restructuring and the ever-growing power of multinationals. If corporations demonstrate a sense of social and environmental responsibility, they help to ease the transition towards the new economic order.

For government, the task is to make sure that the process of global economic and social change is managed properly and fairly. If CSR can assist this change, all the better.

CSR can contribute to Europe’s reform goals of full employment, better jobs and fewer poor by 2010, agreed at the Lisbon Summit three years ago. But CSR can also play a role in developing better global governance and improving living and working standards worldwide.

Let me give you a simple but striking example of why government is interested in CSR. The ILO estimates that two hundred and fifty million children are currently working world wide in dangerous or degrading conditions. We have little influence over this tragedy if the countries concerned have not ratified or fail to apply the ILO instrument outlawing such practices. With proper CSR, we can at least ensure that European companies commit to respecting children’s rights in all their global operations and thus send out a signal to others.

EU strategy

Since EU leaders appealed to companies’ sense of social responsibility at the Lisbon Summit, the European Commission has followed up by launching wide-ranging consultation and a policy paper on CSR. This policy paper is the EU’s strategy for CSR. A key part of this strategy is to build a partnership and to develop a European CSR framework.

The EU strategy pinpoints three priorities :

To promote CSR practices

To ensure the credibility of CSR claims

And to ensure coherence between CSR objectives and related public policies
The first priority is to promote the uptake of socially responsible practices among enterprises. Despite wide public debate in Europe about CSR, we are still faced with the challenge of getting companies to do something, in particular SMEs. Surveys indicate that lack of awareness, in particular of the relevance and benefits of CSR for every business, is a major obstacle to the uptake of CSR.

National governments are taking various initiatives to promote CSR in their policies and the Commission is facilitating the exchange of information about national polices in support of CSR. The simple truth is : if business is not ‘on board’ for CSR, there can be no CSR.

The second priority is to ensure that CSR claims are credible. CSR must make a genuine contribution to sustainable development and not remain a simple publicity stunt. For this we need benchmarks, which properly capture the goals, which we wish to pursue, be they social or environmental. Otherwise the EU would risk providing political sponsorship to ineffective CSR practices and behaviour.

No benchmarks are any good unless two conditions are fulfilled : they must measure something worth measuring, and businesses must actually end up using the benchmarks. This implies that we need consensus on :

the scope and content of CSR benchmarks ("what do we measure with benchmarks?"),

the benchmarking method ("how do we measure performance?"), and on

certification procedures ("what minimum qualifications are required to measure CSR performance?").
The third priority is the compatibility of CSR policies with other public policies. First, let us remember that, although CSR is of public interest, it is not a public policy at all. It was, and is, a business initiative to achieve ‘win-win’ goals with all stakeholders. This distinction is important because it underlines that it is the role of government, not business, to design and deliver public policy. Business may of course be contracted in to deliver public goods and services such as in the power and health sectors, but ultimate responsibility always remains with government. Government has an ‘obligation of result’.

It is clear that CSR cannot replace an absence of public policy. It is the wrong tool for the job. We no longer live in an era where delivery of basic public social and environmental goods relies on the unilateral largesse and charity of big business. That is government’s job. The role of CSR is to provide a properly managed framework for business and stakeholders to go beyond baseline social and environmental standards in pursuing the core business activity of the company in question, whether this is manufacturing steel tubes or providing financial advice.

The growing importance of CSR in the market place and in public policies raises a number of specific compatibility issues. One such issue is the legal status of CSR benchmarks – labels, marks, certificates, ratings – and their effect on the internal market. And increasingly, CSR criteria are included in consumer protection rules, in public procurement rules, in the provision of grants or tax incentives. Despite the best intentions, this plethora of rules throughout Europe carries the risk of "accidental" new barriers to trade in the EU’s internal market ….which may be open to challenge by my colleagues Commissioners Bolkestein and Monti.

CSR has clear internal market implications, which call for greater convergence, transparency and credibility of CSR instruments. We need rules of the game for CSR as it grows from being a niche issue to a fully mainstreamed approach to better business management. This should not come as a surprise, as companies themselves are calling for rules of the game. Let me just quote what a very well known sports shoe producer [Nike] stated publicly last June : All stakeholders should have the benefit of common performance criteria through company reports and [We] believe that there needs to be a level playing field, which can only be accomplished if there are standard and universally applied processes for accountability and reporting. You cannot get clearer than that.

The CSR Forum

In setting out the objectives and challenges for CSR, I have already – indirectly – set out the reasons why the Commission chose to set up a European Multi-stakeholder Forum on CSR. The EU CSR forum seeks to facilitate exchange of experience and good practice with a view to establishing common guidelines for CSR tools such as codes of conduct, reporting, labelling and socially responsible investment. The Forum draws together business, trade unions and civil society.

Yesterday I chaired the mid-term review of the EU CSR Forum. Half way through its mandate, it was time to review the progress achieved in the Forum. The Forum had undertaken a challenging agenda and agreement on the "what, how and by whom" of CSR will not be easy. However, I am confident that the Forum will make an important and innovative contribution to optimising companies’ CSR efforts , not only in the EU but beyond our borders. The Commission will be issuing a policy paper based on the Forum’s findings before this Commission completes its term of office in October 2004.

In conclusion, CSR is not only a management tool for business. It can be a powerful ally of public policy in the social and environmental field, both within our borders and beyond. Business cannot afford to ignore it, but nor can government. The Commission has committed itself over the long term to promoting CSR. I call upon all governments to do likewise.

Thank you for your attention. And my best wishes for a successful event.