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Green Paper on corporate social responsibility

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1) OBJECTIVE

To launch a wide debate on how the European Union could promote corporate social responsibility on a European and International level, in particular, on how to make the most of existing experiences, to encourage the development of innovative practices, to bring greater transparency and to increase reliability in evaluating and validating the various initiatives undertaken in Europe.

2) ACT

Green Paper - Promoting a European framework for Corporate Social Responsibility [COM(2001) 366 - Not published in the Official Journal].

3) SUMMARY

Background

Corporate social responsibility can make a positive contribution to the strategic goal decided by the Lisbon European Council: "to become the most competitive and dynamic knowledge-based economy in the world". A European approach to corporate social responsibility forms part of the broader context of various international initiatives, such as the United Nations Global Compact (2000), the International Labour Organisation's (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (1997-2000), or the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises (2000). While these initiatives are not legally binding, the European Commission is committed to the active promotion of the OECD guidelines. Observance of the core ILO labour standards (freedom of association, abolition of forced labour, non-discrimination and elimination of child labour) is central to corporate social responsibility.

Corporate social responsibility

Being socially responsible means not only fulfilling the applicable legal obligations, but also going beyond compliance and investing "more" into human capital, the environment and relations with stakeholders. The experience with investment in environmentally responsible technologies and business practices suggests that in going beyond legal compliance companies can increase competitiveness and it can have a direct impact on productivity.

Corporate social responsibility should nevertheless not be seen as a substitute to regulation or legislation concerning social rights or environmental standards, including the development of appropriate new legislation. In countries where such regulations do not exist, efforts should focus on putting the proper regulatory or legislative framework in place in order to define a level playing field on the basis of which socially responsible practices can be developed.

Whilst corporate social responsibility is so far mainly promoted by large or multinational companies, it is relevant in all types of companies and in all sectors of activity, from small and medium-sized enterprises (SMEs) to multinationals. Certain SMEs already assume their social responsibility, particularly through community involvement. Worker cooperatives and participation schemes, as well as other forms of cooperative, mutual and associative enterprises structurally integrate other stakeholder interests and take up spontaneous social and civil responsibilities.

Corporate social responsibility: the internal and external dimensions

Under increasing pressure from non-governmental organisations (NGOs), consumer groups and now also investors, companies and sectors are increasingly adopting codes of conduct covering working conditions, human rights and environmental aspects, in particular those of their subcontractors and suppliers. Surveys have shown that consumers not only want to buy good and safe products, but they also want to know if they are produced in a socially responsible manner. In recent years, investors have seen socially responsible investing (SRI) in the social domain and investment in environmental protection as a good indication of sound internal and external management. Socially responsible practices can thus help open the way to reconciling social development with improved competitiveness.

Within the company, socially responsible practices primarily involve investment in human capital, health and safety, and managing change. They also cover environmentally responsible practices relating to the management of the natural resources used in production. In addition to these internal aspects, companies also contribute externally to their local communities, by providing jobs, wages, services and tax revenues. On the other hand companies depend on the health, stability, and prosperity of the communities in which they operate. In this sense, corporate social responsibility involves a wide range of stakeholders: business partners and suppliers, customers, public authorities and NGOs representing local communities, as well as the environment.

In a world of multinational investment and global supply chains, corporate social responsibility must also extend beyond the borders of Europe. One of the external dimensions to corporate social responsibility is that of human rights, particularly in relation to global production activities. Despite the existence of international instruments such as the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and the OECD Guidelines for Multinational Enterprises, human rights remain a very complex issue presenting political, legal and moral dilemmas.

Integrated management of social responsibility

Companies' approaches in dealing with their responsibilities and relationships with their different stakeholders vary according to sectoral and cultural differences. In general, companies tend to adopt a mission statement, code of conduct, or credo where they state their purpose, core values, and responsibilities towards their stakeholders. These values are then translated into action across the organisation, adding a social or environmental dimension to their plans and budgets in order to carry out social or environmental audits and set up continuing education programmes.

Many multinational companies are now issuing social responsibility reports. While environmental, health, and safety reports are common, reports tackling issues such as human rights or child labour are not. In order for these reports to be useful, a global consensus needs to evolve on the type of information to be disclosed, the reporting format to be used, and the reliability of the evaluation and audit procedures.

The Green Paper invites public authorities at all levels, including international organisations, enterprises from SMEs to multinationals, social partners, NGOs, other stakeholders and all interested individuals to express their views on how to build a partnership for the development of a new framework for the promotion of corporate social responsibility, taking account of the interests of both business and the various stakeholders. Enterprises need to work together with public authorities to find innovative ways of developing corporate social responsibility.

4) IMPLEMENTING MEASURES

5) FOLLOW-UP WORK

Last updated: 05.07.2005
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