Post published at Diario El País, Planeta Futuro, 3rd of July, 2014
Europe’s contribution to CSR over the last 14 years has decisively helped to consolidate this movement
Now that that there is a lot of talk, and not always good, about Europe, the writers of this article thought that it would be appropriate to take a trip through what the European Union has given Corporate Social Responsibility (CSR) and what it will give it in the future. Simply put, we should be aware that Europe’s contribution to CSR in the last 14 years has decisively helped to consolidate this movement.
Firstly, a concept of CSR has come out of Europe that is generally accepted by everyone. The “Renewed EU strategy 2011-14 for Corporate Social Responsibility” defines CSR as a function that “maximises the creation of shared value for everyone” and “identifies, prevents and mitigates the possible adverse impacts” of companies in their business activity. This definition comes ten years after the “2001 Green Paper – Promoting a European framework for Corporate Social Responsibility” was published, which says that “being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing “more” in human capital, the environment and relations with stakeholders.”
For some, this issue –that of the concept– could be less important, but it is essential. This is because CSR is a figure so packed with content that it is not easy to understand, and this has generated endless debates among academics, NGOs, institutions and professionals. To understand what we are saying, there is no need to look any further than the fact that CSR encompasses such varied issues as environmental management, climate change, ethics, transparency, the ISR (domestic sustainability index, an indicator of energy sustainability), corporate reputation, human rights, diversity, social innovation, professional/personal life balance, corporate volunteering management, integration of people at risk of exclusion, social sponsorship or multistakeholder dialogue… which has not helped to make it an easy concept to grasp.
Secondly, we should also acknowledge Europe for the “comply or explain” approach, which is the foundation that supports the transparency of companies and institutions. To sum up, this approach –set out in the Directive on financial statements– is an “invitation” to companies and institutions to report certain issues that are of interest to their stakeholders and if they do not do this, they are “invited” to provide a clear and reasoned explanation of why they decided not to report one issue or another. Ultimately, increased transparency to the market can also bring, more generally, reputational benefits for companies and more legitimacy in the eyes of stakeholders and society as a whole, as outlined in the Commission recommendation of April 2014.
Thirdly, the EU has also promoted increased transparency in “non-financial reporting”, with the understanding that for some stakeholders (shareholders, investors, bondholders, partners, regulators, etc.) it is just as important to know “how much” the company earns as “how” it does it in order to make decisions. The latest EU directive on non-financial information by certain large companies states that companies with more than 500 employees that are considered public-interest entities will have to disclose, in the management report (or in a specific document, usually the sustainability report), information on risk management as regards environmental and social aspects, respect for human rights, anti-corruption and bribery issues, and sales relationships, products or services that could have negative effects.
The reason for including this information is that it could be needed in order to understand the evolution of the business, the financial results and the company situation. In other words, it involves finding instruments to generate confidence and reduce risks in investment or sales relations. In Spain, this directive could affect more than 100 companies that trade on the stock exchange and meet the criteria set out.
Fourthly, a level playing field has also come from Europe – common rules for everyone as regards CSR. Many think –and they are right– that companies operating in the common market of Europe should not have to produce a sustainability report for every EU country in which they operate. For example, in Spain it would be better for companies operating nationally to apply the same criteria deriving from the European directive on information throughout the territory. This would prevent fragmentation of the internal market and we would advance with the EU “Single Market Act”. We believe that these common rules would represent a major step forward for consolidating CSR and they would also bring clear cost savings for companies.
Finally, Europe is also promoting a multistakeholder work model to foster the interests of society and a roadmap for sustainable and inclusive recovery. The European Parliament resolution of 6 February 2013 proposes that some sectors, such as Communication and Information Technology, promote guides on CSR in the new digital world (human rights, privacy, freedom of expression, cybercrime) agreed on by all players.
Ultimately, in just over 14 years, Europe and the European Union have shed some light on all of the mantras on which CSR has been built: the concept, transparency, non-financial reporting, multistakeholder dialogue… That is the data; we’ll leave everyone to make their own assessment. In our case, we can say, without any inhibitions, that without the contribution of the EU, this function would not be what it is today.