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Responsible business: a key to competitiveness

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Socially responsible businesses play a crucial role in achieving sustainable economic growth through generating consumer confidence and positively contributing towards society’s well-being. Supporting responsible entrepreneurship is an EU priority, as a recently adopted package of measures demonstrates.

Some European enterprises are world leaders in the field of corporate social responsibility (CSR). Many more instinctively understand the importance of CSR, but nevertheless find it difficult to fully integrate social and environmental concerns into their operations and business strategies. Only 15 out of 27 EU Member States have national policy frameworks to promote CSR. This means that the benefits that CSR can bring to business and the rest of society often remain untapped. 

Everyone wins with CSR

For this reason, the European Commission’s Communicationpdf(137 kB) Choose translations of the previous link  on a renewed EU strategy for Corporate Social Responsibility, sets out to show how enterprises can benefit from prioritising social and environmental concerns while, at the same time, contributing effectively to society. The Communication, which follows up on the Single Market Actpdf, defines CSR as “the responsibility of enterprises for their impacts on society”. The aim is to maximise positive impacts and to minimise negative impacts.

According to the Commission, businesses “should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders”. But this does not mean all companies need a formal process. Indeed the Communication points out that for most SMEs the CSR process is likely to remain informal and intuitive.  Such a strategy can bring benefits in terms of risk management, cost savings, access to capital, customer relationships, human resource management, and innovation capacity. Encouraging more social and environmental responsibility from the corporate sector is also important at a time when the economic crisis has damaged consumer confidence and levels of trust in business.

Key elements of the strategy

The new policy puts forward an agenda for the period 2011-2014, covering a number of areas. These include enhancing the visibility of CSR, disseminating good practices and launching a public debate on the role and potential of enterprises. The European Commission also wants to work with companies and other stakeholders to develop guidance on human rights,  and to leverage EU policies in the fields of consumption, investment and public procurement in order to strengthen market incentives for responsible business behaviour.

Improving company disclosure of social and environmental information and further integrating CSR into education, training and research are also prioritised. The Communication emphasises the importance of national and sub-national CSR policies, and invites EU Member States to present or update their own plans for the promotion of CSR by mid-2012.

Globally responsible and competitive

The new definition of CSR is consistent with internationally recognised CSR principles and guidelines, such as the OECD Guidelines for Multinational Enterprises, the UN Global Compact and the UN Guiding Principles on Business and Human Rights. The European Commission believes that this should provide greater clarity for enterprises, and contribute to greater global coherence in the expectations placed on business, regardless of where they operate.

The European Commission will soon come forward with an operational proposal to monitor the policy commitments made by European enterprises with more than 1 000 employees to take account of internationally recognised CSR principles and guidelines. 

Transparency and accountability

The CSR Communication is part of a larger package, which also includes legislative measures to improve accountability and promote sustainable business among multinationals. For example, the European Commission has proposed a system of Country-by-Country Reporting (CBCR) designed to increase transparency within the extractive and logging industries.

This system would apply to EU privately owned large companies or firms listed in the EU which are active in the oil, gas, mining or logging sectors. CBCR presents financial information for every country in which a company operates, rather than a single set of information at a global level. Reporting taxes, royalties and bonuses that a multinational pays to a host government would show a company's financial impact in host countries, thus encouraging more sustainable business through strengthening accountability.

By proposing to amend the Accounting Directives (78/660/EECpdf and 83/349/EEC), the European Commission also aims to reduce the administrative burden for small companies. In addition, simplifying the preparation of financial statements would make these more comparable, clearer and easier to understand, and could save SMEs in the region of €1.7 billion per year. Furthermore, under the proposed revision of the Transparency Directive (2004/109/ECpdf), listed companies, including small and medium-sized issuers, would no longer be obliged to publish quarterly financial information. This would contribute to further cost savings and help to discourage short-termism in the financial markets.

"This package of measures is in the interests of both enterprises and of European society as whole,” said Antonio Tajani, European Commission Vice-President in charge of  industry and entrepreneurship. “It reduces administrative burdens on small and medium-sized enterprises, and sets the conditions for a strong, dynamic social market economy in the medium and long term."

Next steps

The European Commission plans to work with Member States, enterprises and other stakeholders to monitor progress periodically. A review meeting is scheduled for mid-2014, and a report on the implementation of the agenda will be published prior to this.
Another goal is to disseminate good practice through the launch of a European award for CSR, which will recognise successful partnerships. Multi-stakeholder CSR platforms will also be established in a number of relevant industrial sectors. This is seen as crucial, given that CSR issues are often very sector-specific. Both of these initiatives are scheduled for 2013.

Contact

CSR Team
Directorate-General for Enterprise and Industry

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