EU commission: More CSR obligations for companies

Posted: October 28, 2011 | Author: | Filed under: Government, Law | Tags: , , , , , , | Leave a comment

Quiz question: Where is “shared value” hidden in this graph from HBR 1/2011?

Yesterday, we had a workshop with Seco and Swiss stakeholders, where we presented results of our feasibility study on a “Sustainable Trading Initiative Switzerland”. We argued in favour of a national plattform that enables that Swiss companies and public buyers learn more about sustainable trade, because in future, Swiss companies need to invest more into sustainability issues, if they want to remain competitive. At that time, I didn’t know that two days earlier, the EU commission additionally gave important political reasons for investing into CSR.

On Tuesday, the EU Commission published a 15 pages long “COMMUNICATION FROM THE COMMISSION : A renewed EU strategy 2011-14 for Corporate Social Responsibility“. Definitely, a MUST-read for all interested in the future of CSR. I will briefly sum up some important issues: The European Commission’s new strategy on corporate social responsibility (CSR), is

“part of a package of measures on responsible business (see IP/11/1238), aims to help enterprises achieve their full potential in terms of creating wealth, jobs and innovative solutions to the many challenges facing Europe’s society. It sets out how enterprises can benefit from CSR as well as contributing to society as a whole by taking greater steps to meet their social responsibility.”

The Commission now newly defines CSR as:

“the responsibility of enterprises for their impacts on society” – instead of its much criticized definition:

“a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

In the Commission’s view, companies should “have a process in place to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close cooperation with their stakeholders”. It emphasizes

  • the importance of intgrating CSR into the core business strategy,
  • creating and maximizing shared value,
  • explicit recognition of Human Rights and ethical considerations.

The German “Council for sustainable development” evaluates the new strategy as progressive. It emphasizes that the Commission plans to oblige companies more to CSR-guidelines, prohibit greenwashing and that it announced to soon propose laws that make social and ecological reporting obligatory. Obviously, corporate lobby organizations are vehemently protesting against the new plans and defending CSR’s voluntary character (look at BDA and also look at the article in the Handelsblatt). And also obviously, the CORA network on Corporate Accountability is supporting the proposal.

I have not read the agenda in detail yet, as I am off to a weekend in Montreux at Lac Lemand … but I will report more details when I am back.

In the meantime, you might read Michael Porter’s January “big idea” article in Harvard Business Review on “Creating shared value” – or watch his video on “rethinking capitalism“. I guess the EU proposal reflects on this. This picture sums up his “big idea”.

The California Transparency in Supply Chains Act

Posted: November 12, 2010 | Author: | Filed under: Government, Law | Tags: , , , , , , , | Leave a comment

The actress Julia Ormond founded the advocacy NGO ASSET, an alliance to stop slavery and end trafficing. Her campaigning aims at promoting the California Transparency in Supply Chains Act of 2010 (Senate Bill 657), which Arnold Schwarzenegger signed into law on September, 30th. Bill 657 requires larger retailers and manufacturers with over $100 million in worldwide gross receipts “to eradicate slavery from their supply chains” – by posting on their websites what policies they have in place to ensure that their supply chains are free of slavery and human trafficking. “This will increase transparency, allow consumers to get more information and make more choices and motivate businesses to ensure humane practices.”

Ormond calls upon consumers to “support businesses that are creating best practices, and can encourage them to bring the innovative business skill-set and their extensive supply chain knowledge into the mix”. “We cannot get accurate and efficient access to those victims without the consent and collaboration of the companies that influence those very supply chains.” She also suggests that “we need to set aside the naming and shaming, pointing and blaming and work together, with an open mind to understanding better the very real challenges on every side: government, corporate and personal”.

Having said this, her NGO set up an interesting campaign called chain store reaction, which looks pretty much like “naming and shaming”. It aims at ending “forced labour” – i.e. “Anyone who is forced to work without pay (beyond minimal subsistence), under the threat of violence, being economically exploited and unable to walk away” – by connecting consumers with brands. The website lists more than 700 brands – regarding apparel it shows that only 22 out of 245 brands responded to the campaign in a “good” way.

And Tony Webb of Ethical corporation argues that “Sooner or later, Uzbek cotton, if defined as slave labour based, may fall under this law.” – and he concludes: “At least 3000 companies are now going to have to raise their game on supply chain risks and tracking, or risk damaging lawsuits. I wonder how many of them are currently aware of that.”

See also the interview of Julie Ragatz, Assistant Professor of Ethics at The American College, with Chris Miller, an advisor to ASSET.

Study on legal framework on Human Rights for EU enterprises working outside EU

Posted: October 31, 2010 | Author: | Filed under: Law | Tags: , , , , , | Leave a comment

The University of Edingburgh (Daniel Augenstein) prepared a study for the EU Commission (“Enterprise and industry”) called “Study of the Legal Framework on Human Rights and the Environment Applicable to European Enterprises Operating Outside the EU“. Its purpose is defined as follows:

“to ‘analyse the legal framework on human rights and the environment applicable to European enterprises operating outside the European Union’. The study aims at complementing the UN Framework (by Ruggie) by providing an overview of European and EU Member State law relevant to human rights and environmental protection in relation to European corporations operating outside the European Union, including pertinent international agreements and general international law. The study’s focus on the European legal framework implies that it is predominantly concerned with the 1st and the 3rd pillar of the UN Framework.”

The study identifies three patters of corporate human rights or enviornmental abuse outside the EU:

  1. Abuses committed by subsidiaries or contractors of European corporations. One consequence is that “some European companies may benefit from the operations of their third-party subsidiaries and contractors, while not being held directly responsible”.
  2. “Third-country victims can encounter significant obstacles in obtaining effective redress both in the third country and in the European Union”.
  3. “The States in which subsidiaries and contractors of European corporations operate and/or EU Member States from which European corporations operate are often at least indirectly involved in corporate abuses of human rights and the environment.”

It identifies two challenges to legal reform:

  1. “… international human rights law and international environmental law generally do not directly impose obligations on MNCs to protect human rights and the environment”.
  2. “… under an international legal regime that attributes jurisdiction primarily on the basis of territory, the exercise of extraterritorial jurisdiction to protect human rights and the environment often encounters legal and political obstacles”.

The following quotes just highlight some findings from the executive summary that seemed most relevant for this blog:

  • The European Union and the EU Member States do not always make full use of existing legal opportunities to protect human rights and the environment in relation to European corporations operating outside the European Union.
  • because State measures in these areas are primarily geared towards liberalising trade and promoting investment, States often do not (fully) realise or utilise their potential to protect human rights and the environment through trade law, investment rules, and related legal measures. This can lead to substantial legal and policy incoherence and gaps in protecting human rights and the environment, which often entails significant negative consequences for victims, corporations and States themselves.
  • two main ways in which the European Union and the EU Member States can protect human rights and the environment against extraterritorial corporate through trade law: first, trade restrictions that prevent corporations from exporting or importing goods harmful to human rights and the environment; and second, free trade agreements and conditions imposed upon preferential trade under preference regimes that aim at ensuring human rights and environmental protection in third countries in which European corporations operate.
  • Labelling schemes, such as the EU voluntary ecolabel award scheme, can encourage European corporations to control and prevent negative human rights and environmental impacts of their third-country subsidiaries and suppliers. One way to sanction corporate non-compliance with requirements of labelling schemes in which they participate … is through the medium of existing rules dealing with commercial practices and misleading advertising.
  • Public procurement provides another opportunity for the European Union and its Member States to protect human rights and the environment in relation to European corporations operating outside the European Union. In particular, public procurement can set standards that apply also to third country subsidiaries and suppliers, thus penetrating the whole production chain.
  • Encouraging or requiring corporations to report on their human rights and environmental policies and impacts would help to establish human rights and environmental protection as core business concerns.

New EU “Made in” regulation: Do consumers benefit or is it protectionism?

Posted: October 23, 2010 | Author: | Filed under: Law | Tags: , , , , | Leave a comment

On thursday, the EU Parliament voted to approve new labelling laws that shall ensure more transparency about the “country of origin” of products. The changes can be summed up as follows:

“When the legislation is finalised, likely next year, manufacturers must specify the country where the majority of their product was originally made on the label. … Currently, foreign manufacturers can claim a product was ‘Made in the EU’ when it only underwent minor assembly in the bloc. That could mislead consumers who are looking for local craftsmanship or want to support local businesses.”

This attempt to harmonize might be a step forward, as companies cannot make false claims about the origin of their products anymore. But does the system really “help” consumers, as the EU parliament titled?

It might help them to promote the economy in EU countries, but what else? What benefit do I as a consumer have, if I know that my product was produced, e.g., in China or Bangladesh – as opposed to a EU country plus Turkey?! Should I avoid products that were produced in China? I think that such information only enables consumers to discriminate against whole countries on the grounds of very general information – this smells like protectionism. I am not a fan of the WTO, but is the legislation according to the WTO rules?

Instead, the EU should work towards a legislation that provides consumers with detailed information, which would be of some use to them. A good examples is Switcher’s Respect-Code or the Eco-Index. A label would not need to include all this information, but it should refer to an online database that tell us in which factories products were produced; in some years time this website could also benchmark the factories in terms of social and environmental issues. This would really help consumers to make their choice and, at the same time, it could encourage a race to the top.

The very nice label on the left was designed by Peter Lee.