Ethical Performance
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white papers ease regulatory fears

September 2002

Prospects of imminent regulation on CSR in Europe have receded with the publication of the European Commission’s communication on the subject and the UK government’s response to the company law review.

The two documents – both white papers – firmly reject mandatory environmental and social reporting.

Neither the EC nor the UK government completely discounts the prospect of regulation, but their declared positions effectively end two years of speculation.

The response to the UK company law review favours annual ‘operating and financial reviews’ which may, at the company’s discretion, include information on social and environmental performance.

In its communication, the EC steers well away from directives requiring companies to demonstrate greater social responsibility. The 24-page document merely invites companies to include social and environmental information in annual reports. It does not propose compulsory social labelling of products.

The starting point of EC strategy will be that CSR is of a ‘voluntary nature’. The document says the Commission will play an enabling role to promote responsible corporate behaviour.

Its main tool for doing this will be a ‘multi-stakeholder forum on corporate social responsibility’, expected to be formed in October.

Made up of around 40 representatives from businesses, trade unions, consumer groups and civil society, the forum will meet twice a year to agree a work programme. A steering group will be responsible for the daily management of its tasks.

These will include work to develop commonly agreed guidelines and criteria for measurement, reporting and assurance by mid-2004. This might involve bringing the Global Reporting Initiative and AA1000 closer together.

The forum will direct EC efforts to put the business case for CSR to both large and small companies, and strengthen research on CSR. Its progress will be reviewed in 2004.

On socially responsible investment, the Commission invites the forum to agree by 2004 ‘guiding principles’ on how pension and retail investment funds should disclose any SRI policies they may have, and ‘to consider whether a common EU approach can be established’ on how they assess company social and environmental performance.

The Commission is silent on Europe-wide pensions disclosure regulation, merely noting that existing national legislation in this area in the UK, France and other member states ‘increases transparency’.

The stance of the white paper and the UK government’s response to the company law review will be seen as a victory for business, which has generally campaigned against regulation.

Consultation on both documents took place prior to the collapse of US companies Enron and WorldCom.

The swift response of legislators in the United States to those scandals, although it did not include measures dealing with corporate social responsibility, may have left the door ajar for supporters of regulation.

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