Ethical Performance
inside intelligence for responsible business


business no longer needs to fear EC regulation on CSR

September 2002

The European Commission’s communication on corporate social responsibility initially gives the impression that Brussels felt it had to do something, but was so overwhelmed by the responses to its earlier green paper and the complexity of the issues that in the end it shied away from regulation.

First impressions can be wrong. It is too early for the EC to regulate on CSR or socially responsible investment. Where regulators needed to act – on pension fund disclosure – they have done so in Europe’s largest financial centre, the UK, and in several other member states. And why come down with a heavy hand regarding greater transparency when the market is already going in that direction for a range of investment classes?

So the Commission has decided to encourage dialogue between stakeholders over the next two years, at which point it will take another look. Much will turn on the effectiveness of the forum on which its hopes are pinned. This is stakeholder dialogue writ large – and it will be judged by how the parties involved behave themselves.

The EC, which will chair the forum, could find its hands full managing the expectations of the 40 ‘representative organizations’ it wants to attract. Worryingly, it provides no money for the forum, which will be run by EC officials on top of their existing responsibilities. Given the ambitious agenda ranging from agreeing guidelines on social reporting to SRI issues, this looks optimistic.

The second plank of the strategy – linking CSR practice to other areas of EU policy – could bear more fruit. Employment and social affairs may be the natural home of CSR, but trade and development will also become so as sustainable development assumes greater importance for policy makers.

The prospect of regulation has faded but has not entirely disappeared. The European Parliament clearly favoured a mix of regulation and voluntary approaches. Business got what it wanted and must now demonstrate that the voluntary approach will bring about measurable improvement in social and environmental performance.


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