Ethical Performance
inside intelligence for responsible business


editorial: corporate social responsibility is a response to market demands

May 2000

The publication of the latest stage of the UK company law review and the appointment in the UK of a government minister with a specific corporate social responsibility (CSR) brief, are generating a lot of debate among stakeholders in corporate social responsibility – not just in the UK, but throughout Europe.

At bottom, the big question raised for all stakeholders by these developments is, should companies report on their social and environmental performance in a form prescribed by law? It is hard to imagine what a regulation on this subject would actually state. It would have to apply across all sectors, and the trouble with the ‘one shoe fits all’ approach is that the shoe ends up being a poor fit for almost everyone.

There is a more fundamental problem. The business case for developing socially responsible policies is that they help to protect companies from risk and reputational challenges that can destroy shareholder value. For many companies, sound CSR policies are now a competitive factor in the market for quality staff, for contracts, for customers and even, though it is early days, for investment market funds. If demand from customers, staff and the public for greater corporate responsibility were to drop off, companies would simply reduce the supply. But this is certainly not happening at the moment. For CSR work to have value, it needs to be done with genuine commitment, and regulation would stifle innovation and promote a reporting culture of doing the least possible.

Government can help by promoting best practice and, above all, creating a business environment in which CSR is seen as integral to good practice. In the UK, it can also ensure directors have a stated duty to take account of the impact of their operations on local communities and the environment, as the latest company law review draft suggests.

Detailed mandatory reporting at present would do more harm than good – and for tardy companies, there is always the threat of regulation.


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